High expectations for sports betting in the United States

When the United States Supreme Court struck down the federal ban that prohibited sports betting in all but a handful of states last May, it launched a gold rush of gambling firms hoping to get a piece of the action.

William Hill and Paddy Power Betfair were well placed to take advantage – and they have been followed in by the likes of bet365 and GVC Holdings, the owner of Ladbrokes and Coral.

Barely a month has passed without one of the major British firms announcing a new deal or joint venture on the other side of the Atlantic. Meanwhile, states across the US are preparing legislation to join the seven – Nevada, Delaware, New Jersey, Mississippi, West Virginia, Rhode Island and Pennsylvania – who had fully licensed sports betting by the end of 2018.

The domestic environment, which has seen crackdowns on FOBTs and curbs on television advertising, has become increasingly hostile. So naturally, operators are turning their attention to the US to boost their business.

Remarkable progress: A recent report from analysts GamblingCompliance said that the US sports betting market would be worth $648 million in revenues in 2019 – and that is without any further expansion in the number of states.

They predict that could increase by around $1.4bn to $2.1bn in 2020 depending on how many more states pass legislation.

“I think it has surpassed expectations,” said Ed Comins, managing director of Webis, which runs online pool betting business WatchandWager in the US and also operates the Cal Expo harness racetrack in Sacramento, California.

“I think it’s gone better than people thought since May. The progress has been quite remarkable really – there are a number of states who have gone live very quickly.” William Hill, whose chief executive Philip Bowcock has said their aim is to be “the market leader in the US”, are the only operator to offer sports betting in all seven states to have regulated.

The firm’s director of corporate communications Ciaran O’Brien said: “The customer response has been excellent in all the new states and we are pleased with the initial response to our New Jersey app which launched in late 2018. “To have so many states go live in 2018 means we are ahead of where we would have expected to be.”

New Jersey the trailblazer: Delaware was the first state to offer sports betting following the Supreme Court’s decision, but New Jersey has been the real trailblazer outside Nevada, which had been the only state to allow betting on single sports matches. More than $1.2bn had been gambled on sports in the state by the end of 2018. Paddy Power Betfair’s American arm FanDuel and William Hill are, along with US company DraftKings, doing best in the state.

FanDuel, based at the Meadowlands racetrack in New Jersey, increased their online market share to 38 per cent in December from 30 per cent, while they have a 58 per cent market share in retail betting.

“The encouraging thing from WatchandWager’s point of view is Meadowlands’ figures which have been very, very impressive,” said Comins, who is looking to introduce a similar model at Cal Expo.

William Hill, whose two land-based properties include a base at Monmouth Park racecourse, had a 27 per cent market share in December, while their online market share fell a percentage point to 16 per cent. Gavin Kelleher, analyst at stockbrokers Goodbody, said: “We have seen some decent numbers come out of New Jersey. The market is growing.

“It is showing good prospects for growth. We are seeing good amounts wagered every month in the second half of last year which shows there is demand for sports betting in New Jersey, so the market has potential.”

However, extrapolating the figures from New Jersey and applying them to other states to predict the shape of the total US market is dangerous. New Jersey was among the most enthusiastic proponents of legalising sports betting, while the figures at Meadowlands have been boosted by its proximity to the city of New York – just a 12-mile drive from Manhattan – where sports betting is still not legal.

More states eye sports betting: New York is, though, one of the states that could approve sports betting in 2019. There are only four commercial casinos in the state authorised to offer retail sports betting – one of which has teamed up with bet365 – but legislation that would allow it to launch is not in place.

The state is predicted to be the most lucrative for sports betting in the US outside California, with GamblingCompliance forecasting that the online sports betting market in the state could quickly become larger than that of Spain or France. However, while New York Governor Andrew Cuomo this week called for legalised sports betting in the state, he limited his comments to those “upstate” casinos rather than opening up the market.

New York could be one of as many as 33 states expected to consider sports betting bills in 2019, although far fewer are expected to pass legislation during the year.

“Hopefully New York might regulate this year or next year and really what we are looking for is for more states to regulate sports betting,” Kelleher said.

“If that happens it can be a pretty significant market. It is not going to be allowed in every state but there is a significant demand for sports betting over there.

“Everyone wants to be involved, everyone wants to launch in the US. Certain state markets will become very competitive but then other state markets may only have a certain amount of operators who are allowed to operate.”

Expansion expected: California is lagging behind other states according to Comins, although there is draft legislation.

“Even if the bill gets approved this year which we’re hoping, then you are looking at going live at least a year after that, if not the following year,” Comins said. “2021 would probably be realistic for California.”

William Hill is certainly expecting an expansion in the number of states with legalised sports betting over the next few years.

O’Brien said: “The company is committed to growing a business of scale in the US and will be investing $20m in 2019 in people, technology and marketing to stake its claim.

“Maintaining our leadership in the US and building a business of scale there is a central plank of our strategy to double profits by 2023 and we anticipate the market will deliver 45 per cent of our revenues by that time.

“The key risk to that is when and how many states regulate, but the success of sports betting in those states that have should mean up to 20 further states could regulate over the next three years.”

Federal interference: There is, though, the risk of intervention by the federal government. A bill introduced last year by senators Chuck Schumer and Orrin Hatch proposes giving federal government control over the regulation of sports betting and could open the door to America’s sports leagues getting a cut of gambling revenues. Operators remain hopeful that such interference can be repelled.

“We think it will be a very tall order for there to be any federal intervention now, not least because the horses have bolted,” Comins said.

O’Brien added: “In terms of federal interference we would hope the opportunity for states in terms of cleaning up the illegal market and creating job and tax opportunities would override any need for federal involvement.

“The Supreme Court ruling could not have been clearer that this is a matter for individual states to decide in terms of how they regulate commerce within the state.”

There are also signs that the sports leagues who had opposed the legalisation of sports betting are beginning to come on board.

O’Brien said: “We are already working with sports franchises in ice hockey with our sponsorships of the New Jersey Devils and Vegas Golden Knights, and the other sports franchises are hastily looking at whether they should accept sports betting partnerships – so within the next year we could see NFL and NBA partnerships that should encompass integrity and information sharing as well as sponsorships.”

Another potential stumbling block emerged recently when the US Justice Department issued a revised opinion on the Wire Act,  effectively banning all forms of gambling across state lines.

The act already applied to sports betting so nothing has changed in that respect – the decision impacts gaming.

However, the uncertainty provoked by the decision, with the potential for lengthy legal challenges, could have a knock-on effect in slowing down the impetus of sports betting legislation in some states.

Gamble worth taking: Despite the potential hurdles to cross for sports betting in the US, the rush by states across the country to legalise it continues unabated. Sports betting bills were tabled in five states – Connecticut, Indiana, Maine, New Hampshire and Oregon – in a single day earlier this month. Last week four separate sports betting bills were lodged in the state of Massachusetts. For the familiar names of the UK gambling industry, the United States remains a gamble, just as it was for those who took part in the original gold rush.

However, it appears to be a risk they are happy to take.