What is the U.S. model for sports betting?
After the first four months of 2021, that question is an increasingly complicated one to answer.
The most common perception of the rapidly expanding U.S. market is for states to reserve licenses for their established land-based casinos, which can then partner with one to three online sportsbook brands to operate as their “skins” under those licenses. That is essentially the model put in place in New Jersey, Pennsylvania and a half-dozen other states since the historic U.S. Supreme Court ruling of May 2018, and it has been the regulatory context underpinning dozens of so-called market-access agreements marrying casinos to their skin partners.
Different models have already been established in states without commercial casinos, which have either favoured their state lotteries (e.g. DC, Oregon) or licensed online operators directly like in Europe (Tennessee, Virginia).
In the first few months of 2021, however, the casinos-plus-skins approach has come under extra pressure through two emergent policy trends.
Firstly, it appears owning a land-based casino no longer comes with a cast-iron guarantee of mobile sports betting license and accompanying control over market access.
As enacted last week, New York’s state budget law establishes a competitive bidding process for two (or more) standalone online betting platform licenses – with no assured role for any of the state’s four commercial casinos other than an annual fee owed to at least one of them for storing servers on their premises.
In Maryland, new state law entitles incumbent land-based casinos and racetracks to apply for licenses to offer sports wagering at their facilities. However, casinos and tracks are not guaranteed to receive one of the up to 60 standalone licenses for mobile sports betting. More significantly, online operators can apply for those licenses directly without going through a casino partner, as they had to in New Jersey or other states.
Meanwhile, a new tribal gaming compact between the state of Florida and the Seminole Tribe would permit commercial casinos and their skin partners to participate in online sports betting only if they use the Seminole’s platform and share a much higher percentage of revenue with the tribe than they would under a more traditional skin partnership.
The second notable policy trend of 2021 is a more prominent role for sports teams in the licensing of sports betting. While Virginia last year set aside one of a dozen or so mobile betting permits for the VA-headquartered Washington Football Team (the NFL team since obtaining that permit alongside partner FanDuel), Arizona this month became the first state to apply that model at scale.
Under Arizona’s law, signed by Governor Doug Ducey, each of the state’s major league sports franchises, PGA Tour golf venue and NASCAR speedway track can apply alongside a sportsbook “designee” partner to operate retail and state-wide online betting – giving the likes of the Phoenix Suns and TPC Sawgrass the same kind of market-access control in the Grand Canyon State that Caesars Entertainment or Penn National Gaming have had in New Jersey or Indiana.
Similar legislation to Arizona’s is pending in Texas and may also be put on the table in Ohio if a full-court lobbying press by a coalition of Ohio sports teams is successful.
Also in recent weeks, we have seen an acceleration of the trend for major sports stadiums and arenas to be earmarked to host upscale sportsbooks that were so recently confined to Nevada’s casino resorts.
Sports arenas can host retail sportsbook facilities under the new laws passed in both Arizona and Maryland, following in the footsteps of legislation in Illinois and DC, with North Carolina and possibly Ohio set to consider similar proposals.
In addition to providing daily analysis on regulatory and market developments, VIXIO GamblingCompliance has published its U.S. Sports Betting Tracker report every month since the U.S. Supreme Court held oral arguments in the New Jersey case in late 2017.
Each report identifies emerging policy and market trends, provides a shortlist of legislation or other events to watch, and provides updated forecasts based on the latest regulatory developments.
Some other early 2021 trends we’ve been highlighting include:
Tax Rates: Putting New York’s unique framework to one side, operators are consistently securing favorable tax treatment through the ability to deduct free bets, bonuses and federal excise taxes from taxable revenue.
iGaming: While online sports betting has been approved in four states and counting so far in 2021, iGaming looks unlikely to be approved in more than one (probably Connecticut) or maybe two states max. this year, despite the significant outperformance of online gaming vs. betting in tax-revenue terms in New Jersey, Pennsylvania and Michigan.
Minority Partner Requirements. Minority participation is becoming more of a trend in sports betting policy in 2021. Maryland’s law mandates a new state commission to “actively seek to achieve racial, ethnic and gender diversity” through the awarding of standalone licenses for retail and mobile sports betting, while the Virginia Lottery must similarly give “substantial and preferred consideration” to companies with minority investors or partners when it opens applications for five additional permits later this year.
Illinois’ Rise and Fall:
Governor J.B. Pritzker’s recent move to reinstate a requirement for players to register mobile betting accounts in-person at a casino was made just as Illinois had moved past Pennsylvania in February to become the second-largest U.S. online market by both handle and revenue, behind only New Jersey.
FanDuel No. 1 on Parlay Strength: According to VIXIO GamblingCompliance analysis of detailed Illinois data, there is little daylight between FanDuel and chief rival DraftKings when it comes to online betting revenue derived from football and basketball, and Flutter-owned FanDuel is behind on baseball, soccer, college sports and in-play wagers. However, FanDuel’s outsized market-share of pre-game bets and particularly higher-margin parlays is good for a number one position overall.
For a U.S. market that continues to evolve at warp speed, the VIXIO GamblingCompliance platform provides industry-leading intelligence on key policy and market trends, a customizable revenue-forecasting dashboard, aggregation of all market data, tools to quickly understand and compare the regulatory landscape, and proprietary tracking of enforcement activity and partnerships between operators, suppliers, sports teams and media companies.