July 3, 2024 12 min read

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Are Offshore Bookmakers Losing the Battle Against the Regulated Sector in the US?

In recent years, many popular offshore brands in the United States have voluntarily agreed to exit certain states in the USA after being asked by regulators

The writing is on the wall. Yet neither party is quite satisfied. Since the overturning of the Professional and Amateur Sports Protection Act (PASPA) in 2018 by the Supreme Court of the United States, the country has become a fertile ground for sports betting operations.

Fast forward to 2024, and the debate about whether this has been a good thing rages on. The offshore gambling sector has long dominated the US market, especially in the pre-2018 era.

Offshore gambling sites have successfully cultivated a loyal following of players who are inclined to play there, owing to years of habit, but also because of consumer lack of knowledge about what operations are offshore and what sites are regulated. ‘There is a difference,’ a huge number of players in the betting community wonder when confronted with the question.

The arrival of dozens of locally recognized sports betting sites, though, has begun to shift the balance in favor of the regulated sector. But is the offshore gambling market losing ground quickly enough or are both markets experiencing attrition because of their respective operations? Probably both statements are correct.

Offshore Gambling Sites Are Losing Ground – There Is No Denying This

Much has happened since 2018 and, although lawmakers themselves would not admit it in so many words, there has been important momentum building against the offshore gambling market. This has been once again a multi-pronged offensive launched by independent groups that often have nothing in common other than their desire to strengthen the regulated market and channel more players into it.

The question is whether they are succeeding. There are several reasons to believe that this is indeed the case. One of the truly landmark events in the past six years is the settlement between 5Dimes and the US Department of Justice (DOJ). The US Attorney’s Office in the Eastern District of Pennsylvania exempted the website owner, Laura Varela, from criminal or civil prosecution prior to September 30, 2020, in connection with 5Dimes.

Architecture outside of a court house.
The columns of the US Supreme Court. Image Source: Shutterstock.com

In exchange, the DOJ has been able to secure a $46.8 million settlement, telling you something about the financial clout that offshore gambling sites command, as well as a commitment on 5Dimes’ behalf to withdraw from the US market completely. 5Dimes cut services to US customers at 12 am on September 21, 2020. 5Dimes’ case is celebrated as an opportunity for the US market to shut out offshore operators, although this is not entirely true.

5D Americas LLC, 5Dimes’ newly incorporated Delaware entity, is hoping to gain a foothold in the United States after its parent company winded down its US operations. Things have been changing with the offshore market losing its clout – and it is not just 5Dimes. Other brands have been asked to withdraw from individual states, and they have complied willingly. Yet, whether they would try to break into the regulated market in the US is an open-ended question.

The offshore brands to have voluntarily exited markets in the US

Many popular brands in the United States have agreed to exit certain states in the USA after being asked by regulators. This is happening fairly late, too, only years after states have legalized sports gambling and, in some instances, online casinos.

The most recent cases concern Michigan and Connecticut. The Michigan Gaming Control Board in May 2024 asked Bovada to wind down operations in the state through a cease-and-desist letter to Harp Media, B.V., which operates Bovada.com. American Gaming Association (AGA) CEO Bill Miller has welcomed Michigan’s decision, and also urged other states to follow the example:

“The Michigan Gaming Control Board’s decisive action highlights that states have the power to protect their residents from predatory, offshore gambling sites and is another important step in winning the battle against the illegal market.”

Bovada.com has complied with the request and is not available in the state as of June 2024. Connecticut has reportedly issued a similar cease-and-desist letter, ordering Bovada to leave the state.

Harking back a few years before this, BetOnline, another prominent and highly respected offshore casino and sports betting brand, also decided to pull the plug on its New Jersey operations. BetOnline Garden State’s market exit coincided with that of Bookmaker.eu.

In August 2019, both brands changed their terms and conditions to indicate that they would not be offering their products in the regulated market anymore. A statement from BetOnline read:

“It has come to our attention that your BetOnline account is registered in New Jersey. Please note that, per our Terms and Conditions, BetOnline does not accept customers from New Jersey and your account has been closed. All pending wagers have been canceled and refunded. You have until September 30th, 2019 to withdraw (sic) your remaining funds.”

At the time, rumors swirled that New Jersey Division of Gaming Enforcement director David Rebuck had vowed to oust offshore gambling sites, referring to them as “uncleansed” and the fact that they do not hold any licenses recognized by the state.

Efforts to push back against the offshore gambling sector more or less pre-date the 2018 SCOTUS decision, as New Jersey has regulated online casinos since 2013.

How big is the offshore gambling market in the United States really?

Rebuck did say something interesting, though, in an interview, arguing that in his estimate, 10,000 offshore gambling sites were currently cannibalizing the regulated betting market. He made this statement in 2018 in a publication for an industry publication.

In the meantime, New Jersey’s Attorney General Matthew Platkin took the opportunity in 2024 to release a joint statement together with the Division of Gaming Enforcement and the Division of Consumer Affairs in September that year, hoping to raise awareness about offshore gambling sites and what they look like among consumers.

New Jersey AG's Matthew Platkin
New Jersey Attorney General Matthew Platkin holding an official press conference. Image Source: NJ.com

The message was clear – if you are based in New Jersey and bet on the NFL, or sports for that matter, it would be best to steer clear from such websites.

“Sportsbooks and daily fantasy sites licensed and authorized to operate in New Jersey are subject to nation-leading consumer safeguards against fraud, identity theft, and unscrupulous actors; however, illegal sites have none of these protections,” the statement read.

Another sample about the size of the offshore gambling market, which officials prefer to call “illegal,” came from Miller who has assumed a particularly gung-ho position against the offshore market, and has piled criticism against the sector.

Speaking at the Global Gaming Expo in Asia in October 2022, Miller said that the offshore gambling market size saw as much as $400 billion wagered on it every year, leading to $15 billion in lost gaming revenues, and about $4 billion in tax revenues every year.

Industry voices have echoed those concerns, arguing that consumers are exposed to much greater riskers by playing at offshore websites and that it would be the regulated betting market that gets the blame if something goes wrong offshore.  

To get a better idea of how the offshore gambling market is impacting the regulated market, there are more statistics from AGA that come in handy. According to Miller, the association has discovered that 74% of all sports bettors have cited the importance of only playing at regulated bookmakers.

Yet, out of all bettors, 52% were still using offshore bookmakers, and 63% of the people who were betting at offshore sites were surprised to discover that they were not regulated in the United States.

According to Miller, searches for offshore sportsbooks in the United States increased by 38% in 2021 alone. In a word? The offshore gambling market in the USA is big. According to Miller, Bovada accounted for 50% of all searches when it comes to sportsbooks, demonstrating the brand’s staying power and its pull with players.

To address this, Miller has called on the federal government to step in and assume greater role in helping separate the offshore and regulated markets, and block the former from accessing onshore customers.

What Are the Regulated Market and Lawmakers Doing Vis-à-vis the Offshore Market?

This brings us to the inevitable question – if offshore gambling sites are an issue, what are lawmakers doing? As we mentioned already, the response has been very piecemeal. The American Gaming Association may have sounded a bit alarmist, citing evidence of the sector’s dominance – or at least significant clout, but it’s hard to come by definitive evidence as to how much clout offshore websites actually command.

In the meantime, though, there have been many calls to take active steps on a legislative level to restrict offshore gambling sites. In June 2022, a Congressional group has urged the DOJ to take a more active stance on offshore bookmakers, especially in light of sports betting popularity and its legalization in the United States.

DOJ's official press logo
The official US Department of Justice logo. Image Source: Shutterstock.com

The group sent the letter to Attorney General Merrick Garland asking him to act and push back against a sector that “exposes our constituents to financial and cyber vulnerabilities; does not have protocols to address money laundering, sports integrity, or age restrictions; and undermine states’ efforts to capture much-needed tax revenue through legal sports betting channels.”

The US AG’s office, though, has mostly stayed silent on the debate and has not taken sides. The DOJ has been working on high-profile cases, of course, including the one involving 5Dimes bringing them to a successful conclusion.

In a statement released in August 2023, the DOJ thanked lawmakers who have petitioned it to act more firmly on the offshore gambling market and said that the necessary considerations have been taken, assuring lawmakers that “illegal gambling” is prosecuted and investigated.

“We appreciate your views on this matter. The Department has undertaken, and continues to pursue, investigations into illegal gaming. The Federal Bureau of Investigation (FBI) is the investigative arm of the Department tasked with vetting allegations of violations of federal gaming laws. When the violations have been sustained, the FBI will forward the allegations to the appropriate federal prosecuting authority to pursue charges, likely a US Attorney’s Office in the jurisdiction where the crimes have occurred,” the answer to lawmakers submitted by the DOJ explained.

Yet, a repeat of the Black Friday proceedings in 2011 when three online poker sites received indictments and were seized by the government is unlikely to repeat itself. Meanwhile, PokerStars and Full Tilt settled for $731 million in 2012. So, as you can see, things have remained fraught in the offshore-v.-regulated-market debate.

Lawmakers, industry insiders, and regulated entities want the offshore market out, which is still operating in varying degrees of capacity across the United States.

Instead of Conclusion: Summing Up What We Know about Offshore Gambling

Because the evidence is a little scant, it would be hard to as of right now give an exact estimate of how much the offshore is losing ground to the regulated market. The fact remains that it really is. Some of the biggest brands are already showing signs of self-policing, and other offshore bookmakers, as our article showed, have been asked to leave within weeks.

All have complied. 5Dimes’ settlement with the DOJ and the Black Friday fallout are reminders that however slow and bureaucracy-laden the US justice system is, it will eventually get to you. Offshore gambling operators are most certainly losing ground to the regulated market, although they do hold advantages in certain markets as well.

What the future of offshore gambling sites would look like is hard to pinpoint. The exact number of consumers these brands are losing to the regulated market is not known.

Bill Miller in the company of ASGAM at G2E Asia.
Bill Miller, AGA’s CEO, at the G2E Asia. Image Source: Bill Miller (LinkedIn)

Remember that according to AGA, half of the people who gamble offshore are not even aware of this fact – but awareness about regulated gambling is improving and often with the help of official state authorities who see the value in raising consumer knowledge. So is the offshore gambling market “thriving”?

It most certainly is – but it’s also facing the reality of being completely locked out of the United States once and for all – at least in the capacity it is currently operating in. This will take time, years, or even decades, but it might come out of a sudden, too. The main offshore gambling sites are likely to be impacted first, too.

Yes, the offshore gambling market will continue to encroach on the regulated market in the meantime, while lawmakers are figuring out that they can use a cease-and-desist request to oust those websites. And yes, Americans will continue gambling offshore. Yet, as collective knowledge about offshore operations grows, the sector’s clout in the mainland will diminish.

Alarmist calls about the pernicious influence of offshore gambling sites are somewhat justified. Most of all, though, they will help push through measures that fence the offshore bookies outside the market, not because they are necessarily “bad actors” or ”illegal,” but mostly because the regulated market faces much tougher restrictions locally, and the playing field doesn’t seem as even when you are taxed 51% on your gross gaming revenue versus nothing in the offshore market.

And besides, who knows – it’s possible for some states to welcome back previous offshore brands much like Ontario did after legalizing its gambling industry. In the meantime, both the offshore and regulated markets are experiencing attrition because of the other’s existence, however, it seems like the latter currently has the upper hand in market share.

Co-editor

Stoyan holds over 8 years of esports and gambling writing experience under his belt and is specifically knowledgeable about developments within the online scene. He is a great asset to the GamblingNews.com team with his niche expertise and continual focus on providing our readers with articles that have a unique spin which differentiates us from the rest.

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