A report released by the Campaign for Fairer Gambling and Yield Sec claims the New York and New Jersey mobile sports betting markets lost a combined $2.9 billion in revenue to illegal operators 2023.

Both states surpassed $1 billion in total sports betting revenue in 2003, with New York leading the country with close to $1.7 billion in operator winnings and New Jersey edging over the $1 billion mark. The report claims the two states lost a combined $7.07 billion in online revenue last year, nearly 20% of the $40.92 billion the groups estimate was won by illegal operators from both mobile sports betting and internet casino gaming. The report also included Minnesota in its primary sample set and claimed it lost $2.4 billion in total online revenue as the state has neither mobile sports betting nor online casino gaming available.

“The dominance of illegal online gambling operators remains unchallenged, despite the expansion of legal gambling,” said Campaign for Fairer Gaming founder Derek Webb. “Sector-friendly legislation, regulation, and tax rates have not made much of a dent. Despite wildly different legal regimes, these three states continue to accommodate over 800 illegal operators, who operate with zero regard for state law.

“This is one reason why we need federal involvement in the oversight of online gambling. We are eager to equip policymakers with real, reliable data, so that we can have more informed, balanced debate, and ultimately smarter gambling policy,” Webb added.

The Empire State began allowing mobile betting in January 2022 and quickly became the largest commercial market in the U.S. The nine mobile operators combined to generate $1.69 billion in revenue from $19.1 billion in handle in 2023.

Using the same 8.9% hold those operators attained in 2023, the $1.91 billion in estimated revenue lost to illegal operators would have come from approximately $21.54 billion worth of wagers placed. Based on the 51% state tax New York levies on its digital sportsbooks, the state missed out on an additional $972.1 million in tax revenues. It collected $861.8 million in levies in 2023 and recently crossed the $2 billion mark in total taxes raised last week.

The $1.9 billion in online sports betting represents roughly 36% of the $5.35 billion estimated lost to illegal operators when including online casino gaming. New York has tried on multiple occasions to legalize iGaming, but it has failed to get traction to this point.

The Garden State was the first outside Nevada to legalize sports betting, doing so almost immediately after the U.S. Supreme Court ruled PASPA unconstitutional in 2018. But New Jersey launched internet casino gaming in late 2013, creating one of the most mature online gambling marketplaces in the country.

The $996 million in illicit revenue is slightly more than the $962.4 million in 2023 winnings from New Jersey’s mobile sportsbooks. Using last year’s statewide 8.4% mobile hold, illegal operators would have accepted $11.84 billion in wagers. Based on New Jersey’s 13% tax rate on mobile revenue, the state would have missed out on $129.5 million in tax revenue after digital operators provided approximately $125.1 million in such payments last year.

New Jersey’s mature online market is a double-edged sword as it was one of the first states to launch online casino gaming in late 2013 and has a total of 43 such operators when combining sports wagering and internet casino gaming. The lost sports betting revenue accounts for 58% of the $1.72 billion in total estimated online gaming revenue lost, though the $719 million in estimated illegal winnings is well below the $1.9 billion in revenue generated by the Atlantic City-tethered platforms.

The report, in which the CFG commissioned Yield Sec to “monitor, analyze and assess the split of total online gambling share between legal and illegal operators,” was a follow-up to its USA Report One, which was an analysis of online gaming in the U.S. prior to Super Bowl LVIII.

The data compiled by Yield Sec in this study showed no correlation between lower tax rates and less illegal activity. The report also claims the 119 legal affiliates that operate in both New York and New Jersey provide “no evidence that multiple affiliates per operator have any benefit to the overall legal market.”

Yield Sec founder and CEO Ismail Vali called upon the federal government to “end this theft in broad daylight,” stating, “This data and analysis exposes a stark reality: Illegal gambling operators are brazenly stealing money from state and federal coffers, and legitimate American industry.”