States that crack down on offshore sports betting are driving more players into the legal market, according to data released Tuesday by GeoComply.
The geolocation provider compared sports betting activity in 10 states with similar adult populations. Five of those states – Arizona, Louisiana, Massachusetts, Michigan and Tennessee – took enforcement actions against offshore operators in the past year.
That data was measured against five similar markets – Iowa, Indiana, Kentucky, North Carolina and Virginia – where regulators have not taken recent action.
Results showed the states that took steps against offshore operators grew active players 10% faster than the other group year-over-year. Account sign-ups were 39% higher in enforcement states over the same period.
Legal markets grow faster in states that act
Tennessee has been among the most aggressive, recently fining offshore operators $50,000 each for illegally offering bets in the state. Michigan regulators have sent more than 40 cease-and-desist letters to unlicensed operators in the past 12 months.
Arizona regulators have ordered multiple operators it to stop taking bets in the state, declaring them an “alleged felony criminal enterprise.” Meanwhile Massachusetts’ attorney general sent letters to additional offshore sportsbooks last month, building on a crackdown that pushed several out of the market last year.
“These findings demonstrate that enforcement works,” said Kip Levin, CEO of GeoComply. “When states crack down on illegal sportsbooks, players migrate to the legal, licensed market, where they’re protected and where their play generates state tax revenue. Consumers often can’t tell the difference between a state-regulated sportsbook and an offshore site, but when regulators take action, it raises awareness and helps guide players to safer, accountable operators.”
Offshore sports betting outpaced by legal market
Last month, 50 state attorneys general urged the U.S. Department of Justice to crack down on offshore sportsbooks, arguing that they cannot stamp out the market on their own.
A recent American Gaming Association report found offshore operators still handle nearly a third of U.S. wagers, but that is down from 40% in 2022. The AGA estimates those bets cost states about $1 billion in lost tax revenue over the past year.
The release comes as licensed sportsbooks prepare for the NFL season, the busiest time of year for the industry. GeoComply said its technology processed more than a billion transactions per month last season and expects even higher volumes this fall.
