IRS-CI probes illegal sports gambling

The Internal Revenue Service's Criminal Investigation unit has been stepping up its enforcement efforts targeting financial crimes tied to illegal gambling.

Over the past year (July 1, 2026, to June 30, 2026), IRS-CI said Thursday it initiated 54 illegal gambling investigations involving $11.5 million, linked to an estimated $126 million in laundered funds.

IRS-CI reported it has maintained an 84% conviction rate in prosecuted illegal gambling cases, with defendants sentenced to an average of 37 months in prison.  

"Illegal gambling isn't just about placing unlawful bets," said IRS-CI chief Jarod Koopman in a statement. "Our investigations routinely uncover money laundering and tax crimes tied to illegal gambling operations. Following the money allows us to dismantle larger criminal networks."

Recent cases demonstrate how illegal gambling operations can intersect with money laundering, tax evasion and wire fraud, while producing millions in illicit proceeds.

A California man was sentenced in June to 27 months in prison for tax evasion, operating an illegal gambling business and money laundering. Unlicensed and illegal gambling businesses used websites operated by his Costa Rica-based business to place bets, which is illegal under federal law. He then laundered millions of dollars derived from this business and evaded taxes on approximately $4.2 million in income.

An Indian national who lived in Georgia pleaded guilty in May to multiple conspiracy charges tied to wire fraud, operating an illegal gambling business and money laundering. He and his co-conspirators ran illegal gambling businesses at four separate locations in Missouri under the guise of internet amusement arcade games, skill game arcades and adult arcades. They obtained approximately $9.5 million in gross proceeds from their wire fraud scheme and illegal gambling businesses and conducted various financial transactions to launder the proceeds.

With football season approaching, IRS-CI is warning taxpayers to steer clear of illegal gambling operations, as it did last year, even as legal forms of sports betting apps continue to increase in popularity and usage and are heavily promoted during sports games and events like the recent World Cup and NBA finals.

When placing bets, IRS-CI cautioned taxpayers to be sure to use state-licensed gambling platforms that are legal in their jurisdiction. Taxpayers should steer clear of offshore and crypto-based gambling platforms that attract anonymous users by avoiding Know Your Customer protocols and financial reporting obligations. They and their tax preparers should also make sure to report all gambling winnings as taxable income to avoid civil and criminal penalties from the IRS and never accept payment to place bets on behalf of someone else or gamble to obscure the source of funds. Otherwise they and their tax preparer could find themselves in the middle of a money-laundering conspiracy.

IRS-CI is encouraging sports enthusiasts who are unsure about their tax obligations or have questions about reporting gambling income are encouraged to consult tax professionals or visit the official IRS website for guidance, as ignorance of the tax law does not exempt individuals from their responsibilities. More information on reporting gambling winnings and losses is available on IRS.gov.