It was four years ago that the Supreme Court overturned the Professional and Amateur Sports Protection Act of 1992 (PASPA), the federal law prohibiting sports betting in all but a few jurisdictions.
And during that time the American public latched onto sports betting in a way few expected.
Modern Day Gold Rush
Since the floodgates opened after PASPA was struck down in the courts, Americans’ thirst for all things sports betting appears to be insatiable.
After New Jersey led the way, more and more states have adopted sports betting as it has proven to be a highly lucrative revenue stream for state and municipal governments.
Sports betting operators cede to virtually every demand the states make from outrageous licensing fees to burdensome taxes, just to get the early adopters in every new market that opens.
As of this writing, exactly four years to the day that the landmark ruling was entered, Americans have bet $125 billion over that span and not all states have passed sports betting legislation.
The rate at which Americans wager will only increase once more states hop aboard and enjoy the fruits of this nascent industry.
“When PASPA was repealed, I don’t think any of us would have expected how big the (industry) would be just four short years later,” said Karol Corcoran, general manager of FanDuel’s online sportsbook.
DraftKings president and co-founder Matt Kalish said: “I got into this industry because I was always the kind of kid who liked to predict things, to compete with my friends and make predictions.
For people that like to do that, sports betting has become far and away from the No. 1 thing.”
The Arms Race
Between the money spent on advertising, absurd bonus promotions that offer up to $1500 in free bets, and the onerous tax rates the sportsbooks pay the states in which they operate, it has become an extremely expensive battle for market share.
We must note that although more than $125 billion has been wagered, approximately half of those bets win and the books make their profit on the vigorish, or the commission.
But paying all of the upfront costs, including exorbitant licensing fees, can make it tough to make a buck.
Naturally, no tears are being shed for online bookies but the expenses are taking their toll.
Consider DraftKings stock, once at a peak of nearly $71 per share in March of 2021 closed at $12.61 on May 13, 2022.
That is a stunning decline in a little over a year but it reflects the panic from stockholders regarding the obscene outlay of cash to earn new customers.
The relentless advertising blitzes in states that have allowed online betting has been unprecedented. In 2020, $292 million was spent on sports betting advertisements but that number swelled to $725 million a year later.
Bill Miller, president and CEO of the American Gaming Association, referred to the sheer volume of sports betting advertising as “an unsustainable arms race.”
Moreover, the constant barrage of advertising has had a deleterious effect on problem gamblers as noted by Felicia Grondin, executive director of The Council on Compulsive Gambling of New Jersey.
“It is disturbing, it is alarming and it is intensifying every day,” Grondin testified before New Jersey. “It’s very easy to gamble today. You can just take out your phone and sit on your couch.”
And while it is a virtual certainty that more states will approve online gambling, there will come a point where the advertising will slow due to diminishing returns.
But until then, it is a race between the major players to scoop up customers before their competitors do because studies have shown that most sports bettors use only one sportsbook.
It is a shifting battlefield for market share and it will move to wherever new markets open up. “We feel fortunate to have access to about 38% of the American population,” said FanDuel’s online GM, Karol Corcoran.
“But there are still millions of people that don’t yet have legal sports betting. We’d love to be able to operate where they are.”