With the beginning of the 2024-2025 NFL season, the IRS Criminal Investigation Atlanta Field Office (IRS-CI) is reminding sports fans that illegal gambling activities can result in criminal charges ranging from money laundering to tax evasion.
The annual revenue from the illegal sports betting market in the United States is estimated at more than $700 million. Between fiscal years 2020 and June 2024, IRS-CI initiated 151 investigations into illegal gambling activity totaling more than $178.8 million and resulting in 71 sentencings with an average prison term of over two years.
“Individuals who participate in illegal gambling may think it’s a harmless activity that does not affect anyone,” said Special Agent In Charge Demetrius Hardeman, IRS-CI Atlanta Field Office. “However, illegal gambling activities provide criminal organizations money to finance violent and illicit activities.”
While many states have authorized sports betting, Alabama and Georgia are among those that do not. Louisiana and Mississippi are two of the 38 states that allow legal gambling through authorized licensed sports betting operators.
Last year, a federal grand jury in Birmingham, Ala. indicted eleven people from across the United States in a multi-million dollar wagering excise tax evasion scheme involving an illegal sports-betting organization. The 114-count indictment charges stem from the defendants’ management of a multi-million dollar wagering excise tax evasion scheme. According to the indictment, the organization’s alleged lead bookmaker, Timothy J. Pughsley of Birmingham, Ala., began operating a bookmaking business approximately around 2006. The organization eventually became known as “Red44,” and bookmaking and betting activities occurred online via an offshore server located in Costa Rica. The other defendants named within the indictment are alleged to be senior agents in the Red44 organization or original founding members.
Regarding the tax counts against the defendants, the indictment alleges that the organization was estimated to have accepted hundreds of millions of dollars in wagers from bettors from 2019 through 2021. In 2019, the Red44 Organization was alleged to have earned a gross profit of $14,930,787. The excise tax owed to the IRS, or two percent of total wagers placed by bettors, would be $6,882,460 for 2019 alone. In 2020, the organization had income of approximately $24 million. The excise tax owed to the IRS for this year would total approximately $6 million. Further, in 2021, the organization had income of approximately $36 million. The excise tax owed to the IRS for 2020 would total over $7 million.
Individuals who engage in sports betting activities are required to report their winnings on their annual tax return. Additionally, the IRS encourages individuals to keep detailed records of all gambling transactions, including bets placed, winnings received, and losses incurred.
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. Ignorance of the tax law does not exempt individuals from their responsibilities.
For more information on reporting gambling income and other tax-related inquiries, please visit IRS.gov.
CI is the criminal investigative arm of the IRS, responsible for conducting financial crime investigations, including tax fraud, narcotics trafficking, money-laundering, public corruption, healthcare fraud, identity theft and more.
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CI special agents are the only federal law enforcement agents with investigative jurisdiction over violations of the Internal Revenue Code, obtaining a more than a 90% federal conviction rate. The agency has 20 field offices located across the U.S. and 12 attaché posts abroad. Atlanta Field Office covers the states of Alabama, Georgia, Louisiana, and Mississippi. You can reach the Atlanta Field Office at atlantafieldoffice@ci.irs.gov and on the IRS:CI Atlanta Field Office LinkedIn.
