If Illinois were to legalize online casinos, the state could potentially generate up to $105 million in tax revenue annually.
In November 2022, the Innovation Group conducted a study for the American Gaming Association, uncovering that the United States is missing out on more than $4 billion in tax revenue each year as a result of individuals gambling on illegal black market online casino platforms.
Furthermore, when taking into account all illicit gambling practices like online casinos, sports betting, and unregulated gaming machines, the AGA predicts:
Illegal and unregulated operators profit more than $510 billion annually from American bets, causing a loss of $44.2 billion in gaming revenue for the legal industry and $13.3 billion in tax revenue for state governments.
Illegal online casinos account for nearly 66% of that total.
Operators who are not licensed and operate illegally are diverting revenue away from the regulated market. This leads to a reduction in tax revenue that states rely on to support important public programs such as education and law enforcement. Additionally, this interference hinders the significant economic benefits that come with regulated gaming. The impact of lost tax revenue is substantial, with more than half of potential state gaming tax earnings being lost to unregulated operators.
Illinois accounts for illegal online casino handle of $1.65 billion annually
Let’s perform some calculations.
There are currently seven online sportsbooks operating in Illinois, with additional launches expected in the near future.
Some people in Illinois are hesitant to legalize online casinos because they mistakenly believe that residents are not already participating in illegal, unregulated online gambling.
According to the AGA study, which examined the gambling behaviors of more than 5,000 Americans, the findings indicate a different conclusion.
Approximately $91.8 billion is estimated to be wagered annually by residents of the 12 midwestern states through illegal online casinos. This results in the black market capturing around $3.7 billion in revenue in the Midwest alone.
The Midwest officially includes 12 states, with Illinois having the largest population among them.
- Illinois has a population of 12.67 million.
- Ohio — 11.8 million
- Michigan — 10 million
- Indiana — 6.8 million
- Missouri — 6.2 million
- Wisconsin — 6 million
- Minnesota — 5.7 million
- Iowa — 3.2 million
- Kansas — 2.9 million
- Nebraska — 2 million
- South Dakota — 895,000
- North Dakota — 775,000
There are approximately 69 million people living in the Midwest states, with Illinois accounting for 18% of the total population in the 12-state region.
$16.524 billion in bets placed on illegal online casinos, resulting in $3.7 billion in lost revenue.
- $1.65 billion in handle
- $660 million in revenue
Illinois had an average tax rate of 16% on online sports betting in 2022. Applying this rate to the estimated $660 million revenue lost to illegal online casinos in the state results in approximately $105.6 million in lost tax revenue to the black market. This substantial amount could have been a valuable contribution to the state’s funds.
In summary, this represents a substantial source of income for a state that is in need of financial support.
Illinois clearly needs the money
Illinois, like many other states, is in urgent need of more revenue.
According to data from USGovernmentSpending.com, Illinois ranks fifth in the nation for highest debt at around $65 billion. Despite this, the state’s debt is relatively low compared to its gross state product, accounting for only 6.6%.
In a report by The Pew Charitable Trusts, it was revealed that from 2005 to 2019, Illinois was one of eight states where expenses exceeded revenue. The report also indicated that Illinois could only sustain its operations for just over 27 days based on its current balances.
Illinois has one of the highest state and local tax burdens in the US, ranking seventh with a tax burden of approximately 12.9%.
Illinois ranks second in the nation for unfunded pension debt as a percentage of state personal income, at 19.2%. As a result, revenue from the upcoming Bally’s Chicago casino will be directed towards the city’s police and fire pension funds.
This suggests that Illinois needs to generate significant revenue without raising taxes. Currently, there are seven online sportsbooks operating in the state, with six of them offering both online casinos and sportsbooks in the seven North American regions where both are permitted.
Illinois is known for its thriving online gambling market, ranking second in revenue generation for sports betting and third in handle nationwide.
Thus, incorporating online casinos would provide the state of Illinois with a fast and simple way to generate significant revenue.
Regulating online casinos also protects Illinois citizens
Most importantly, legalizing and regulating online casinos in Illinois not only generates much-needed revenue from an activity that is currently illegal, but it also provides the best way to protect consumers.
The AGA said:
The U.S. legal gaming industry is subject to rigorous monitoring, with regulations covering financial stability, licensing, customer identification, and anti-money laundering. Operators and suppliers must comply with a multitude of laws to protect consumers and ensure trust in the gaming sector.
Unregulated and illegal gambling operators ignore these standards, endangering consumers and undermining the economic and tax advantages provided by the legal gaming industry.
Many customers find it difficult to differentiate between legal and illegal online casinos. A report by the AGA revealed that 90% of gamblers consider betting on a legal site to be important. Unfortunately, unlicensed online operators often falsely portray themselves as legal, leading to confusion among consumers.
In addition, those who participate in illegal gambling are at risk of being involved in more serious criminal activities, including organized crime, money laundering, drug trafficking, and violent crimes, without any financial protection.
This highlights the importance of implementing a licensing and regulatory framework for online casinos in Illinois, as long as the laws include strict standards for promoting responsible gambling.
