The US market could grow from $1.5B to as high as $81B by 2030
10 Minute Read
Remember when Nevada was the only state where you could place a legal, regulated bet on a sporting event? Neither do I, and that was just two years ago.
As 2020 begins, according to Legal Sports Reports, 20 states have legalized and regulated sportsbooks after a landmark Supreme Court ruling in 2018. Seven of those states allow online sports gambling. About 20 other states have or had pending legislation regarding sports gambling, signaling the potential for it to become legal in the majority of the country.
Even with just the 20 states, the US sports betting market is expected to be worth about $1.5B next year and ~$2.75B by 2023, according to a study by GamblingCompliance. The future market could be vast. By 2030, H2 Gambling Capital estimates it to be worth $81B. According to the American Gaming Association, some $150B is wagered illegally on sports — through bookies, offshore sites, etc. — by Americans every year. That number, $150B, nearly matches the current market size of the regulated global sports gambling industry, which is centered mainly in Europe, Asia, and Australia.
Via Gambling Compliance
But with FanDuel, DraftKings and existing casinos hosting sportsbooks are there opportunities for new entrants? The answer is yes. While those established players will likely control the actual sports gambling, entrepreneurs can get involved in gambling adjacent businesses. Marc Edelman, a consultant on legal and business issues in sports gaming and professor of law at Baruch College’s Zicklin School of Business, told the team at Trends about the following opportunities that will occur because of the proliferation of legal gambling:
- Gambling advice networks
- Online infrastructure for gambling sites and geofencing technology to ensure gambling sites act in compliance with state laws.
- Social networks that bring offices and communities together, especially those featuring newby gamblers.
One of the biggest opportunities may involve assisting the major sportsbooks with building a more user-friendly and interactive platform for gamblers. One anonymous European sports gambling executive said “I’d go as far to say that all tier one sportsbooks and platform providers are way off the mark with true customer experience.”
Learning from Europe and making a truly good consumer experience
In Europe, gambling is seamlessly intertwined with sports culture, particularly in Great Britain, where the total gross gambling yield was ~$20B in 2018-19. People bet not just on results but individual plays during the games. And even lesser-known sports, like the minor leagues of tennis, are popular among bettors. William Hill, one of the most prominent sportsbooks, takes bets over Twitter.
But there will not be many — if any — opportunities for entrepreneurs here to create sportsbooks of any kind. In fact, some of the top international companies, including William Hill and Flutter, have expanded to the United States. “It seems reasonable to presume that it will be large companies with established relationships either in operating sports gambling overseas or in working with professional sports leagues that will win out,” Edelman says.
The opportunity for entrepreneurs relates to building the best platforms for the major sportsbook operators, especially at local casinos, which have struggled to match DraftKings and FanDuel in online offerings. In New Jersey, the first state to legalize since the 2018 Supreme Court decision, the vast majority of bets are made online and some 80% of those bets are through DraftKings and FanDuel.
Local casinos will need platforms that can handle mid-game, or prop, betting and personalized player vs. player bets. The platforms will also need to be mobile oriented — in Europe an estimated 80% of bets are made via mobile.
Speaking at a gambling conference, Tailorbet CEO Liam Casey (Tailorbet is a peer-to-peer sports betting network that works with gaming operators) shared what he described as “the holy grail of sports betting”:
In Casey’s presentation, which you can listen to here or download the PowerPoint by clicking on the second link of these Google results here, he also shared several comments from anonymous industry leaders. The overall theme was that the betting sites were doing a terrible job of interacting with customers and learning from their habits. Here are screenshots of some key slides:
The newest markets likely to legalize gambling
So far, Nevada, Delaware, New Jersey, Mississippi, West Virginia, Pennsylvania, Rhode Island, Arkansas, New York, New Mexico, Iowa, Tennessee, North Carolina, Colorado, Illinois, New Hampshire, Montana, Oregon, Michigan and Indiana have legal sports gambling or have decided to legalize it in 2020.
Where should you look for future opportunities? Among the states that have legalized sports gambling, only New Jersey, Pennsylvania, Nevada, Rhode Island, Iowa, West Virginia, and Indiana offer it online.
- The other states that have legalized gambling have it onsite. If and when those states offer online gambling, local casinos would need proper online infrastructure and a geofencing system to ensure bets are placed only by people currently in those respective states.
Why care about following particular states? Because legislation is different in every state, and that means not every state will be like New Jersey, where FanDuel and DraftKings dominate. With different laws that could allow only local casinos to provide online gambling, there are potentially more possibilities for entrepreneurs to partner with these entities.
As for the parts of the country that don’t have legalized sports gambling? As mentioned above, 20 states had 2019 legislation regarding sports gambling. But not all of that legislation is equal. The amount that a bill moves within a state legislature typically indicates how much traction the bill has. This is how those states break down in terms of likelihood of legalizing sports gambling in the near future.
- Connecticut: Has support of many state legislatures but has been hampered by negotiations with Native American tribes.
- Louisiana: Passed part of the legislature last year before falling apart before a deadline.
- Kentucky: 9 legislators have already pre-filed sports gambling bills for 2020.
- Maine: Bill passed through legislature but governor declined to sign in 2019
- Minnesota: Created a sports wagering commission and visited Iowa to learn about its sports gambling regulations.
- Ohio: Governor supports sports gambling.
Less promising (with bills that barely moved)
- North Dakota
- South Carolina
- South Dakota
How the Action Network covers sports gambling
The Action Network launched in early 2018, a few months before the 2018 Supreme Court decision that gave states the opportunity to regulate sports gambling. It provides news and insights related to sports gambling with a largely North American focus. Unlike ESPN or other sites that dabble in gambling, gambling is Action Network’s complete focus. “Sports fans generally want to be the smartest people in the room,” says Chad Millman, the site’s chief content officer. “If we’re giving them data and information in a narrative that’s different from other places — whether they bet or not — they’re going to want to have that information.”
In February 2019, Action Network closed its Series B funding round with $17.5m and in early 2019 was averaging about 2m unique visitors a month. It now averages about 2.5m to 3m unique visitors monthly, according to Millman. The staff has grown to ~75, from ~35 at launch, including Darren Rovell, a well-known former ESPN personality. Millman says Action Network’s ability to hire established gambling experts with sizable social media followings has helped the site differentiate itself from competitors.
Action Network’s revenues come mostly from subscriptions, which range from $4.99 to $59.99 a month. But the site recently created an “affiliate” program. Affiliates introduce customers to casinos and sportsbooks where they can place bets. Millman anticipates that affiliate revenues could become larger than subscription revenues in the coming years.
Action Network CEO Patrick Keane has also said the company intends to partner with leagues and other media giants.
Sports leagues, which initially opposed gambling, are now starting to capitalize on it. Ted Leonsis, owner of the Washington Wizards, Washington Mystics, and Washington Capitals, says the arena where his teams play — and others across the US — will become entertainment complexes focused on sports betting.
He described these venues as including technologically advanced, glass-encased sports studios with sports bars that have screens everywhere, from the walls to the tables, that constantly stream data and games.
Leonsis has made a deal with William Hill to operate in and next to Capital One Arena, where Leonsis’s teams play.
Adjacent opportunities, away from the major players
Tempting as it may be to think of opening your own sportsbook, Edelman says the major players will continue to dominate in this category. The states that have legalized sports gambling so far have mostly required any entity that starts an online gaming book to have a relationship with an existing casino provider. Because the sports leagues would prefer a limited number of companies offering gambling and the lobbying power of current casino operations, those regulations are unlikely to change.
So what can you do? Here are a few possibilities:
Social gambling apps: These are platforms that create competitions between friends or co-workers who are gambling through the major players. Betcha, founded by a former Credit Suisse investment banker, is an early-stage startup in this space. It was featured at the 2018 Harvard Summer Venture Incubation Program. Betcha is geared toward casual gamblers who will start betting more often when sports gambling becomes legal and gives them opportunities to create groups and compete against each other.
The Athletic for gambling: Several media sites, from ESPN on down, spend a good chunk of resources on gambling coverage. And the Action Network offers gambling insights from national perspectives. But what about devoting resources to a gambling angle on every major sport and sports team in America on one website? The Athletic, which has more than 500k subscribers, does this for coverage of sports news. If gambling becomes as popular as many experts believe, a website that employs a beat writer focused purely on the gambling edges for every major sports team, as well as national experts, could become an attraction.
Audience development and identification for casinos: With new casual gamblers likely to enter the fold, the casino sportsbooks will need companies to help them build and understand new audiences. Chris Grove, managing director at the research firm Eilers & Krejcik Gaming, told the Las Vegas Review-Journal casinos will be interested in “companies that can slice up an audience into subgroups and create ads dedicated to them.”
Gambling cessation and regulation: With new and larger audiences, casinos will also need more assistance in detecting problematic gamblers. Similarly, they’ll need geofencing and related technology that ensures the only people allowed to make bets are located in the proper geographical area.
Niche sports gambling advice: Become a gambling coach focused on a particular niche — remember people bet on almost everything. A high-end/lifestyle focused advice site could also work, as many gambling-related websites still have an outlawed feel. Cannabis lifestyle companies, such as Revelry Supply, followed a similar high-end path before cannabis went mainstream.
Gambling-related games and apps: Entrepreneurs likely won’t be able to start sportsbooks, but they can still create games of skill involving sports. And as gambling becomes more common, demand for such skill games is likely to rise, too. Sports Illustrated’s Michael McCann recently predicted the wall between fans and the games, as well as the athletes, is going to break down in the coming decade. What does that mean? Everything from apps that create fan communities where they can predict or even call the next play (but not bet), to athletes who let fans invest in their contracts.
With loads of adjacent opportunities, gambling on the future of sports gaming appears to be a safe bet.