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Legalized Sports Betting in the United States Will be Like Wild West

Written by:
Aaron Goldstein
Published on:
Apr/29/2019
  • State-by-state legalization of sports betting like the Wild Wild West

  • So far, Draftkings and FanDuel control 84% of the NJ sports gambling market

  • Draftkings original estimates have thus far exceeded expectations in New Jersey

  • The two companies may have a tough time mirroring their NJ dominance in other states


WHY BE AN AFFILIATE WHEN YOU CAN GET 100%?  JUST PAY $5 PER PLAYER

CNBC this weekend compared the sports betting landscape in the United States to the early days of the Wild Wild West where each US state has its own set of rules and regulations.

Since the US Supreme Court ruled to reverse a decision banning sports wagering nationwide last year, only eight states have amended their laws to allow licensed sportsbooks.  New Jersey has so far been the only success story, yet only two companies control 83% of the market: Draftkings and FanDuel.

“Our original estimates for the New Jersey market have been very, very, very materially exceeded,” said FanDuel Chief Revenue Officer Mike Raffensperger. “Gambling is still dominated by an illegal grey-and-black market, whether with local bookies or offshore operators, that have been in place for a very long time. In a regulated, consumer-protected business, we’re very optimistic that we can actively displace that as more responsible actors.”

But FanDuel and Draftkings will have a tough time duplicating their near monopoly in other states.  Pennsylvania is proving to be a success story via its retail sportsbooks, but Draftkings may not even have a mobile presence there when the state prepares to go online in the coming weeks.  In Mississippi, William Hill reigns as the dominant player.

Draftkings is optimistic that the majority of states will adapt New Jersey's model, where 80 percent of the revenue is derived from the mobile market.


Hundreds gather at a party hosted by Betting on Sports America

“It’s going to take some time for a national roll-out, but as legislators start looking at what New Jersey did to create a tax stream and remove the illegal market, legislators want to move faster,” said Paul Liberman, co-founder and chief operating officer at DraftKings. “New Jersey has done a great job of developing a regulatory framework that works for both businesses and the state. We believe over the next few years we’ll get a dozen or more states to adopt it.”

New Jersey is also the state that filed a lawsuit to overturn the the Professional and Amateur Sports Protection Act (PASPA).  They have the most skin in the game.

Draftkings, FanDuel and William Hill look to be the dominant players in the industry.  Each already have a major presence in the States, William Hill running sportsbooks in Las Vegas, Draftkings and FanDuel owning the Daily Fantasy Sports market.

CNBC writes:

The two start-ups were richly funded in their early days, allowing them to spend hundreds of millions of dollars advertising four years ago to build customer rolls. At the time, the companies were frantically signing up players to compete in Daily Fantasy Sports, a competition where users choose players and use real-life statistics to compete against others for prize money.

During one week in November 2015, DraftKings outspent every other company on the planet in weekly TV advertising. It had a valuation of about $1 billion at the time. FanDuel wasn’t far behind, spending more money on TV advertising in 2015 than it had in total 2014 sales, according to estimates by research firm iSpot.tv.


Listen to experts discuss what they see as the future of state-by-state legalization

At least week's first ever Betting Sports America Conference in East Rutherford, New Jersey, panelists admitted that each state's sports gambling model will probably be unique.

SportsHandle last week featured an article on the 9 Craziest Sports Betting Proposals Across the US.  These included Vermont's idea to extend credit to gamblers, Tennessee's "no betting on Sunday only after the NFL games getting underway", Iowa's 3% "mobile convenience fee" to be paid for by consumers, the greater than 6% tax that would be levied against Texas sports bettors, and what we would deem the craziest idea of all, Kentucky banning bets on its beloved Cardinals and Wildcats.  Hell no!

In the end, high customer acquisition costs, between giving away free money for betting and advertising, will be a huge barrier to entry, CNBC suggests.


Associated industries like Doc's Sports Service, in business since 1971, look to capitalize on legalized sports betting industry in US

Besides Draftkings and FanDuel, New Jersey has around ten other companies competing for the remaining 20 percent market share.  It would also be foolhardy to think that offshore sportsbooks and local bookies don't still operate here.  NJ gamblers under the age of 21 and those looking to place a bet on their beloved Seton Hall Pirates and Rutgers Scarlet Knight can't place bets with any of the licensed sportsbooks.  Gambling911.com also spoke to a number of professional sports bettors in attendance at the Betting Sports America Conference Meadowlands Race Track rooftop party and we were advised that each of them were no longer welcome at any of the NJ books.

The most likely beneficiaries of legalized sports wagering in the United States will be offshoot businesses like sports handicapping services, hybrid fantasy products that mimic sports betting but don't quite cross that line (i.e. Monkey Knife Fight), and odds and data analytics services.  Media companies also stand to make a windfall.


SB Tech will likely play a key role in the early progress of sports betting in the US

Indeed we are witnessing something similar in the cannabis sector with testing labs, LED lighting, labeling, waste disposal service and dispensaries all beneficiares of the burgeoning young industry.

With sports betting, CNBC points out that SBTech is working with various leagues to build technology around putting chips in balls, uniforms and equipment to allow for more prop bets, such as whether or not a golf shot will be within six feet of the pin. NFL in-game betting is particularly reliant on the speed of data because strategies change so quickly depending on game situations.

The ultimate industry winners will have to innovate in betting, predicted Paul Martino, a former FanDuel board member and venture capitalist at Bullpen Capital.  It will be up to FanDuel and DraftKings to acquire innovative startups or incorporate their ideas to ensure they maintain top market share, he told CNBC.

- Aaron Goldstein, Gambling911.com

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