There are moments in American history when financial opportunities are abundant. For example, the California Gold Rush (1848-1855) and the dawn of the internet in the 1990s provided savvy entrepreneurs with opportunities to amass great fortunes.
A similar scenario is occurring with sports betting and igaming. Gaming operators, large and small, are vying for shares of an industry that has proven to be worth billions of dollars.
Daniel Kustelski, the CEO of Chalkline Sports, says the Supreme Court’s 2018 decision to repeal the Professional and Amateur Sports Protection Act “opened the US to being a $30 billion online gaming and betting industry in just a few years. It will be the largest regulated online gaming market within five years of PASPA’s repeal.”
Kustelski is a gaming industry veteran who helped launch two sports betting sites in South Africa and was CEO of a horse betting site in the U.S. His company, Chalkline Sports, provides freeplay games that engage and educate bettors across marketing channels
According to the American Gaming Association, sports betting and igaming are increasingly popular among gamblers. For the first six months of 2021, igaming revenue was $1.7 billion, up 165% year over year. The sports betting handle from January through June his year was $24.1 billion, a 375% increase over the same six months in 2020, with sports betting revenue reach $1.8 billion over the same period, a year over year increase of 471%.
Given the increasing amounts of monies wagered, it’s no wonder that gaming operators are investing huge sums of money in sports betting and igaming. During its most recent investors call, Caesars Entertainment announced it was allocating a billion dollars during the next two-and-half years to build its online customer base, with new ads featuring J. B. Smoove and Patton Oswalt. Jamie Foxx serves as BetMGM’s brand ambassador. Bally’s Corporation has partnerships with MLB, the NHL, and the NBA, and Penn National and Barstool Sports recently acquired Canadian sports app theScore.
FanDuel has partnerships with Hulu, NBC, The Ringer, CBS, Turner Sports and the Associated Press, and Kustelski notes that DraftKings has spent $400 million for marketing efforts this year.
“A billion dollars is a lot of money,” Kustelski says regarding Caesars’ commitment. “But it’s not the most money being spent. If you take (DraftKings investment) and double it, there going to spend close to a billion dollars this year alone on marketing. It’s really about building that name recognition and creating an association to it.”
But are the millions earmarked for marketing a wise use of capital? According to BettingUSA.com analyst and content director Steve Ruddock, there are multiple reasons why companies are pouring money into sports betting and igaming.
“Certain companies are looking for customer acquisition,” Ruddock says, “or looking to prop themselves up as the top sportsbook in their market which could then translate nationally as more and more states legalize sports betting.”
Currently, sports betting is legal in 22 states and the District of Columbia, and legal but not active in 10. Five states – Delaware, Michigan, New Jersey, Pennsylvania, and West Virginia – have legalized igaming. Some of the biggest potential markets, notably California, New York, and Texas, could be individually worth billions.
“There are still a lot of untapped markets,” Ruddock says. “I think (monies spent on marketing) are just a matter of putting up numbers for investors to look at to look good, or for raising more capital, or maybe for mergers or acquisitions. There’s a lot of different reasons why people would be spending money that maybe they’re not expecting to get a good ROI on.”
While it’s too early to judge what marketing campaigns will be effective, Kustelski agrees that hardcore bettors, including the gamblers who wagered with illegal offshore betting sites before PASPA was repealed, are not the target demographic for these campaigns. Gaming operators want to attract casual gamblers through ad campaigns. Kustelski cites as an example a Dallas Cowboys fan in Indiana who is certain that Dak Prescott and Ezekiel Elliot are going score enough points to cover Sunday’s point spread.
“There are so many steps that person needs to take and make before they actually deposit money and make the wager,” Kustelski says. “And I think that’s really the crux of people’s marketing spend.”
“If I were looking to attract customers,” he adds, “I would really try to help educate them on things like the odds. What does -110 mean? What does over/under mean? What are spreads? I think operators are going to continue to help educate the market on sports betting and terminology in order to acquire those customers.”
No one knows what the sports betting and igaming landscapes will look like in a few years. But many professionals are making strategic decisions in attempts to best capitalize on these markets. During a session of the Bernstein 37th Annual Strategic Decisions Conference in June, MGM Resorts CEO Bill Hornbuckle compared sports betting and igaming to the telecommunications industry.
“There will be four, maybe five key operatives, and there will be real consolidation in between,” Hornbuckle said.
Kustelski, however, points to the success of regional casinos as a counterpoint to the idea that a few multi-state operators will control these emerging markets.
“I don’t necessarily think it’s going to be an oligopoly where there or four or five operators and no one else,” Kustelski says.
According to Ruddock, the European model for sports and online betting has resulted in a handful of mega-operators with smaller operations fighting over tinier market shares. He thinks a similar model will evolve in the U.S., but with some differences.
“Especially with the way laws are structured here where everything is intrastate at the moment,” Ruddock says. “The (Interstate) Wire Act still applies to sports betting, and there are still some unanswered questions about that. But the way states have structured it where they’re basically tethered to land-based operators within a state, I think you’ll also see some regional powerhouses.”
According to the AGA, since PASPA was repealed in June 2018 the aggregate sports betting handle in the U.S. is an astounding $63.3 billion. Sports betting revenue through June 2021 is $4.6 billion.
So, what’s more important: Being the first in market to launch sports betting and igaming, or taking the time to get it right?
“My take all along since 2018 has been, what’s the rush?” Ruddock says, adding that when laws are open to revisions “you just run into more and more people showing up telling you what you should be doing, and then you try to appease all of these people. I think getting it right is the No. 1 goal. Being first doesn’t always pan out. It might help initially, but in the long run, the states that get it right are going to be in much better shape.”
