The 2018 Supreme Court decision to strike down the federal ban on sports betting and the widespread legalization of marijuana were enacted with a shared promise: transitioning vices from the illicit black market to a regulated, transparent industry would protect consumers and curb criminal enterprises. Instead, data from financial institutions and industry groups shows that legalization has expanded the reach of these markets, left underground networks intact, and accelerated addiction rates, particularly among young Americans.
The Persistent Underground Market and High Taxation
Legalization has failed to eradicate illegal operators for both sports betting and cannabis. High state taxes and regulatory costs—such as rates taking up to 51% of sportsbooks’ gambling revenue—allow unlicensed bookies and underground dealers to undercut legal storefronts. A 2025 report from the American Gaming Association indicates that the illegal gambling market grew by 22% over a three-year period, continuing to account for roughly one-third of all U.S. gambling activity. A similar dynamic plagues the cannabis sector. According to research directed by Geoffrey Lawrence at the Reason Foundation, regulatory overhead pushes legal prices past black market alternatives, driving consumers toward illicit suppliers and reducing state tax collections.
Spreading Financial and Psychological Harms
Rather than containing risk, accessible legal frameworks have exposed broader segments of the population to addiction and financial distress. Federal Reserve data links legal sports betting to declining consumer credit scores, while state-level rates for gambling disorders have climbed from 3.0 to 4.8 per 100,000 residents in jurisdictions permitting the practice. Among online sports bettors, 68% report engaging in at least one problem behavior, such as borrowing money to fund wagers. Concurrently, broader cannabis availability has coincided with a 17% national smoking rate, up from 7% in 2013, alongside a 16% rise in hospitalizations for marijuana-related conditions between 2025 and 2026.
Comparative Market Dynamics
| Sector | Adoption Rate / Market Share | Key Harms Identified |
|---|---|---|
| Sports Gambling | More than half of men aged 18 to 49 hold sportsbook accounts; illegal market accounts for roughly a third of total volume. | Falling credit scores, financial distress, and rising gambling disorder rates. |
| Recreational Marijuana | 17% of Americans smoke cannabis, up from 7% in 2013; illegal sales outnumber legal transactions in California. | 16% increase in hospitalizations (2025–2026) and adolescent health risks. |
Legalization impacts on black markets and younger gamblers
Did legalization eliminate the black market for sports betting and marijuana?
No. High taxes and regulatory expenses enable illegal bookies and unlicensed cannabis operations to remain competitive by offering lower prices and avoiding compliance costs.
How has legal sports betting impacted younger demographics?
Data indicates that over half of men aged 18 to 49 maintain sportsbook accounts, with significant majorities reporting problem behaviors like borrowing money to gamble and experiencing lower credit scores.
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