“ We are migrating Americans into the safety of consumer protections of that legal marketplace by the tens of millions , and I think that will be further as we continue to bring in stronger brands . But the illegal marketplace is not going anywhere because we need to figure out how we can better understand where they are and how to stop them .”
— Bill Miller , President and CEO , American Gaming Association
He adds that “ most , if not all , of the brands that aren ’ t going to survive that first cut have exited at this point ,” with the key words being “ first cut ”— -the number of additional waves yet to come is impossible to say just yet , given a host of factors , including an ever-changing regulatory landscape .
Sports betting is inherently a low-margin business , especially when compared to land-based and online gaming , which is why it makes sense for established operators to focus on those efforts if they feel that the risks of bookmaking outweigh the benefits . However , when a difficult path to success is beset with increasingly high tax rates , that hikes up the difficulties to a new level .
In the densely populated Northeast , New York , New Hampshire and Delaware all carry online rates of at least 50 percent ; Pennsylvania is not far behind at 36 percent for both verticals ; in the Midwest , once-darling Ohio quietly doubled its levy from 10 percent to 20 percent last year , and mere weeks ago , Illinois Governor J . B . Pritzker ’ s latest state budget pitch included a proposed hike from 15 percent to 35 percent , in the name of reducing deficits .
This , Mark says , is perhaps the No . 1 factor that may dampen what has been the roaring 2020s of the sports betting business , especially given that “ under half of the states in the U . S . still have not legalized online sports betting .”
“ The regulatory environment will continue to be a headwind for the sports betting and gaming industry ,” he argues . “ As New York moves into the second-largest sports betting jurisdiction following the U . K ., we will continue to watch if other states follow suit .”
Taxes aside , the increase — or as some would call it , inundation , bombardment , etc .— of advertising could also be seen as a negative development that has arisen from this increased activity and investment . While this discussion could easily fill several of its own articles , there ’ s no doubt that it is in fact a trend worth noting , not just for regulators , but also for the bettors and anyone else with access to cable television .
In response , bookmakers and industry advocates would argue that the marketplace is still very much in its infancy , and therefore must do what it can to make up for lost ground .
“ There have been points in time when the industry has been criticized for the amount of advertising ,” Miller conceded . “ My response has always been , ‘ Look , the illegal marketplace has had decades of head start on the legal marketplace that was just opened up in the last few years .’”
When asked about the regulatory considerations of sports betting expansion , both the Nevada Gaming Control Board and the New Jersey Division of Gaming Enforcement declined to comment .
Horse , Hound and Arms Races
At this point and in the immediate future , the next frontier of growth does not lie directly in sports betting , but rather in other avenues , namely iGaming and iLottery .
In mid-February , DraftKings announced it had acquired the Jackpocket iLottery app in a cash-stock deal worth $ 750 million in total , which CEO Jason Robins lauded as a way to “ create significant value ” by giving players “ another differentiated product ” in the company ’ s overall platform .
In a similar but slightly smaller vein , FanDuel made its own announcement a week later by acquiring iGaming start-up BeyondPlay for an undisclosed sum , adding high-level jackpot management systems and multiplayer software to its FanDuel Casino platform that already ranks second in the U . S . Asaf Noifeld , managing director of FanDuel Casino , said resolutely that the company ’ s strategy in the U . S . “ is about investing to win .”
“ We expect to see this trend continue ,” Mark says . “ Just as nonsports betting operators in the online gaming world are looking for new opportunities to enter into the market , the big platforms will look for ways to diversify their portfolio and take market share in other parts of the online gaming street .”
For Grove , this style of vertical M & A “ is absolutely the next arms race in sports betting ,” adding that DraftKings has “ placed far and away the biggest bet with Jackpocket .” Moving forward , he says , bookmakers need to “ aggressively survey the landscape for targets ” that can bring similar value , and those who don ’ t “ are likely to risk surrendering significant market share and long-term potential .”
Overall , it ’ s no secret that the U . S . loves gambling , sports , gambling on sports , and , perhaps most of all , open marketplaces . This combination has resulted in a devilishly entertaining six-year run that economists will likely study someday with fascination or horror , depending on several complicated factors and surely several more yet to materialize .
In the meantime , bettors and investors alike will continue to have a front-row seat to a battle that extends far beyond the playing field and into boardrooms everywhere .
30 Global Gaming Business APRIL 2024