Article originally published on Forbes
A civil lawsuit involving Grammy-winning rapper Aubrey “Drake” Graham was filed in the Eastern District Court of Virginia in December, with allegations that he allegedly participated in an illegal crypto gambling scheme. The 50-page complaint, filed by consumers LaShawnna Ridley and Tiffany Hines, charges the rapper with masterminding an unlicensed gambling operation disguised as celebrity entertainment. The federal class action lawsuit accuses Graham, plus streamer Adin Ross, and actor George Nguyen, of operating a criminal organization, as defined by the Racketeer Influenced and Corrupt Organizations Act, centered on crypto gambling platform Stake.us.
But the civil RICO lawsuit goes beyond any particular celebrity’s alleged wrongdoing to expose a dark shadow gambling economy that has robbed American consumers and legitimate businesses of tens of billions of dollars. The lawsuit coincided with the release of new data by Yield Sec, a gaming intelligence platform, which revealed the immense scope of the underground gambling economy in the United States. It found that illegal gambling operators took in 74% of the U.S. online gambling market in the first half of 2025, capturing a staggering $38.7 billion out of a total of $52 billion.
How Drake Became Associated With Crypto Gambling
The alleged scheme involved not only promoting illegal gambling to the rapper’s vast social media audience, but also a complex money laundering operation in which millions of dollars were allegedly funneled through the platform’s “tipping” feature to fund bot farms that may have fraudulently boosted the rapper’s Spotify streams.
The allegations are still pending in court with no resolution in sight. Neither Graham, Ross, nor Stake.us have issued a public response to the civil lawsuit’s specific allegations. Despite this, the consumer lawsuit has brought to light what insiders have long suspected but been unable to measure: legal gambling in the U.S. has failed to supplant the illegal industry it was intended to eradicate. Moreover, new data implies that illegal gambling may now be a more widespread issue than ever before.
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Behind the alleged individual scheme involving the rapper known as Drake lies a more staggering reality. The Campaign for Fairer Gambling, an advocacy group funded by former poker executive Derek Webb, commissioned Yield Sec to research the gambling industry in America.
“American commerce is being robbed,” Ismail Vali, founder and former CEO of Yield Sec, the current President of Gaming Compliance International, said in a press statement. “Legal online gaming brands are being cheated out of their rightful earnings. Moreover, the American community is also a victim of this theft, as the brands’ illegal operations deprive the government of tax revenue that is rightfully due.”
Despite the past seven years of state-by-state legalization, the Yield Sec data suggests that legalized gambling has not captured significant market share from illegal operators. Instead, it has normalized the practice, while illegal platforms have maintained their dominant market share. The outcome has resulted in lost tax revenue and the “silent death of legal, licensed operators,” according to Vali.
When legal sports betting went live across the U.S. in 2018, 103 licensed operators entered the fray. By 2024, the number had dropped to 95, and by mid-2025, only 57 remained operational.
“None of this is due to consolidation,” Vali told me in an interview. “It’s purely due to the fact that these brands can’t generate the revenue they should, which means they can’t pay the taxes states expect.”
The operator collapse is further underscored by a 19% year-over-year decline in sports betting app downloads in 2025, according to Sensor Tower data, despite the gambling market’s overall growth. Legal operators are constantly losing customers who prefer unregulated competitors.
The Crypto Gambling Revolution
At the core of the underground gambling network lies crypto gambling. With $14.4 billion in revenue estimated by Yield Sec, accounting for 37% of illegal gaming revenue, this market has revolutionized how Americans participate in online betting. The shadow gambling industry has been growing exponentially alongside crypto adoption.
Vali told me that “crypto gambling” has emerged as a highly successful product, exploiting the term “crypto” to entice a certain audience that lacks a basic understanding of blockchain technologies. The platforms capitalize on the volatility of cryptocurrency prices to create what Vali terms a “winning lie,” where users are lured by inflated account balances and encouraged to place more frequent bets, and often larger bets, when bitcoin prices rise.
Crypto platforms perpetuate a dangerous illusion by displaying user deposits as fluctuating cryptocurrency coins, misleading users into believing they are earning investment returns. As Vali notes, this perceived wealth encourages users to gamble more and take greater risks. Consequently, many users engage in more frequent, high-stakes betting.
Plus, to leverage higher conversion rates, some platforms that don’t accept cryptocurrency deposits still market themselves as “crypto casinos.” Vali notes that illegal operators exploit pay-per-click advertising systems, which is how they can afford to buy the term. “If I can put some other word in there which people started doing 13 [or] 14 years ago with crypto, now it’s cheaper for me to buy that term,” he explains. This mirrors the global casino boom driven by stablecoin adoption.
Why Legal Gambling Can’t Compete With Illegal Crypto Gambling
Vali’s said the industry term “cross-sell” is the core issue. This refers to the ability to transfer customers between different gambling products to maximize lifetime value, which legal operators struggle with compared to illegal competitors.
“To turn a profit in this industry, you must be a one-stop gambling shop with cross-sell capabilities,” Vali added. “The key is to leverage sports betting to acquire a database audience and then migrate them to casino and poker, where the profit margin is higher. Without cross-sell, it’s a challenge to turn a profit, as the margin for sports betting, legal or illegal, is extremely thin.”
Vali believes that legalized sports betting in most U.S. states, without online casinos, puts operators at a significant disadvantage, comparable to “fighting with one hand tied behind your back.” This restriction means they can only offer sports betting, a low-margin product with single-digit profit margins, if they’re lucky. In contrast, illegal operators provide a wide range of gambling options, including casino games, poker, and emerging products like prediction markets or (unlicensed) crypto trading.
“Why would I gamble with you if you don’t offer me a benefit in the casino when I lose money on sports, or vice versa? Legal brands are advertising everywhere, trying to get their hands on that valuable customer database, but illegal operators give customers everything they want in one place,” Vali said.
Ohio’s experience with legalizing online sports betting has been instructive. Legalization has failed to displace illegal gambling operators, instead adding a new layer of gambling options, resulting in Ohio incurring the highest per-capita losses to illegal gambling in the country, according to Yield Sec data. That’s a significant market, considering that Gambling Insider reported that Ohio yielded $133 million in lawful sports betting revenue in November alone.
The legal gambling industry’s ongoing profitability crisis is largely due to its competitive disadvantage. For example, despite a $150 million annual licensing deal with Disney, ESPN Bet struggled to gain traction, capturing only 3-5% market share before Penn Entertainment terminated the partnership in December 2025. Furthermore, Deadspin reported that Fanatics Betting projects lost $300 million in 2025 and could lose another $150 in 2026. Meanwhile, other major operators, such as DraftKings, were forced to cut their full-year guidance by $300 million due to unfavorable sports outcomes, which do not impact the illegal competitors’ house-edge casino games.
In contrast, BetMGM finally turned a profit in 2025, with $200 million in earnings before interest, taxes, depreciation, and amortization, but only after hemorrhaging over $360 million in 2023 and 2024. This milestone was reached only through sustained losses that would have driven smaller operators into bankruptcy.
The Law Enforcement Void Vs. Tech Exploitation
According to data from Gaming Compliance International, the parent company that acquired Yield Sec, nearly 3,500 illegal gambling apps on Android and Apple stores have evaded the standard 30% revenue share required of licensed gambling operators.
“When illegal gambling appears, they don’t identify it as such, as this would require a state government license to enter the app stores’ gambling sections,” Vali said. Instead, operators misrepresent their apps as “sports information” or “games,” then transition them to real-money gambling within 24 hours of download.
The issue is widespread across major tech platforms. Illegal operators manipulate ad systems on Meta (Facebook, Instagram), Google, and others by advertising legitimate products such as “sandwiches or sneakers” for 28 days—the standard monitoring period. They then switch to gambling promotions, exploiting the system’s limitations.
The scope of the issue is hard to quantify. The American Gaming Association estimates illegal gambling to be around 32% of the total U.S. gambling market, whereas Yield Sec’s figure for online gambling activity is 74%. This disparity can be attributed to differences in methodology: Yield Sec’s estimates are based on proprietary digital tracking of online activity across search engines, apps, social media, and advertising platforms, whereas industry groups like the AGA primarily rely on consumer surveys and publicly available data. Moreover, Yield Sec focuses exclusively on online gambling, where illegal operators may have a competitive edge, whereas broader industry estimates include offline gaming, where legal operators tend to dominate.
Nevertheless, the data presents American policymakers with a clear choice: Acknowledge the inadequacy of the current state-by-state approach to legalization or adopt a more comprehensive framework.
“Legalization alone can’t eliminate or reduce illegal gambling,” Vali said. “To move from chaos to control, legalization requires ongoing monitoring, policing, enforcement, and optimization.”
State regulators currently prioritize monitoring licensed operators instead of combating illegal gambling. Meanwhile, federal law enforcement lacks the necessary resources to monitor the rapidly evolving illegal gambling industry. The enforcement gap has generated a “perfect storm” for illegal operators, according to press statements by Derek Webb, founder of Campaign for Fairer Gambling. A former gaming industry entrepreneur who funded GCI’s research, Webb contests the notion that legalizing online gambling will curb illegal online gambling. Instead, experts like Webb say that federal intervention is necessary to reduce the quantity of illegal operators exploiting the current state-by-state regulatory system.
Unlicensed platforms offer consistent nationwide access, while legal operators are forced to navigate 50 different regulatory frameworks.
The ongoing consumer lawsuit against the rapper known as Drake sheds light on the massive underground gambling economy. The bait and switch approach to attracting customers is both widespread and costly for the American public. As policymakers consider the issue, they must decide whether to view these instances as isolated or as a systematic problem that undermines legal gambling markets.
