Look In The Mirror

There is a simple way to deal with gray and black market products: legalization and regulation that offers a legal product that outcompetes them.

Online gambling has been a “threat” since the early 2000s, when the popularity of the Poker Boom made the general public aware that gambling was just a mouse click away.

The introduction of sweepstakes sites, sports contracts offered at prediction market sites, or whatever the next wave of unregulated online “gambling” is, is not the threat. There has been rampant unregulated online gambling for 25-plus years. The threat comes from pockets within the industry that are too stubborn to adapt, as well as from lawmakers willing to go along with them.

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As Dustin Gouker recently wrote in his Closing Line newsletter, there is a certain amount of absurdity in the sector, with states restricting or prohibiting licensed, regulated options while being unable to shut down unregulated sites.

They are essentially patting themselves on the back and glad-handing one another about stopping the scourge of gambling, while gambling is occurring all around them.

Oregon Trail

That absurdity is laid bare in Oregon, Gouker’s home state, where a tangle of restrictions and loopholes creates a gambler’s paradox.

As Gouker wrote:

“Nowhere is the absurdity on display better than in Oregon, where I live, although a lot of the following can be applied to many states that either do or don’t have legal sports betting. Here’s a rundown.”

Gouker goes on to explain that while he has one legal sportsbook to choose from, DraftKings, which operates through a contract with the state lottery. And because of state laws, that sportsbook can’t offer any college markets, but the state’s retail sportsbooks can, and he can jump on any of the following:

• Offshore sportsbooks.

• Fantasy parlay/pick’em apps.

• A variety of sweepstakes sportsbooks.

• A peer-to-peer real-money exchange called BetOpenly.

• Kalshi, Robinhood, and Crypto.com.

He can also fall victim to one of the increasing number of scam sites that pretend to be affiliated with a land-based casino.

Even stranger, DraftKings can’t offer DFS in the state, because of its deal with the lottery, but Gouker can play DFS at “FanDuel, PrizePicks, Underdog, and dozens of others.”

As he wrote, “Make it make sense.”

The problem is, it doesn’t make any sense. Some argue that these restrictions protect problem gamblers, but leaving them at the mercy of offshore sites and scams offers no safety net at all.

PokerStars and Full Tilt weren’t the problem. DFS wasn’t the problem. Sweepstakes sites aren’t the problem. Kalshi and prediction markets aren’t the problem. The problem is that states don’t offer customers legal options, or those legal options are so restricted that the gray and black market options are more appealing.

Gambling Is Bad, We Know This and Do It Anyway

Everyone knows gambling can be harmful. At its best, it’s a drain on time and money. At its worst, it can spiral out of control, causing extensive damage.

Yet, like it or not, it’s woven into human nature and isn’t going anywhere. The urge to take a chance persists across cultures and eras, as I’ll discuss in a moment. Instead of pretending we can banish it, the real question is how to manage it sensibly, channeling that impulse into regulated, safer avenues rather than confining it to shadowy illegal markets.

Think of it this way. People like sugary soda; it’s delicious. It doesn’t matter that it’s terrible for your health; people love it.

The answer isn’t to prohibit or dilute it. That will simply create a black market or lead to people adding extra sugar. The answer is to provide healthier (not HEALTHY) alternatives that still satisfy the craving.

In Oregon’s gambling landscape, the paradox is evident: restrictive laws push bettors toward unregulated, risky platforms rather than fostering a regulated market that balances consumer choice with protections.

Legalizing a broader range of betting options — such as college markets, DFS, and allowing more sportsbooks to enter the market — could streamline the system, reduce reliance on offshore and scam sites, and generate revenue for the state to fund resources for problem gambling.

Prohibition and overregulation don’t eliminate demand; they just drive it underground.

Let’s Get to the Root of the Problem

Breaking News from the dawn of civilization: People like to gamble, and they will gamble on just about anything.

Gambling was prevalent at the Roman Coliseum and during the Olympic Games in ancient Greece. Evidence from China suggests that lotteries and keno-like games were in use more than 2,000 years ago. Egyptian wall paintings and papyri feature depictions of betting, often accompanied by drinking, with some Egyptian myths centered around gods wagering on cosmic games.

It spans all cultures and periods, was usually illegal (although enforcement was lax in many eras), and almost always seen as a sign of moral failing when done in excess. Prohibitions, religious bans, and edicts from rulers be damned, people gambled and continue to gamble anyway, because people like to gamble.

There is only one way to lessen the impact of gray and black market products.