Since the U.S. Supreme Court lifted the federal ban on sports betting in 2018, and as more states have legalized recreational marijuana, the anticipated decline of black market activity in these sectors has not materialized. Instead, the illegal markets for both sports wagering and cannabis have persisted—and in some cases expanded—despite the growth of legal industries designed to regulate and control these vices.

Thirty-nine states now allow legal sports betting, a major shift following the Supreme Court's decision. Proponents argued that legalization would create a safer environment and curb unlawful gambling. However, industry reports indicate that the illegal sports betting market has increased by 22% over the past three years and continues to represent roughly a third of the U.S. gambling market. Due to high state taxes that can reach up to 51% on sportsbook revenues, illegal operators retain a financial advantage by evading taxes and regulations, sustaining their customer base.

Moreover, legal sports betting has extended gambling activities to states where it remains prohibited. Residents in these areas often cross state lines to place legal bets, use illegal bookmakers, or engage in alternative platforms such as “prediction markets” to participate. Research highlights troubling behavioral patterns among younger bettors: more than half of men aged 18 to 49 hold accounts with major sportsbooks, and among online sports bettors, 68% have exhibited problem behaviors like borrowing money to gamble or experiencing financial harm, with over half reporting multiple such issues. Corroborating these concerns, data from the Federal Reserve links legal sports betting to a decline in credit scores, and gambling disorder rates in states permitting sports betting have risen from 3.0 to 4.8 per 100,000 people.

Legalization of recreational marijuana, first implemented in Washington and Colorado in 2012, was supported on grounds including criminal justice reform and personal freedom, alongside promises of a regulated, safer market supplanting illegal suppliers. However, illegal cannabis sales remain robust. High taxation and regulatory burdens on the legal market often push prices above those of illicit sellers, further incentivizing consumers to seek out the black market. This dynamic has prevented the full transition to legal channels.

Since recreational marijuana was first legalized, U.S. cannabis use has more than doubled, rising from approximately 7% of Americans in 2013 to 17% today. While broader consumer access was an expected outcome, there has also been a 16% increase in hospitalizations linked to marijuana-related conditions between 2025 and 2026. Additionally, research has associated teen cannabis use with mental health challenges including depression, anxiety, bipolar disorder, and schizophrenia.

Despite the emergence of regulated markets, illegal cannabis distributors continue to operate by avoiding taxes and regulatory requirements. In states such as California, illicit sales still outpace legal transactions, with consumers often unable to distinguish between regulated and unlawful sources. Some experts suggest that legal marijuana availability may inadvertently serve as a gateway to cheaper, unregulated products.

While proponents of legalization emphasize personal freedom and regulation, critics argue that neither the legal sports betting industry nor the cannabis market has eliminated underground activities, and both have contributed to the normalization and spread of related harms, particularly among younger populations. The reliance on tax revenues from these industries complicates efforts to reverse legalization policies, yet some advocates argue that states retain the authority to reassess and modify their approaches.

The ongoing challenges facing legalization efforts highlight the complex interplay between regulation, market forces, and consumer behavior, leaving policymakers to weigh the balance between individual liberties and public health risks.