New Delhi, Dec. 8 -- Washington -Across America, the familiar chime of slot machines has gone digital, slipping into pockets and purses via smartphones. Seven states now permit full-scale online casinos, where players can wager on virtual blackjack tables and spinning reels from their couches, generating billions in tax revenue that state coffers eagerly claim. Yet beneath the glittering promise of easy money lies a shadow economy of addiction, regret, and aggressive marketing tactics that prey on the vulnerable.

New Jersey, the pioneer since 2013, has collected more than $2.5 billion overall, its revenue surging 25 percent year-over-year amid a national wave of legalization. Michigan leads the pack, raking in over $2 billion in iGaming ...