Five Years From PASPA, Combatting Illegal Sportsbooks Still A Focus For US, Michigan

It’s been five years since the landscape of the gambling industry in the United States changed forever.

On May 14, 2018 the US Supreme Court struck down a 26-year-old federal statute called the Professional and Amateur Sports Protection Act. That lifted the ban on states being able to authorize sports gambling.

Legal sports betting in Michigan began in 2020 and has produced over $10 billion in sports betting wagers since. That has led to over $859 million in revenue for respective operators.

Though Michigan has put up impressive numbers, the continued presence of unregulated and offshore betting is a thorn in the side of not just the state, but the entire country.

The American Gaming Association recently released a report that shows many Americans are still illegally betting, even if they aren’t aware of it.

Illegal gambling awareness still a concern in US, Michigan

One of the leading issues since legalized sports betting began continues to be illegal gambling.

Those numbers continue to improve with each year, but still remain concerning.

The AGA report shows that just 29% of American adults say they are unsure of the legality of online sportsbooks in their state. That’s down 45% since 2018.

However, 70% of sports bettors who place a majority of their bets with illegal operators believed they were betting in some capacity with legal sportsbooks. That includes over half believing most of their betting was done through legal means.

What is encouraging is that legal online sports betting sat at just 44% of the market share in 2019, but that is now up to 77% in 2023.

Misinformation, search engines leading to illegal betting confusion

One of the challenges of unregulated sportsbooks is their ability to manipulate a user into appearing as a regulated sportsbook.

Through search engines or partnerships with websites that promote online sports betting, it is something that can easily confuse a potential user.

Gambling literacy has been an issue with bettors nationwide, including here in Michigan. It’s mainly a problem for younger bettors, ages 18-24.

As part of the AGA survey it asked the following question: “Which of the following aspects of an online sportsbook lead you to think that it is regulated?”

Here’s how the responses turned out:

• Knowing that the online sportsbook is affiliated with a casino in the US: 40%
• A statement that sports bet placed in the online sportsbook are legal: 38%
• Seeing the site or its betting lines mentioned on TV or in other media: 37%
• Seeing that the website or mobile app is based in a US state: 36%
• Seeing credit card companies as accepted forms of payment: 36%
• A statement of strong data encryption and privacy: 32%
• Encourages players to play responsibly: 32%
• I learn that it’s legal through a Google search or review websites: 32%
• A well-designed user experience: 30%
• Seeing the logos of the sports teams and leagues: 27%

In Michigan, each regulated online sportsbook is clearly affiliated with one of the state’s tribal or commercial casinos. You will see the respective casino logo well represented on the app or homepage of the desktop version.

Search trends show Michigan bettors looking for legal gambling options

Since online gambling became legal in Michigan, Google trends do show that residents of the Great Lakes state are searching more often for legal options.

The graph below shows search volume over the past five years for the top three online sportsbook and online casino operators in Michigan: BetMGM, FanDuel and DraftKings. It also shows searches for one offshore site during the same time frame.

That’s good news for the MGCB and legal operators in the state. It’s also not that surprising, considering the marketing behind those online gambling giants, and how it increased near launch in January of 2021.

But there’s clearly still work to do, and that shows when you look at trends outside of Michigan’s Big 3. Search traffic for offshore sites does start to close the gap on other online sportsbooks in the state.

Michigan part of group urging DOJ crackdown on illegal gambling

Late in April, the Michigan Gaming Control Board was part of a coalition of seven gaming state’s regulators in urging the Department of Justice to combat illegal and offshore sportsbooks and online casinos.

Michigan was joined by Colorado, Illinois, Louisiana, Mississippi, New Jersey and Nevada.

The AGA estimates that $511 billion is illegally gambled each year in the United States. That leads to billions lost in potential tax revenue.

Among the top reasons consumers told the AGA they migrate to illegal sportsbooks is that they don’t have regulated sports betting in their state, or they don’t have legalized online casinos in their state.

That’s obviously not an issue here in Michigan. The state collected nearly $2 billion in tax revenue through the gambling industry in 2022.

Support strong for legalized sports betting

The AGA report indicates that most Americans feel that the PASPA decision five years ago was the correct one.

According to the survey, 85% of American adults agree with the Supreme Court’s decision to strike down PASPA. That number sat at just 63% in 2019.

Along with that, 77% of American adults support legalization in their respective state.

Michigan has seen its legalized online sports betting market somewhat plateau over the last year.

While it grew 24.5% in online handle from 2021 ($3.66 billion) to 2022 ($4.55 billion), Q1 online handle for 2023 ($1.23 billion) is down 8.8% from Q1 of 2022 ($1.35 billion).

Michigan’s history with legalized sports betting

Michigan attempted to move quickly on legalizing sports betting. State legislature passed a bill in December 2018. However, outgoing Gov. Rick Snyder vetoed it.

A year later, Michigan lawmakers passed a package of bills legalizing online gambling, sports betting, fantasy sports and online poker.

On Dec. 20, 2019, Gov. Gretchen Whitmer signed the bills into law. That allowed tribal and commercial casinos to apply for sports betting and online gambling licenses.

It was March 11, 2020 when Michigan’s first retail sportsbooks launched in Detroit. All three Detroit casinos had retail sportsbooks by March 12. However, all three casinos were ordered to close on March 16 due to the COVID-19 pandemic.

On Jan. 22, 2021, Michigan launched online sports betting and online casinos. A total of 10 online sportsbooks and eight online casinos were part of the initial launch.

Currently, 15 operators exist in Michigan for both online sportsbooks and online casinos.