Report: Legalization didn’t undercut illegal sports betting

BOSTON (SHNS) – In the first year after sports betting was legalized in Massachusetts, the state made inroads but didn’t substantially redirect much of the revenue from illegal sports wagering into its coffers, according to new research from the University of Massachusetts.

According to a survey conducted by the UMass School of Public Health and Health Sciences in both 2022 and 2023, there was no change in the proportion of monthly gamblers who engaged in illegal sports betting between the two years. But there was an increase in the proportion of monthly gamblers who engaged in online legal sports betting between 2022 and 2023, even as illegal sports betting stayed stagnant.

Massachusetts legalized sports betting in August 2022 and it first launched in January 2023, with online betting becoming available in March 2023.

The Social and Economic Impacts of Gambling in Massachusetts study also asked respondents: if Massachusetts had not legalized online sports betting in 2022, would they still have engaged in the gambling activity? Fifty-three percent said they would have, researcher Rachel Volberg told the Massachusetts Gaming Commission during its meeting last Thursday .

“Now, taken together, these data suggest that there has not been, or had not been in 2023, a substantial recapture of illegal sports betting revenues in Massachusetts between 2022 and 2023,” Volberg said. “However, as many jurisdictions internationally have found, it can take a substantial period of time for sports bettors to migrate fully from non-regulated to regulated providers.”

Though the research revealed that illegal sports betting is still prevalent, Massachusetts has nonetheless built a revenue stream on taxing the wagering that is now happening legally in the state. Through this July, the Gaming Commission had collected about $166.6 million in taxes and assessments from legal sports betting operators.

The data indicating Massachusetts may not be fully redirecting the illegal market into taxable legal gambling was not the main thrust of Volberg’s presentation — which was about gambling-related harm — but it caught a number of commissioners’ attention.

“That’s definitely the piece that piqued my interest and got my ears up,” interim Gaming Commission Chair Jordan Maynard said.

One commissioner said the state can do more to make clear to bettors what their legal options for betting are.

“I do think it’s more complicated for consumers in the online space and sports betting, than obviously walking down to a bookie, when you know what you’re doing. You know you’re going into an illegal place, as opposed to a casino,” Commissioner Eileen O’Brien said. “But I do think we need to do more, we are, but I think we need to continue to do that and educate consumers in Massachusetts.”

Commissioners agreed that they will watch the 2024 data closely to see if this trend continues.

“A lot of the reason we wanted to make sure this is done and done correctly, sports wagering, is that we want to stamp out the illegal market, and want to reiterate to consumers that the illegal market is not a victimless place,” Maynard said. “If you have an issue with your bookie, there are only a few places you can go. If you have an issue with a legal sports wagering operator or gambling operator in the state, you can come to the Gaming Commission and we can help take care of these issues.”

Commissioner Brad Hill wondered whether a “minor” increase in illegal betting was due to taxation issues or issues of convenience.

“I don’t know what the answer is but that was a little interesting to see that since we have legal betting that we are still seeing an increase in illegal betting,” Hill said. “So I think that’s something that the commission’s going to take a hard look at as we move forward.”

The online survey conducted by UMass researchers was not a traditional randomly-selected sample, Volberg made a point of saying. Participants were paid, which can create behavioral biases in the data.

“For example, online panel members have much higher levels of psychological and physical pathology than are found in the general population. They tend to have very high rates of substance use, mental health problems, and as you’ll see, gambling involvement and gambling problems,” Volberg said.

Due to this bias in the survey, Volberg said researchers don’t use the panels to examine problem gambling rates, but instead to study changes in gambling attitudes, behaviors and harms.

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