Do not Trust the American Gaming Association's $4.2 Billion Illegal Betting Estimate

While researching statistics on the Super Bowl 50, I encountered an astounding statistic: Americans are expected to gamble away $4.2 billion on just one game. What's more, 97% if that will be bet off the books.

This statistic is from the American Gaming Association, and has been quoted by Forbes, Fox, Sporting News, Sportsbook Review, anyone else looking for numbers on the Super Bowl. It’s easy to look over. In modern times, people used to simply accepting that the gambling industry involves obscene amounts of money.

However, the AGA posted the methodology by which it obtained this statistic in its press release. It’s a simplistic summary, and doubtless, the AGA has just abstracted the deeper math from us in the name of producing a readable news brief. But still… that methodology looks like it’s based on outdated sources.

The AGA’s main source for this estimation is the 1999 National Gambling Impact Study. Commissioned two decades ago by the Clinton administration, this study was meant to investigate institutionalized gambling for political digest. The study sought to explore six aspects, one of which stood out to me: according to the text, this 1999 report examined “the effects of technology, including the Internet on gambling.”
So the AGA is using data predicated on a study three presidencies ago--before the iPhone, before the housing crash, even before the dotcom boom. It is certainly grievously out of date. Does the convenience of bets placed via mobile phone crowd out black markets? Has the economic crash affected how much Americans are willing to bet? America, and the AGA’s “estimates,” would stand to gain much knowledge by another impact study.

The AGA claims it used the study’s “most conservative estimate of illegal sports betting activity” from 1999, which had been $80 billion per year, and multiplied it by GDP growth. Then, it assumes that “the proportion of legal gambling activity on the Super Bowl at Nevada sports books is the best available indicator of what proportion it might make up in the illegal market.” So this is more or less complete guesswork, assuming Nevada’s numbers are abstractable to the rest of the country.

As a group with the mission of “promoting, educating and lobbying on behalf of the gaming entertainment industry through education and advocacy,” it is to the AGA’s great advantage to “estimate” the illegal gambling market as something huge that would need to be tackled.

In 2016, the AGA is in the process of building “a broad coalition” to corral in these unregulated betters. To conquer illegal betting, the AGA has stated that a solution “could include strict regulation, rigorous consumer protections and robust tools for law enforcement to eliminate illegal sports betting and strengthen the integrity of games.” But the clear first step would be to gather sturdier data.

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