AUSTIN — In the push to legalize mobile sports betting in Texas, a powerful pro-gambling group says Texans spend a whopping $8.7 billion annually on illegal wagers. Former Gov. Rick Perry touted the number in an advertisement for the Sports Betting Alliance in making the case for Texas legalizing sports betting.

But experts question the accuracy of the figure because they said it’s impossible to accurately determine the size of an illegal market. Even the research firm that produced the estimate called it a “highly-speculative exercise.”

“Given the high level of uncertainty in this approach, this estimate should be treated as low-confidence,” said the report by Eilers & Krejcik Gaming LLC.

In the 2023 legislative session that begins Jan. 10, lawmakers are expected to consider making sports betting legal in the Lone Star State. Estimates of illegal betting’s economic impact are a key to the push as advocates make the case about how much the state could potentially earn by taxing a piece of the profits.

The current illegal market estimate would yield tens of millions of dollars in potential state revenue over a two-year period. Lawmakers behind the push want to earmark those dollars for education and public safety.

But experts caution against putting too much stock in the accuracy of Texas’ illegal market estimates in part because the studies tend to draw from survey responses.

“By definition, if you’re studying an illegal market, it’s hard to know [the market’s size],” said Koleman Strumpf, an economics professor at Wake Forest University who has studied the sports gambling industry. “If a random person calls you and asks do you cheat on your taxes, would you be truthful?”

They also are wary of the view held by many proponents that regulating sports betting will stop Texans from placing unregulated, untaxed bets.

“The regulated market is not taking business away from the unregulated market,” said Harry Crane, a statistics professor at Rutgers who has studied betting markets.

Cara Gustafson, a spokeswoman for the Sports Betting Alliance, said: “There is no doubt that there is an extensive illegal market operating in Texas and it is clear in the report that the numbers used are estimates.”

She did not respond to detailed questions on the figure and its accuracy and why the group is confident in it.

Adam Krejcik, who is the head of sports betting at Eilers & Krejcik Gaming, said in an email that the disclaimers listed in the report were meant to tell any reader to take the projections with “the largest possible grain of salt.”

The Sports Betting Alliance partners with Eilers & Krejcik Gaming, Gustafson said. Krejcik said the firm was commissioned to produce a study on the sports betting market in Texas.

Perry, who is a paid spokesman for the Sports Betting Alliance, told The Dallas Morning News the figure is “as good a number as you can come up with.”

“We know it is a substantial number,” he said without offering specifics.

The former governor, who joined the group in the fall, said he does not actively participate in sports betting. The Texas A&M graduate said he has placed one bet in his life: $25 for the Aggies to win the national championship about 10 years ago. He lost.

Sports gambling in 2023

Legalizing sports betting faces an uphill battle in the upcoming legislative session. Sen. Carol Alvarado, D-Houston, has filed Senate Joint Resolution 17, a constitutional amendment that would legalize sports betting and allow a newly created Texas Gaming Commission to issue casino licenses for up to four “destination resorts.”

Two-thirds of the House and Senate must sign off for the initiative to go forward. Then, Texas voters would have the final say in a November election..

Last session, Lt. Gov. Dan Patrick, who runs the Senate, said sports gambling would not “see the light of day,” and the bills died out.

Patrick’s office did not respond to a request for comment on his position on sports betting going into the 2023 session.

Gov. Greg Abbott indicated before the midterm elections that he would be open to casino gambling, the Houston Chronicle reported in October.

Saying that people in the United States place billions in illegal bets annually and that the practice needs to be regulated is not a new argument. In 2014, NBA Commissioner Adam Silver wrote an op-ed in The New York Times that said about $400 billion is illegally bet on sports each year.

Ever since the Supreme Court in 2018 ruled that the federal ban on sports gambling was unconstitutional, states have been in a sprint to pass legislation that would make it legal.

Currently, 31 states and Washington, D.C., have some form of legalized sports betting, according to the American Gaming Association. Texas and California are the two largest states where it is still illegal, although live and simulcast parimutuel betting on horse racing is legal on the state’s remaining tracks, including one in Grand Prairie.

Voters in some states still aren’t sold on legalizing sports gaming. In November, Californians voted down two propositions to amend the state’s constitution to legalize mobile betting.

A New York Times investigation from November concluded that projections of how much several states could collect in taxes from sports betting were “wildly inflated.” But a few, like New York, exceeded projection expectations by adding a high tax rate

When Louisiana legalized it in 2021, for example, 25% of the state revenue from sports gambling was dedicated to early childhood education. The revenue generated could be used to fund different sectors of the state like education.

Louisiana officials estimate that bettors there will wager about $1.8 billion in the first full fiscal year of operation, and the state expects sports betting tax revenue to be higher than the projected $30 million during the first year. Through the first five months of the current fiscal year, more than $15.2 million in taxes were paid to the state on more than $844 million in wagers.

Illegal market studies

The report on the Texas market by Eilers & Krejcik Gaming is based on three studies with wide-ranging estimates of the scope of illegal sports betting in the U.S.

One report calculates the illegal market in the U.S. is as high as $150 billion a year, a second says it’s $107 billion and the final says it’s between $50-$60 billion. Eilers & Krejcik Gaming takes a midpoint of $100 billion.

Strumpf, who has published a paper on sports betting, analyzed the methodology for The Dallas Morning News and said he doesn’t have high confidence in the numbers.

The first report projecting the U.S. market was $150 billion can be traced back to the 1999 report by the National Gambling Impact Study Commission, which gave a range of $80 billion to $380 billion. Commissioner John Wilhelm has been identified as the origin of the estimate, saying it in a 1998 commission hearing, meeting transcripts show. He did not cite a source.

Strumpf said that the illegal market size cited in the 1999 report is “essentially made up.” Slate and The New York Times have also written stories that challenge the accuracy of that calculation. Reached by text, Wilhelm said he doesn’t remember much about the 1998 meeting or the number. He declined to comment further.

The two other studies draw on surveys to try and get a grip of how many adults in the country are placing illegal bets. The method can be unreliable because it involves taking a small sample size of bettors and trying to assign that behavior to the rest of the United States population.

“That doesn’t make any sense,” Strumpf said in an email. Ultimately, he summed up the study this way: “If a student turned this into me as part of a class project, I might be generous and give them a C but really it is failing.”