IRS issues warning on the growth of illegal gambling in US
The United States’ Internal Revenue Service’s Criminal Investigation division has issued a warning that illegal gambling operations are frequently tied to broader financial crimes, including money laundering and tax fraud.
The IRS-CI revealed that during the past year, it had initiated 54 illegal gambling investigations involving $11.5 million. Those cases were linked to an estimated $126 million in laundered funds, according to the agency.
IRS-CI said it has maintained an 84% conviction rate in prosecuted illegal gambling cases, with convicted defendants receiving an average prison sentence of 37 months.
“Illegal gambling isn’t just about placing unlawful bets,” IRS-CI Chief Jarod Koopman said. “Our investigations routinely uncover money laundering and tax crimes tied to illegal gambling operations. Following the money allows us to dismantle larger criminal networks.”
Recent cases highlight the scale of illicit proceeds generated by unlawful gambling enterprises.
In June 2026, a California man was sentenced to 27 months in prison after being convicted of tax evasion, operating an illegal gambling business and money laundering.
Prosecutors said he operated websites through a Costa Rica-based business that enabled unlicensed gambling operators to accept bets in violation of federal law. Authorities said he laundered millions of dollars in proceeds and evaded taxes on approximately $4.2 million in income.
While sports betting has been broadly legalised in the United States, there is still a strong black market, which are not subject to state-based regulation.
IRS-CI urged bettors to use only gambling platforms that are legal in their jurisdictions and to avoid offshore or crypto-based sites that circumvent customer identification and reporting requirements.
The agency also reminded taxpayers that all gambling winnings are taxable and must be reported to the IRS, which differentiates it from Australia.
Prediction markets, which aren’t legally recognised as gambling and are licensed as financial products federally, are growing enormously in popularity in the United States.
