New York has seen massive success with its online gambling sector, particularly sports wagering. Since it legalized online sportsbooks in January 2022, the state has generated over $2.3 billion in tax revenue from online bettors, a major contribution to its budget.
Yet, with online casinos still illegal in New York, the state is losing significant revenue to offshore and unregulated platforms.
Some estimates reveal that illegal online casinos and offshore platforms cost the state over $5.35 billion in GGR in 2023 alone.
Overview of NY Online Gambling
New Yorkers spend billions of dollars each year on different types of gaming. In the 2022-2023 fiscal year, the state brought in over $4.8 billion from gambling, accounting for about 3.6% of its total operating funds. This revenue comes from a mix of traditional lottery games, video lottery terminals (VLTs), commercial casinos, and mobile sports betting.
Nearly 95% of this revenue goes to education purposes. The rest is distributed to municipalities near commercial or Native American casinos, with a small portion allocated for other state expenses.
According to the New York Governor’s Office, the launch of mobile sports betting in January 2022 has been a major milestone. By January 2023, New York had already generated nearly 700 million in tax revenue from mobile sports betting, highlighting the growing trend in the NYS online gambling sector – this had grown to about $1.55 billion by January 2024.
Despite the industry’s growth, the state remains cautious about the potential social impacts and problem gambling. There are ongoing efforts to balance out new New York iGaming options with responsible gambling initiatives to protect vulnerable populations.
Is Online Gambling Legal in NY?
Currently, New York offers limited legal online gambling, mostly focused on sports betting.
The New York State Gaming Commission (NYSGC) regulated mobile sports betting in 2021, and the market officially launched in January 2022. This move followed the U.S. Supreme Court’s decision to overturn PASPA in 2018, paving the way for sports betting within the state.
However, iGaming New York, including online casinos, poker, and other digital casino games, remain off-limits. Lawmakers are exploring options to legalize these activities, but no bills have been passed yet.
Potential Tax Revenue from Legal Online Gambling NY
Offshore online casinos operate outside U.S. jurisdiction, often bypassing state taxes and regulations.
A report from the American Gaming Association shows that Americans spend more than $510.9 billion every year on illegal and unregulated betting. This costs the legal gaming industry approximately $44.2 billion in revenue and results in $13.3 billion in lost tax revenue.
Of this total, an estimated $337.9 billion is wagered on illegal iGaming websites, resulting in a loss of $3.9 billion in state tax revenue. The illegal online casino market in the U.S. is nearly three times the size of the legal market, estimated at $5 billion in 2022.
A recent report from the Campaign for Fairer Gambling (CFG) and Yield Sec (YS) showed that in 2023, New York lost more than $5.35 billion in gross gaming revenue (GGR) to illegal gambling on unregulated sportsbooks and online casinos.
New York is the top sports betting market in the country, bringing in $2.3 billion in state tax revenue just since it went live in January 2022. However, it is missing out on an additional $1.9 billion in sports betting GGR and another $3.45 billion in online casino GGR.
Can Prohibition Reduce Black Markets in NY?
Contrary to popular belief that not allowing gambling protects gamblers, banning gambling without offering legal online casinos can actually strengthen black markets rather than reduce them. As a result, gamblers are prone to participating in riskier gambling activities with less protection.
As history has shown, banning something doesn’t make people stop wanting it. For example, the Prohibition era in the U.S. didn’t end alcohol consumption. It just pushed the industry underground, creating black markets and illegal bars.
A similar pattern emerged with sports betting in the U.S. Before the Supreme Court’s 2018 decision to overturn PASPA, sports betting was illegal nationwide. Yet, the prohibition didn’t stop betting activity. On the contrary, estimates suggest Americans spend approximately $150 billion annually through unregulated channels.
The same trend applies to gambling restrictions. When people can’t access safe, legal NYS online casino sites, they often turn to unregulated sites, which lack oversight and don’t offer player protection. However, proper regulation can redirect black-market revenue into legitimate and taxable channels, reducing the risks of unlicensed casino operators.
Reports have shown that New York, where only sports betting is legal, captures just 24% of its gambling GGR through legal channels, while 76% goes to unregulated markets. New Jersey, in contrast, has legalized both sports betting and iGaming and captures 62% of GGR legally, with only 38% flowing to illegal sites.
Illegal Betting Frauds and Scandals
Over the years, illegal betting and unregulated NY state online gambling sites have posed significant risks and led to many incidents, including financial fraud, compromised sports integrity, and even organized crime. These events highlight the importance of strict regulation and oversight to protect players.
Some notable examples include the 1919 Black Sox Scandal, in which eight players were accused of intentionally losing the World Series in exchange for money from gamblers, and the 2024 Jontay Porter Betting Scandal, in which NBA player Jontay Porter was banned for life after conspiring with bettors to manipulate game outcomes.
In one of online poker’s biggest scandals, players were cheated out of over $50 million. Absolute Poker and Ultimate Bet were two well-known online poker sites involved in a cheating scandal where certain “superuser” accounts could see opponents’ cards.
When Will Online Gambling Be Legal in NY?
While there’s still no formal timeline, New York online gambling laws are actively being discussed, and lawmakers’ support suggests they may be approved soon. If this happens, New York would join neighboring New Jersey, which has already regulated both sports betting and online casino games, generating millions in revenue.
Senator Joseph Addabbo has introduced several bills to legalize online casino games, noting that New York is losing billions to neighboring states with legal online casinos and to offshore casinos.
If approved, the state could distribute 31 licenses across land-based commercial and tribal casinos, video lottery terminal (VLT) racetracks, nine online sportsbook operators, and three applicants outside the state. New York online casino sites would be subject to a 30.5% tax rate and a $2 million licensing fee ($10 million for independent operators).
Addabbo believes that legal online gambling in New York could generate substantial revenue for the state, which could fund education, infrastructure, and responsible gaming initiatives. Assemblyman J. Gary Pretlow has also introduced a bill to legalize certain forms of online poker by classifying them as skill-based games.
Gambling in New York Sits at a Crossroads
New York is at a turning point with online gambling regulation. The success of sports betting, which brought in $2.3 billion in tax revenue, shows how much-regulated gambling can contribute. CFG estimates show that legalizing online casinos could help the state capture billions currently lost to illegal sites – over $5.35 billion in 2023 alone.
With growing support from lawmakers and clear demand from residents, New York may soon follow neighboring states by offering safe, regulated online casino options that boost the economy and protect players.
