Five years to the day after the Supreme Court overturned the Professional and Amateur Sports Protection Act (PASPA), opening the floodgates for legalized sports betting in the United States, a major player finally made its move in the market.
Fanatics announced its purchase of Australian-based sportsbook PointsBet on May 14, marking the apparel and collectibles giant’s foray into the world of sports gambling for the price of $150 million.
The sale spotlighted the consolidation that has defined an industry expected to be a marketplace of variety and competition. Instead, the first five years of legal sports gambling saw four companies assume the vast majority of the market share, while corporations like Fanatics sat on the sidelines — until recently, prompting the question:
How will the next five years of sports betting look?
How many states have legalized online sports betting?
Thirty-three states, plus the District of Columbia and Puerto Rico, have legalized betting. Three more states are preparing for a launch later this year.
According to the American Gaming Association, 39.2 million people placed a traditional sports bet in the last 12 months. A Harris Poll from November 2022 revealed that 71% of sports gamblers bet on sports at least once a week, with 20% of people betting on sports at least once a day.
The average bet spend is between $30-35, with less than two percent of wagers being more than $100. Which points to the idea of the “recreational bettor,” said Sportradar's North America chief operating officer Andrew Bimson, who noted the increasing bets on multipliers and same-game parlays.
According to a December 2022 report from Variety Intelligence, 56% of gamblers said betting is entertaining and 42% determined that it makes games more exciting.
“People are just looking to be entertained,” Bimson told USA TODAY Sports. “They’re looking at this as a component of being a sports fan.”
Since May 2018, the AGA said, $220 billion has been wagered with U.S. sportsbooks. Nearly $90 billion of that figure took place between May of 2022 and April 2023 — a roughly 22% increase year-over-year — as three more states opened markets.
Four major sports leagues (NFL, MLB, NBA, MLS) have deals with sportsbook operators. There are 12 sportsbooks attached to professional stadiums. In his ownership prospectus obtained by ESPN, Washington Commanders soon-to-be owner Josh Harris said sports betting could add $10 million to $15 million to a team’s annual earnings.
Sleeping giants: California, Texas, Florida don't have legal sports betting
The three most populous states in the country — California, Texas and Florida — do not yet have legal markets, and forecasters remain rosy-eyed about the future of gambling. Analytics firm Eilers & Krejcik Gaming, which studies the industry, said the next five years will feature more growth.
“Legal sports betting will become even more a part of the U.S. mainstream, with deeper integration between operators and endemic stakeholders like leagues, teams, and stadiums — and also between operators and betting-adjacent stakeholders like media companies, hotel chains, and beverage companies,” the firm wrote to USA TODAY Sports.
The company projects $8.6 billion in revenue for the entire industry in 2023, with that figure rising to an estimated $14.1 billion by 2027.
“We cannot stress enough that from both a stakeholder-integration and a product-development perspective, U.S. sports betting is still very much in its infancy,” the firm said.
Familiarity breeds success for FanDuel, DraftKings
Four primary sportsbooks have acquired a 90% market share of the industry, according to Eilers & Krejcik.
In the top group, FanDuel and DraftKings — two companies born from the daily fantasy craze that entered the market with a digital footprint — outdo their legacy, Las Vegas-based competition BetMGM and Caesars.
“A big part of it was a lot of people underestimated FanDuel’s and DraftKings’ customer lists,” Oklahoma State management professor John Holden, who has written and commented extensively about the gambling industry, told USA TODAY Sports.
Brands from the United Kingdom and Australia — two countries with decades-old legalized betting industries — and traditional brick-and-mortar brands were expected to compete more.
“What we saw was that Americans were really familiar with the tech of FanDuel and DraftKings and they liked the interface and they liked the experience they had with daily fantasy,” said Holden.
“There was a real advantage of the familiarity.”
Bimson said that consolidation is just beginning, thanks to the pressures of the market and the stranglehold the top four have on it.
“It’s going to be hard to stand up against the other four,” he said.
Holden is curious whether a larger corporation, such as Disney, Google or Microsoft, could jump into the business to give FanDuel or DraftKings a challenge.
“That’s the billion-dollar question,” he said.
But it’s hard to envision such a shake-up at the top, even if Fanatics says it has a global customer database of 94 million.
“Does sports cards, does apparel, translate to sports bettors? I don’t know,” Holden said, “And I think everyone is waiting to find out.”
Problem gambling an 'afterthought'
The great failure of the last five years, Holden said, is the lack of attention paid to problem gambling by both operators and state governments.
“It’s largely an afterthought,” he said.
1-800 numbers exist, including state-specific hotlines, for those seeking help. Often, though, there isn’t enough funding to sufficiently operate the phone lines, said Holden.
For Keith Whyte, executive director of the National Council on Problem Gambling (NCPG), there were two main failures on the part of state legislatures that legalized gambling.
- Not ensuring a percentage of the state’s sports betting tax revenue is used to prevent problem gambling
- Not requiring operators to share data about potential gambling issues (only New Jersey and Ohio passed legislation requiring this)
States will do the minimum for what’s required, Whyte said. For example, D.C. approved a budget recently that eliminated funds allocated to address problem gambling ‒ from $200,000 to $0.
“If the state doesn’t set strong protections for its own citizens, it’s unlikely that a sportsbook is going to come in and voluntarily do a lot more,” Whyte said, noting that the forward-thinking sportsbooks — like the ones at the top of the market — have set their own high standards, even when not required to do so. FanDuel's mobile app has a feature that informs users of the amount of time they have been logged in and how much they have wagered during that time.
The NCPG lobbied at the state level for increased consumer protections, Whyte said, but "we just couldn't get the states to adopt it."
Betting irresponsibly on sports is just one way gambling can be problematic. Whyte and other advocates also are aware that for gambling addiction to be looked at as a national public health issue, a complete national prevalence study to find the base rate of those with gambling problems and to identify those who are most at risk should be prioritized.
Young bettors at risk for gambling problems
The NCPG also conducted a national survey of 3,000 respondents in 2021 and found a concentrated risk among young (18-24 years old), online sports bettors. The 18-24 age group lacks gambling literacy and roughly 75% of respondents in that cohort agree gambling is either a great way to make money or they're unsure.
“That’s terrifying,” Whyte said. “They’re going into their gambling careers looking to gamble completely the wrong way, and that is definitely a risk for gambling problems.”
Meanwhile, 100% of those surveyed 65 and older agreed it was not.
“It’s OK gambling is not a way to make money,” Whyte said. “It’s entertainment. You wouldn’t think going to the movies is a good way to make money, either.”
Young people are more likely to take risks and the brain is not fully developed until 25 in most males, Whyte said. But youth today face a challenge those in the past did not with the legalization and prevalence of gambling: the “four As,” as Whyte described them.
- Advertising — Sportsbook brands spent $314.6 million on national TV ads in 2022, according to iSpotTV.
- Accessibility — Gambling on phone, paying with a credit card, watching a casino Twitch stream
- Acceptability — There used to be a stigma associated with gambling in general. No longer, as celebrities such as Jamie Foxx and Kevin Hart serve as pitchmen for gambling companies.
- Action — There is always something to wager on, sometimes with hundreds of options for one game.
There is something about sports betting that breaks the mold when identifying at-risk gamblers in general. A college graduate is twice as likely to bet on sports compared to someone with a high school diploma, the NCPG's survey found, and the likelihood of someone betting on sports increases with income.
How streaming giants have integrated betting into live games
In the last five years, networks went from going out of their way to avoid betting talk to a full-on embrace by both announcers and graphics producers.
The emergence of streaming giants such as Amazon and Apple in the latest media rights deals for the NFL and MLS, respectively, gives operators a glimpse into the future for how betting will be integrated into over-the-top sports broadcasts that reach the consumer directly.
Nine out of 10 bets are placed on a mobile device, according to Sportradar’s Bimson. Embedded betting is an example of a real-time engagement aspect that allows fans to bet on the same screen while watching a game, and Bimson thinks that is part of the next wave.
“That, for us, is the type of game-changing technology that will start to drive more activity, especially when you think about the latest media rights deals,” Bimson said.
As Artificial Intelligence is further integrated into all of society, the sports betting world will not be immune. Data collection is key, from the movements of a player to the actions of a prospective bettor.
Receiving a push notification on your phone while watching the game on your smart TV is on the horizon.
“All of those things, for us, become kind of an extremely interesting component,” Bimson said.
How has it affected NCAA, pro leagues?
Sports betting has not been immune to scandal since its legalization. In May, reports of irregularities at a sportsbook connected to Great American Ballpark — home of the Cincinnati Reds — led to the firing of Alabama head coach Brad Bohannon.
The NFL suspended Jacksonville Jaguars wide receiver Calvin Ridley for an entire season for betting on NFL games while away from his team at the time, the Atlanta Falcons. (Ridley has since been reinstated.) NFL players are allowed to bet on other sports but aren’t permitted to bet on league grounds; Detroit Lions wideout Jameson Williams will miss six games in 2023 for violating that rule.
In December, New York Jets wide receivers coach Miles Austin was suspended indefinitely for running afoul of the NFL’s gambling policy, which prohibits coaches and personnel from all gambling.
NCAA guidelines prohibit athletes, coaches and staff from betting on any sport in which the entity offers a championship. More than 40 athletes from Iowa and Iowa State also were being investigated by the state’s gambling commission.
How has sports betting in Las Vegas changed?
For decades, Las Vegas was the bastion of wagering. Sportsbooks took nearly $5 billion in bets in 2018, the year the overturn of PASPA changed everything for all other states.
Not much has changed in Sin City the last five years, though. MGM Resorts reported a record handle bet in Nevada during Super Bowl 57 between the Philadelphia Eagles and Kansas City Chiefs.
Concern of whether legalization across other states could eat into the state’s overall take has not materialized, said Jay Kornegay, vice president of the Las Vegas Hotel & Casino SuperBook.
“That’s possible in the long run, especially if California were to legalize it,” Kornegay told USA TODAY Sports. In 2022, voters in the state rejected a pair of propositions that would have legalized sports gambling, and the fight includes protecting the sovereignty of Native American tribes who control wagering in the state. “However, I have also spoke to a number of people who were introduced to sports wagering recently and that prompted their visit to Las Vegas.”
Sportsbooks now exist across the country, but Kornegay said it is “difficult to emulate most of the Las Vegas sportsbooks and what Las Vegas has to offer.”
The conversation changes to “we got to go to Vegas for this,” Kornegay said, during tentpole sporting events such as the Super Bowl or March Madness.
Vegas will have to keep an eye on what’s happening nationally because they could be surpassed by promotions and creative offer packages in other states.
Vegas-based operators are investing in technology to match the competition because the technology they do have "is well behind what you see nationally," Kornegay said.
Follow Chris Bumbaca on Twitter @BOOMbaca.
