US Sports Betting Five Years On: The Winners and Losers

  • FanDuel and DraftKings have claimed most of the market, with profits skyrocketing
  • Smaller sportsbooks have struggled to get a foothold due to high marketing spend
  • State and federal coffers have benefited greatly, betting contributing $3.6bn in tax
  • Unregulated sportsbooks have had to either leave the market or try to get regulated
US flag cupcake
US betting is celebrating its fifth anniversary, and we have summed up the winners and losers of the fast-growing market. [Image:]

2018 to 2023

US lawmakers made history in 2018 by repealing the Professional and Amateur Sports Protection Act (PASPA). It’s a moment that changed the course of gambling history in the nation, allowing each state to have its own say on whether to allow citizens to wager on sports.

Americans across the country have now bet more than $220bn

Since then, the US betting landscape has changed dramatically. Prior to June 2018, only Nevada had a legal sports wagering market. Afterward, a whole host of states began joining the party, from New Jersey to Pennsylvania and most recently Ohio. Americans across the country have now bet more than $220bn in total.

Last week marked the anniversary of PASPA’s repeal, meaning that five years have passed since that fateful day. Now that Americans have had half a decade to adjust to the spread of legal betting, VegasSlotsOnline News has listed the winners and losers of the market so far.

Winner – FanDuel and DraftKings

Let’s start with the obvious. The main winners from the spread of legal betting are the sportsbook giants who have taken the healthiest chunk of the market. Opting to spend big on ads to build on their head start in US betting, FanDuel and DraftKings have cemented their brand among Americans, so much so that a 2021 poll deemed them lengths ahead in terms of brand exposure.

The companies were able to monetize a whole database of daily fantasy sports players after 2018, and their success in doing so is clear in the figures. DraftKings annual revenue increased from $226m in 2018 to $2.24bn last year. Similarly, FanDuel revenue stood at $300m in 2018 and reached $3.1bn in 2022. Those are increases of 891% and 933%, respectively.

They’re certainly not stopping there either. FanDuel has projected annual revenue of up to $16bn by 2030, including earnings of $4.8bn. This is thanks in part to the spread of online casino too, a vertical that FanDuel boss Amy Howe believes will contribute 25% of that 2030 figure. DraftKings has remained more tight-lipped on long-term projections, but analysts believe the operator can nearly double its current revenue by 2030.  

the top two giants have more than 70% of US business on lockdown

As is evident from the figures, Flutter Entertainment-owned FanDuel is currently winning the battle for market share. The operator now has 46% of the market, with the leading portion in 15 of the 18 states in which it has access. DraftKings sits comfortably in second place with around 25% of the market share, meaning the top two giants have more than 70% of US business on lockdown. Not a bad position to be in at all.

Loser – Smaller sportsbooks

While FanDuel and DraftKings have found themselves at the top of the pyramid, other sportsbooks that have less established brands have struggled to get a foothold. This is because the rest of that pyramid’s upper half is taken up by casino giants such as Caesars Sportsbook and BetMGM, as well as the media powerhouse-funded FOX Bet.

The bottom of this rung is a difficult place to be, mainly because the cost of marketing is so high as sportsbooks battle for position in newly-regulated states. In 2021, American Gaming Association (AGA) boss Bill Miller deemed this an “unsustainable arms race,” and it’s a race from which several embattled companies have been forced to retire. MaximBet, 888 Holdings, theScore, and Kindred have either left the market or vastly reduced their presence in the US in recent years for this reason.

The latest, and perhaps most surprising, operator to do so was PointsBet. The Australian sportsbook firm was one of the first to enter the US after the repeal of PASPA in 2018. After forecasting losses of between $115m and $123m for H2 this year, the company agreed to sell to sports merchandise company Fanatics for $150m earlier this month.

pretty much every online betting company in the world targeted that market.”

PointsBet Chief Executive Sam Swannell summed up the difficulties encountered by smaller betting firms in the US when explaining the deal. He said: “You had a situation [in 2018] where pretty much every online betting company in the world targeted that market. It is expensive, the cost of doing business there, because it’s a state-by-state market. You need scale.”

That said, other fledgling companies seem to be ignoring the warning signs. As mentioned, Fanatics is attempting to enter the market utilizing PointsBet’s operations, while Jake Paul has just launched his micro-betting company Betr in Massachusetts. Only time will tell whether they fair any better.

Winner – State and federal coffers

Other than the sportsbooks themselves, the other main sports betting profiteers are the governments that tax it. In the five years since PASPA, the AGA calculates that sportsbooks have won $17bn. Over that same time, betting taxes have generated nearly $3.6bn for the US government. Around $3bn of that went to state and local governments, while $570m went to the federal government.

The amount of this tax is dependent on each individual state. If we take the latest addition to the sports betting party as an example, Ohio state receives 10% of gross revenue from its sportsbook operators, while gambling winnings are also taxable income. The Ohio budget estimates that this will bring in $24m in taxes by mid-2024.

Meanwhile, other tax legislation is a little harsher on sportsbooks. New York charges 10% for online sportsbooks like Ohio, but then a staggering 51% for brick-and-mortar sportsbooks. Neighboring Pennsylvania charges a tax of 36% for all sportsbooks in the highest rate of any competitive commercial market in the country and triple the national median rate.

The debate over a higher versus lower tax rate rages on, although data suggests that both systems reach the same goal in different ways. While a higher tax rate might deter sportsbooks from entering the state, it does provide more profits from the ones that do. A lower tax rate will attract more sportsbooks but provide less return for state coffers on average. New Jersey and Pennsylvania’s opposing tax policies but near identical annual tax totals are evidence enough of this.

Regardless of their tax policies, it’s clear that the states that choose to legalize are benefiting significantly from doing so. They use this cash for any range of issues, from education, to infrastructure, and homelessness.

Loser – Unregulated sportsbooks

Before the repeal of PASPA in 2018, the US was a perfect hunting ground for shady bookmakers and offshore sportsbooks. Much like the moonshine smugglers of the 1920s, they capitalized on the draconian measures of the US government to make a healthy profit. However, these companies were unchecked by any regulator, leaving vulnerable gamblers unprotected.

78% of bettors place all or most of their bets through regulated operators

Undoubtedly, the spread of legal betting has come at a high cost to these sites. When a recent AGA survey found that 85% of Americans now support the Supreme Court’s decision to repeal PASPA, it also showed that 78% of bettors place all or most of their bets through regulated operators. This total stood at just 44% in 2019. Furthermore, the AGA research found that nearly half of those that do bet with unregulated operators plan to transition to legitimate sportsbooks in the next 12 months.

It’s also not easy for unregulated sites to turn legitimate. Costa Rica-based 5Dimes has endured significant legal trouble in return for years of catering to the US public pre-2018. The sportsbook operator exited the unregulated market to go legit in 2020, but had to pay a federal settlement of $46.8m to do so. This year, reports suggested site owner Laura Varela was on the verge of a breakdown after continued issues.

The AGA is ready to fight some more too. It has urged the US Department of Justice to take action against illegal operators in 2022. This led to a letter from 28 members of Congress to the DOJ also pushing the federal body to intervene. More recently, gaming regulators in seven states, including New Jersey, Illinois, and Nevada, have also joined the DOJ push. Whether that pressure will lead to results is still to be seen.

All in all, it seems the golden age is truly over for unregulated sportsbooks in the US. Meanwhile, fully licensed operators are just getting started.

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