Online gambling growth sees increase in financial crime risk

Online gambling growth in the US has been exponential. But what repercussions does it have on money-laundering and other financial crimes? Let’s Explore…

  (photo credit: SHUTTERSTOCK)
(photo credit: SHUTTERSTOCK)

Authorities in the US and across the world have always spoken of the risk of money laundering that comes with gambling. The reasons are not hard to identify – gambling involves cash and is a good way for criminal elements to whitewash illegal earnings. 

The boom that online gambling is experiencing in the US currently raises concerns that it could also, like traditional land-based gambling result in a spurt in money laundering and other related financial crimes. 

Legalization of Online Gambling in US States

In 2018, the Supreme Court of the United States of America passed a judgment that rendered null and void the ban on online sportsbetting, especially single-game wagering. Not just that, it vested in each individual state the authority to legalize or ban sports betting and single-game wagering. 

Today, gambling is either legal or in the process of being legalized in more than 80% of the states of the USA. When it comes to online sportsbetting, as of August 2022, 20 states – including Washington – have legalized online sportsbetting. 6 other states have taken the first step to legalizing it, but are yet to confirm concrete plans. 

Rise in State Revenues

The main driver for states to opt for legalization was the potential for increased revenues through taxes earned. The COVID-19 pandemic ensured more states started looking at it as a way to negate losses incurred. 

The numbers tell the story: according to the American Gaming Association, online sportsbooks in the US raked in revenues to the tune of $2.8 billion while handling bets worth $42.5 billion approximately in the first half of 2022. 

Another good example is the State of Massachusetts. It is set to rake in quite a chunk by levying a 5-year license fee of $5.2 billion with its decision in the early days of August, 2022 to legalize sportsbetting. This amount is over and above any form of revenue that it generates through taxation. 

Yet another example is New York: its decision to legalize sportsbetting in January 2022 was the reason it was able to profit a cool $25 million for a license from prospective operators. 

The story is no different when you look at legalization of slots and other traditional offerings. The number of states where it is 100% legal is small – with merely 6 offering this – but the revenue generated is staggering: the earnings in the first half of 2022 witnessed a massive 43% jump from the record-setting numbers of 2021 and now stood at $2.4 billion, according to an AGA report.

Online Gambling and the Risk of Increased Financial Crime

One thing is abundantly clear – legalization of online gambling and sportsbetting means more money and profit for individual states. And yet, therein lies the problem. 

Land-based gambling and wagering is easier for regulatory authorities to monitor when compared to online gambling. This is especially true in the US because of the decision to leave the choice of regulation to individual states. Without federal oversight, it is difficult to control instances of illegal activity done in the name of online sportsbetting. 

When it comes to the US, there are many gray areas to deal with since different states have their own set of laws which differ accordingly. Moreover, the reality that there hasn’t been stringent enforcement adds to the ever-increasing concern. Chief Editor at, Ben Edwards echoes such thoughts:

‘As an affiliate site, our first priority is to ensure that all the providers we work with are fully-compliant. The US presents its fair share of challenges because there’s no standardized set of rules in place, since they vary depending on state. Fortunately, compliance experts are anticipating a proper crackdown, since online casinos are going nowhere any time soon - quite the contrary, actually - and serious regulations need to be implemented soon!’

Why Legalizing Online Wagering and Sportsbetting can be Risky

There is one simple and huge reason why legalizing online sportsbetting or wagering can pose a huge risk. There are not enough regulatory measures and compliance guidelines in place to regulate the money being wagered while ensuring that it is for fun purposes only and not for the purpose of commission of a crime. 

This is one of the things that sets online casino gambling and wagering completely apart from banks. Banks follow stringent compliance measures and failure in doing so results in steep penalties, which is not yet the case when it comes to online sportsbetting and gambling in the US. As a result, online casinos make for easier targets for criminal activity. 

Using Online Gambling for Criminal Activity – How It Works

There are different ways criminals may use online gambling for illegal activities like money laundering. They could use an online casino or, better still, a mobile casino app, to deposit ‘black’ money into an online casino account and win ‘clean’ money.

Another way could be for partners to play as opponents and use money from dubious sources to place their bets and rake in legit winnings. 

One thing to note, though; the industry definitely has made efforts to be compliant with the anti-money laundering laws of the US. Some of the big players in the country, like a DraftKings, for instance, have special and dedicated compliance teams in place. 

The industry itself too is doing its bit to be compliant with existing money-laundering laws. The problem comes when you consider the smaller players in the market. Many of them lack resources and don’t have compliance teams in place; some are at times not even aware of the need for an effective anti-money-laundering program until questioned by payment providers.

The picture is not too bleak, though, given that there are quite a few agencies that are already overseeing how the industry works, especially when it comes to revenues and profit. They all have a good chance of being able to take a truant company to task. Some of the agencies in the picture include the following: 

  • FinCEN, an agency of the US Treasury that deals with financial crimes
  • Internal Revenue Service, which also oversees the functioning of the industry

However, while there are agencies in place to handle any issue that arises, up to this point in time there is no clarity with regard to which of them will gear up to take the lead in the country’s attempts to ensure that regulate gambling and prevent illegal activity. 

This article has been written in collaboration with