How legal and illegal gambling compare in the industry

The history of gambling in the U.S. goes back to the nation's beginnings; in many Native American communities, gambling was used in tribal ceremonies, celebrations, and for trading and sharing resources. For many Native people, gambling was more about the experience than the outcome of the game. When European settlers colonized America, they brought traditions of cards, billiards, and other forms of gambling with them. As early as the 1680s, upper-class Virginians flaunted their elite status by making exorbitant bets during horse races.

Despite a nearly nationwide outlawing of gambling by the end of Andrew Jackson's presidency (1829-1837), saloons along the Western frontier remained strongholds for legal and illegal gamblers up until the late 1800s. In 1931, Nevada formally re-legalized frontier gambling that had been widespread in the state for a century, largely to help lift the state out of the Great Depression; Las Vegas became the national capital for casino gambling soon thereafter and remains so to this day.

Though gambling and sports betting today is allowed in 33 states and Washington D.C., legal gambling is one of the most highly-regulated industries in the U.S., subject to thousands of laws and regulations. Legal gambling takes place either online or in-person (usually at casinos and racetracks); slot machines in casinos were responsible for more than half of the $16.6 billion in revenue the gambling industry netted in the U.S. in the first quarter of 2023.

Laws controlling gambling span from federal to state and local levels. Major regulations include the Interstate Wire Act of 1961, which bans wiring money for sports payments across state borders; the Unlawful Internet Gambling Enforcement Act of 2006, which prohibits online gaming websites from accepting payments for unlawful internet gambling debts; and internet casino gambling bans, which exist in all but six states.

Illegal gambling is nearly half the revenue size of legal gambling in the U.S. ($44.2 billion versus $92 billion), according to American Gaming Association estimates. Americans spend more than $510.9 billion annually on illegal and unregulated gambling operations—but they may not even know it. Over half of Americans engaging with illegal operators believe they are using legal avenues.

Illegal gambling is dominated by unregulated machines, which divert an estimated $26.9 billion in revenue, followed by online games that steal $13.5 billion from legal markets. Sports betting comes in third, shifting $3.8 billion in revenue away from legal venues.

Gambling has been controversial and met with regulations for nearly as long as it has existed in the colonized U.S. The first commercialized gambling on a large scale began in New Orleans during the 18th and 19th centuries, even though gambling was outlawed in nearly all Southern states by the 1830s.

After Prohibition ended, eliminating bootlegging as a lucrative cash cow for organized crime families, these underground groups migrated from New York and Chicago to Las Vegas to commence illegal gambling operations. In 1970, racketeering became federally banned, minimizing the mob's monopoly in Las Vegas. Internet gambling websites popped up two decades later, and despite the passing of the Unlawful Internet Gambling Enforcement Act of 2006, many Americans continue to find ways to circumvent the law and continue gambling online.

Additional reporting by Eliza Siegel. Story editing by Carren Jao. Copy editing by Tim Bruns.