Could Offshore Sites Be Benefitting From States Legalizing Sports Betting?

Written By Brant James on June 29, 2021 - Last Updated on September 7, 2021

Legal sports betting continues to be unfortunately good for business for illegal sports betting. Just how good remains a source of debate.

The scenarios that set up the odd situation are fairly well agreed-upon, though:

  • Emboldened current offshore bettors feel vindicated in visiting the local bookie or their unregulated site of habit when their state moves to legalize wagering.
  • Semi-informed current bettors assume that a bookie or Costa Rican outlet is suddenly legal in their state.
  • And the half-listening dabblers, who caught 10 seconds on the evening news about their state legalizing, Google themselves right into an offshore account by searching for sports betting options where they live.

This has been the conundrum for each of the states that have legalized and implemented sports betting since the negation of the Professional and Amateur Sports Protection Act in 2018. A study released by the American Gaming Association asserts that seven million will place an NFL bet with a bookie in 2021, a 13% increase from 2020.

And as legislative sessions end and the less-publicized and often-lengthy launch periods begin in places like Arizona, Connecticut, Florida, Louisiana, Maryland and South Dakota, offshore sportsbooks are hardly quaking at the thought of lost customers, said John Pappas, founder and CEO of Corridor Consulting.

“The illegal online sports betting market has been in the US long before states began legitimizing it. This has given them a ‘first mover’ advantage over the newly legal sites that need to attract customers through a strict regulatory lens, whereas the black market continues to operate without restriction,” Pappas told PlayUSA.

“They are also extremely deceptive in how they portray their legal status. Simply do a web search for ‘Can I bet on sports in …’ and you will be directed to a myriad of websites claiming to be legal.

“This creates confusion for consumers who believe betting may be legal, because they heard about it on the news, but don’t fully understand how to determine websites that are regulated.”

Regulated being the key word.

Pappas pointed to a recent study by Conscious Gaming’s Bettor Safe campaign that uncovered confusion even in markets that the industry would consider mature and filled with savvy customers. According to the report, 75% surveyed in New Jersey and Pennsylvania couldn’t definitively discern a legal and regulated sportsbook from one that was illegal in their state.

This, even as the same respondents listed as “safety and security” as the most important factor in when and if they place a wager.

New Jersey’s sports betting market came online in August of 2018, with Pennsylvania launching mobile in May of 2019. New Jersey leads the nation in post-PASPA national sports betting handle with nearly $16 billion with Pennsylvania next at almost $8 billion.

New Jersey’s Rebuck saw it all coming

The official in charge of regulating legal gambling in New Jersey has long spoken of the pervasive nature of offshore operators, once telling a group of Indiana state legislators, “Every hearing I’ve had as a legislator in the state, I tell them, ‘Online gambling exists in your state today. Representatives, respectfully, you all have staff. Most of your staff are probably aged 22-to-35. Tell him to go back today, type in the following on Google: ‘Where can I place a sports bet in … Indiana.’ Boom. Google it right up and open an account. You’ll be gambling in five minutes.”

For offshore sportsbooks harvesting customers in the United States, legalization “justifies their current existence” with the current and prospective customers, said Brendan Bussmann, director of government affairs at Global Market Advisors.

Other assertions from the Conscious Gaming report include:

  • 31% of respondents in Pennsylvania were not sure if online sports betting was legal there.
  • 15% of those who admitted to placing an online bet were not sure if it was legal in Pennsylvania.
  • 45% of bettors are exclusive to only legal websites in Pennsylvania.

Offshore sportsbook choice exposes new bettors to consumer protection woes

Bill Pascrell III, a gambling consultant and lobbyist with Princeton Public Affairs Group said that confusion over safe sports betting legalization has been similar to that of recreational cannabis in terms of public misunderstanding. Clarity of media coverage, he said, is crucial. But Pascrell is less concerned than Pappas over how much business offshore sportsbooks can generate in the months before sports betting is installed and made available legally in certain locales.

“Bovada is not stupid. I mean, they’re going to do all they can to quietly and gingerly market and take advantage of the situation,” Pascrell III told PlayUSA. “But I think that’s a minor spike on the way to full regulation/implementation, because what tends to happen is, Johnny hears that Virginia is going live, they’ve legalized it. And so Johnny goes online, he gets pushed to Bovada or another site.

“And then he’s at a bar with a couple of buddies, three or four months from now, when Virginia’s live. And they’re like, ‘Hey, I’m playing on this’ or ‘I’m playing on that.’ And he’s like, ‘Oh, really? How’s that experience compared to the Bovada experience?’ And little Johnny’s not in jeopardy of getting indicted, but if he goes back and does any history, if he’s relatively educated, you go back and look at what happened on Black Friday where before the four sites were indicted by the Justice Department – and really only PokerStars reimbursed everybody – the rest of them just bolted and left them hanging. So you have no recourse to get your money from Bovada if there’s a questionable bet or whatever. And so the industry has to educate people more, the consumer more about that.”

Joe Bertolone, executive director of the International Center for Gaming Regulation at UNLV concurred that most of those betting illegally in states pre-implementation were likely to have been doing so anyway, and might very well continue. He wonders if the under-informed, who are likely to be ardent fans seeking out a wager on a big game, might be put off by the obstacles of opening a sports betting account, onshore or offshore.

“‘They’re asking for my social, they’re asking for all this information’,” Bertolone said, channeling this prospective bettor. “’My wife’s a Tar Heel. She said she just wants to bet because she loves North Carolina and I don’t care what the point spread is. That doesn’t matter to me.’

“My sense is it’s less of those types of people versus people that are really looking to get action on, the people that are going to seek out an offshore type of account. And is it a danger, is it a risk? Absolutely. Is it any greater than it was, pre-PASPA? Probably, simply because of the focus and hype and activity associated with sports betting as it rolls across the United States.”

Bertolone said another key disadvantage for legal sportsbooks is the wide variety of large bonus offers available to unregulated offshore competitors.

Bet $5 Get $200 + Up to $1,050 Bonus

DraftKings, Penn size up offshore market, prospects for reducing it

There have been successes for an American market where 31 jurisdictions are in some phase of legalization. 5Dimes pulled out of New Jersey in 2020 and Bovada told customers it would flee New York in May, citing “newly introduced regulation and its increased restrictions on our players residing in NY.”

The Conscious Gaming study noted that 32% of respondents in Pennsylvania had placed their first bets since legalization in 2019. While it’s impossible to truly gauge the size of the illegal sports betting market in the US without handle figures offshore sportsbook sites would never provide, major domestic operators acknowledged its current impact on recent earnings calls.

Penn National CEO Jay Snowden said in a first-quarter earnings report that “You’re going to see our ability to convert black market bettors get better over time, especially as more states legalize and we have more scale.” But at the same time, offshore sportsbooks are doggedly retaining their previous customers.

DraftKings CEO Jason Robins said during a March investor presentation that “we actually haven’t converted a ton of people over from the illegal market yet, and those are arguably the most valuable players.”

“People get comfortable with a particular product, a brand, a [user interface] and they just don’t want to change,” Robins said.

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Brant James

Brant James is a veteran journalist who has twice been recognized in the Associated Press Sports Editors Awards, most recently in 2020. He's covered motorsports, the National Hockey League and Major League Baseball among a myriad of others beats and written enterprise and sports business for publications including USA TODAY, ESPN.com, SI.com.

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