Proposed bill aims to curb illegal wagering platforms

Proposed legislation from a state agency would give the Iowa Racing and Gaming Commission the authority to take action against unlicensed gambling sites.

State officials said if passed, the bill would give the commission authority to issue cease and desist orders to the “bad actors” that scam Iowans for information, money or run unregulated, offshore markets. The bill has been filed by the Iowa Department of Inspections, Appeals and Licensing in advance of the 2026 legislative session, which begins Jan. 12.

Tina Eick, the gaming commission’s administrator, said under current law, the commission does not have the “clear authority” to take action against anyone other than the casinos and sports books that it currently licenses.

“When Iowans gamble on unlicensed platforms, they’re putting their money and their personal information at serious risk,” Eick said. “So we’re trying to be proactive here.”

According to the latest report from the American Gaming Association, Americans wager more than $673 billion annually in illegal and unregulated gambling markets. The illegal market, according to the report, has grown 22% since 2022. The association attributes the increase to the rise in iGaming, or online gambling, illegal sports betting and unregulated skill games, or unofficial slot-like machines.

Unlicensed vendors also skirt state taxes. According to the association’s report, the illegal market leads to an estimated loss of $15.3 billion, annually, in state gaming tax revenue.

What does illegal gambling look like?

Eick said the state encounters three main types of illegal gambling.

The first kind are companies that spoof or pretend to be a legitimate business to try and steal information. Eick said these bad actors will usually have a website address that looks just slightly off from the casino or legitimate business they are trying to impersonate.

Online casino gambling is not legal in Iowa, so Eick said if a local casino is reaching out and advertising online games, “that’s a fake.”

The second kind of bad actor is an online casino operator advertising sweepstakes that offer a cashout in cryptocurrencies. Eick said the commission receives complaints about these companies because when people go to cash out their winnings, they are unable to receive the money.

Offshore sports betting companies also pose a problem in Iowa, Eick said. These companies are not licensed in Iowa and therefore do not have to follow the same rules that licensed operators have to follow. Eick said this means the offshore companies offer wagers on “things that aren’t legal in Iowa” and raise “integrity concerns.”

By contrast, Eick said the licensed market is regulated by the commission for the benefit of the state and for the people who participate in the games.

“We have a strong regulatory system that ensures the games are fair,” Eick said. “We hold those operators accountable – their information and their funds are secure, and then they have responsible gaming, self exclusion programs in place, and then we tax them. They pay their fair share of taxes to Iowa.”

The bill allows the commission to issue cease and desist orders and obtain injunctive relief on parties offering these unlicensed types of gambling.

Under current law, she said the only thing the commission can really say is “buyer beware” and encourage Iowans to check the websites they are on before entering personal and financial information.

Eick said the commission regularly hears complaints from Iowans who have been scammed by these types of illegal gambling operations, which is why the commission wants to find a solution.

“The bottom line is, illegal gaming undermines the public trust and puts Iowans at risk,” Eick said.

Prediction markets still an unknown factor

Eick hopes the bill could “clean up” some of the simple exploitations happening in the gambling market, but there are some newer types of online gambling that will be more difficult to control.

One of those is sports prediction markets, which allow users to trade contracts based on the future result of real-world events. For example, rather betting on whether the Cyclones will beat the Hawkeyes, users can bet on whether or not the Cyclones will win. The same type of predictive markets have existed in the past in topics such as politics, but predictive markets have recently become more popular in sports betting.

In late December, the sports betting app FanDuel, launched its own prediction market platform. Kalshi and Crypto.com were early adopters of the model, and are regulated by the federal Commodity Futures Trading Commission, which allows the trading to occur without state licensing.

Lawsuits around the model have cropped up in several states, and attorneys general from 38 states, including Iowa’s Brenna Bird, signed a friend of the court brief in a case between Kalshi and Maryland’s Lottery and Gaming Control Commission, arguing the prediction market model “threatens the States’ longstanding ability to protect their citizens.”

Eick said the questions the commission has on prediction markets have “some overlap” with the questions it has on the “clearly illegal” gaming markets.

“It lacks some of the consumer protections that we see in the regulated gaming industry that we currently have in Iowa,” Eick said.

Eick said the prefiled bill is not meant to regulate predictions markets in Iowa, because that issue is “more complex.”

Eick said she’s not sure the legislation will get passed, but at the very least, the bill is a “conversation starter” to find solutions that will keep Iowans safe when they gamble.

“For the integrity of the industry, and so that Iowans don’t lose faith in the regulated and secure market, we need to do something about these other markets,” Eick said.