Drake lawsuit shines light on size of US illegal iGaming market

In early January 2026, a federal civil RICO (Racketeer Influenced and Corrupt Organisations Act) class-action complaint targeting the global music star Drake, streamer Adin Ross, Stake.us and others has shone a light on America’s illegal online gambling industry. Filed in the U.S. District Court for the Eastern District of Virginia, the lawsuit alleges that the defendants helped orchestrate and profit from an illegal gambling network built around the crypto-focused casino platform Stake.us.

While the lawsuit’s immediate allegations focus on promotional conduct and purported money-laundering activities, the larger implications reveal a deeply entrenched underground market that dwarfs the regulated gambling industry in the United States.

The legal complaint asserts that Stake.us and its celebrity associates engaged in deceptive marketing, presenting the service to U.S. consumers as a lawful “social casino” while facilitating real-money wagering through a dual–currency structure that effectively circumvented state and federal gaming laws.

According to the plaintiffs, millions of dollars seeded through the platform’s internal tipping and transfer functions were diverted to fund bot farms and other schemes, including efforts to artificially inflate streaming totals and manipulate digital platform algorithms. Though the allegations remain unresolved and have yet to be tested in court, they provide a rare glimpse into the mechanics of a shadow economy that has grown extensively in recent years.

Perhaps the most startling aspect of the lawsuit is not its celebrity component but the scale of the illicit market it describes. Independent research commissioned by advocacy groups and conducted by market intelligence firm YieldSec claims that illegal gambling operators represented a staggering 74% of the U.S. online gambling marketplace in the first half of 2025. This translates to roughly $38.7 billion in gross gaming revenue flowing to unregulated entities, with only a minority of the market captured by licensed, tax-paying companies.

Industry experts, including Ismail Vali, the founder of YieldSec and current president of Gaming Compliance International, argue that the legal gambling sector has consistently failed to displace its illegal counterpart despite years of state-by-state legalisation efforts.

Advocates had hoped that regulated betting and wagering products, especially sports betting which has been legalised in many states since 2018, would draw consumers away from offshore and unlicensed operators, thereby increasing public revenues and strengthening consumer protections. But the data suggests the opposite. Legal operators have stagnated and even contracted, while helping normalise online gambling behaviour for the benefit of unregulated gambling operators.

Between 2018 and mid-2025, the number of licensed legal operators actually shrank significantly. When legal sports betting first launched, more than a hundred companies entered the arena; by 2025 that number had dwindled to fewer than sixty. This decline has been accompanied by a drop in app downloads for legal sportsbooks, even as overall gambling activity grew.

Legal brands struggle with thin profit margins, especially in single-product categories such as sports betting. Meanwhile illegal platforms freely bundle multiple high-margin offerings, from casino games to poker and other betting products.

One structural disadvantage facing legal operators is the lack of broad cross-sell capabilities. Successful gambling enterprises typically use a suite of products—sports betting to build an audience as well as more profitable segments like casino and poker to maximise customer lifetime value. But laws in many states restrict legal operators to narrow product offerings, hindering their ability to compete with unregulated competitors that offer everything in a single ecosystem.

This fundamental mismatch in product breadth and profitability has contributed to the attrition and financial struggles of licensed companies, many of which have posted losses in recent years.

The result of this market imbalance is not just lower profitability for legal operators; it also means significant losses in tax revenue for states and a void in consumer protections that regulated gambling was meant to deliver. In states that have legalised online betting, illegal operators still retain the majority of customer share, raising questions about the effectiveness of current regulatory frameworks.

Critics argue that the patchwork nature of U.S. regulation, with distinct rules in each state, only compounds the problem, allowing illicit platforms to exploit jurisdictional gaps while providing seamless, nationwide access to customers.

At the heart of the underground gambling surge is the explosive rise of crypto-based gaming. These platforms have carved out a niche by exploiting the inherent attributes of digital assets: frictionless transfers, reduced identity verification requirements, and near-instant settlement.

With an estimated $14.4 billion in revenue, crypto gambling accounted for a significant portion of the illicit market and nearly a third of total online gambling revenues in 2025. Operators leverage the very volatility of crypto to create illusions of wealth and entice users to engage in riskier betting behaviour, often blurring the line between investing and gambling.

Crypto gambling’s success also stems from its relative marketing advantages. Illegal operators aggressively purchase search terms, dominate social media advertising, and exploit loopholes in major technology platforms. For instance, some deploy advertisements for innocuous products for the statutory monitoring period required by app stores or ad platforms, only to switch to gambling promotions once the monitoring window lapses. Major ecosystems like Apple’s App Store, Google’s Android marketplace, Meta’s social suite, and others have inadvertently become conduits for illicit gambling content, enabling these operations to flourish with little resistance.

The lawsuit against Drake and his co-defendants has drawn attention because of its celebrity association, but its broader significance lies in exposing the size of America’s unregulated online gambling industry. What began as allegations of unlawful promotion and alleged misconduct has evolved into a spotlight on the structural weaknesses of America’s online gambling ecosystem. As legislators and regulators take notice, the pressing question remains whether policymakers will treat this case as an isolated celebrity scandal or as evidence of systemic failings that require urgent intervention.

Meanwhile, lawsuits against Stake.us just keep on piling up. The State of California filed a lawsuit against them last year calling into question the legality of their ‘social casino’ operation. Other states are considering similar action.