Post-PASPA: Offshore Sports Betting in the U.S.

The death of PASPA has been a reality for two-years now, and legal sports betting is quickly spreading across the United States. But that leaves one wondering, what is the current state of the offshore sports betting market? Has it faded away, or is it simply just another competitor in the market?

What People in the Business Expected to Happen with Legalization

As PASPA was being challenged, many industry experts had a lot of reasons why this would be good for the U.S. gaming industry. In addition to the potential tax revenue from legal sports betting, they argued that players were already playing offshore at illegal websites. In New Jersey alone, more than one hundred offshore sites were being used by Garden State sports bettors.

What was unclear about the offshore sports gambling industry was the size of the market. Estimates ranged wildly, from$10 Billion to $100 Billion annually. Likewise, there was no discernible difference between local bookies, the black market, or the offshore websites.

Many proponents of repealing PASPA claimed that legal options for sports bettors would give them little reason to gamble offshore. But, while the revenue income from states like New Jersey and Pennsylvania has been impressive, there’s no indication of what percentage of that money has been reclaimed from an offshore business. In fact, it seems as though much of the revenue is coming from gamblers who are new to sports betting, and the hold percentages in the states with legalized betting hold up that theory.

States Slow to Legalize Don’t Help

When evaluating the viability of offshore sports betting in the recently regulated market, the industry as a whole must be analyzed. While thirteen states now offer legal sports betting, thirty-seven states do not yet offer the option. Likewise, all of the talks concerning sports betting in the United States remain at the national level.

The gambling shows on American sports networks, as well as content such as podcasts and handicapping articles, are not restricted to those in legal sports betting states.

For example, if you live in California, and see or listen to one of these programs, you might be interested in placing a sports bet. However, you might not realize that sports betting isn’t legal in California. You might also search online for a place to place a bet. Your search results for sports betting will bring up results for gambling websites that are all based offshore.

That is the issue. While sports betting is being discussed at a national level, it’s only legal regionally. This gives offshore websites an advantage; offshore sites can attract players to their illegal operations before they can find a legal option in their state.

The Advantage Offshore Offers

Looking beyond the issue of regional legality, the next thing to look at when it comes to offshore sportsbooks’ are the advantages they offer players. For one thing, offshore sites are not subject to state taxation; that means their profit margins are significantly higher. This allows offshore gambling websites to price their wagers more competitively, as well as offering better incentives to attract new players.

It’s true, casual gamblers might have an interest in playing on an offshore website, no matter how attractive. However, players who already set up accounts before sports betting was legalized in their state, now have a good reason to stick with the offshore site. As long as they are getting paid when they win, why would they switch, simply to pay more for their bets?

The Legal Sports Betting Industry Needs to Shift Focus

Considering all of this, it’s safe to say some offshore sportsbooks are actually thriving, at the expense of the regulations that are in place. The 37 states that are still considering legalized sports betting should also focus on stopping unregulated operators:

  • Set a reasonable tax rate; states such as Pennsylvania, with its 36% tax rate on sports betting, make it very difficult for operators to compete and make a profit.
  • Move quickly. Every day that goes by where legal wagers cannot be placed in a day where an illegal offshore website benefits.
  • Put a focus on in-play data. Most of the offshore sports gambling sites don’t have access to the same kind of data that legal, U.S. operators have. They simply can’t offer the same kind of in-play betting that can be offered in the states.
  • Produce comprehensive legislation; states such as Pennsylvania and Michigan have laws that also allow licensed operators to offer online casinos and poker and online casinos. Many players want more than just sports betting, and having a one-stop-shop reduces the threat of offshore gambling websites.
  • Despite the revenue coming from mobile and online play in states like New Jersey and Pennsylvania, some states still limit sports betting to in-person sportsbooks only. They don’t have any legal mobile betting options. That strategy is sure to lose potential players, and it can’t be stressed enough that these regulations are useless.

The bottom line is, the market for offshore sportsbooks remains strong and competitive, and it’s a viable option for gamblers all over the United States. While the sports gambling industry in the United States is enticed by the revenues coming in from regulated states, that doesn’t mean illegal gambling websites are not a legitimate threat. Moving forward, gambling legislation should consider ways to eliminate the threat posed by illegal, offshore gambling operations.

 

 

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