Old-School Gambling Falters as Crypto Fuels US’ $67B Shadow Betting

As traditional gambling companies in the US struggle to maintain profitability, a growing crypto-powered shadow market is bringing in substantial change. A new report by analytics firm Yield Sec, sponsored by the Campaign for Fairer Gambling, revealed that out of the $90.1 billion US online gambling market in 2024, an estimated $67.1 billion (which is roughly 74%), was generated through illegal operations, many of them using cryptocurrency.

Crypto Exploits Gambling Industry Regulations Loopholes

The reports suggest that industry analysts may be significantly underestimating the scale of unregulated activity. “Everyone makes the same mistake,” says Ismail Vali, founder of Yield Sec. “We legalize and regulate, then assume crime just disappears. That’s not how crime works.”

As per a report, many illicit entities evade regulations by using crypto for anonymous and cross-border transactions that are difficult for regulators to track. These platforms offer games and services that are unavailable through legal channels and exit loopholes in state laws. In regions like New York, where only sports betting is permitted, offshore operators provide access to casino games and other high-risk products. In states like California and Texas, where online gambling remains illegal, the market is 100% unregulated, yet worth $5.5 billion and $4.5 billion respectively.

Yield Sec’s state-by-state analysis reveals the limits of legalization as a tool for controlling the market. Even in states with legal online crypto gambling, such as Ohio, only 15% of gambling revenue flows through licensed platforms. On the other hand, nearly 1,000 illegal operators continue to target American consumers from overseas.

Crypto casinos have proven successful in capturing market share. Stake.com, the world’s largest crypto casino, reported $4.7 billion in gross gaming revenue in 2024 alone and claims to have processed 300 billion bets since its 2017 launch. Yield Sec alleges that thousands of similar platforms are operating worldwide, often licensed in offshore jurisdictions like Curaçao or Malta for as little as $20,000.

The company uses tech that was first meant for counter-terrorism efforts to track illegal gambling trends. Their system analyzes user behavior across websites, search engines, and social media, to estimate revenue. Yield Sec said that this methodology accurately predicted betting volumes for events like the Super Bowl and March Madness in both legal and illegal markets.

Critics have pushed back on these reports. Competing analytics firm Tanzanite claims the global crypto gambling market is only worth $10–11 billion. Tanzanite further argued that blockchain analysis and self-reported data offer more reliable metrics. But Vali dismisses these objections. He asks, “Do you really believe companies that operate illegally are accurately reporting their earnings?”. “Criminals don’t file quarterly reports.”

Beyond the financial implications, the report highlights the human toll of illegal crypto gambling. These platforms often require higher minimum deposits and offer riskier products, such as celebrity death pools or war zone betting markets. During Brazil’s welfare crisis, Yield Sec estimated that 25% of social benefits were funneled into gambling sites, a figure the government later confirmed.

The adaptability of crypto casinos became especially apparent during the pandemic. When professional sports were stopped, operators began producing their own betting content, i.e., amateur basketball, table tennis, and even snail racing. These operators maintained user engagement and revenue flow.

Traditional gambling firms, however, remain caught in a losing battle. Even with dominating the legal sports betting market, companies like Flutter and DraftKings have seen little growth. Moreover, the US industry recorded just one profitable quarter in seven years.

As regulators rush to respond, enforcement actions are increasing. The UK Gambling Commission has issued over 280 cease-and-desist letters to crypto gambling sites since April 2024. US states, too, are hitting back with legal cases against operators using derivative markets as legal shields.

Experts, however, warn that stronger enforcement, not more regulation, may be the only solution. “We don’t need new laws,” Vali says. “We need the political will to enforce the ones we already have.”