After legislative discussions and sportsbook operations were disrupted by the pandemic in 2020, the U.S. sports betting market continued its strong rebound in the first half of 2021 as revenue growth accelerated, more than a half-dozen states joined the post-PASPA club, and three of the “big four” states in New York, Florida and California took major steps toward legalization or expansion.
Here are five notable trends from H1 2021 and a guide to some of what our expert analysts will be watching for in the second half of the year:
VIXIO Expansion Outlook
In our January U.S. Sports Betting & iGaming Outlook report, we predicted that six to 14 states would legalize sports wagering this year from a line-up of Arizona, Connecticut, Florida, Georgia, Kansas, Louisiana, Maine, Maryland, Massachusetts, Missouri, Nebraska, Ohio, South Dakota and Wyoming. We also tipped New York and potentially North Carolina to legalize mobile sports betting, and one or two out of Connecticut, Indiana and Illinois to authorize internet casino gaming.
At the halfway point of the year, a total of eight states have already legalized sports wagering (South Dakota, Wyoming, Arizona, Maryland, Florida, Nebraska, Connecticut, Louisiana). New York has passed legislation for online sports betting, albeit under a regulatory structure that few would have predicted at the start of 2021. Maine and Ohio have made significant progress towards enacting bills. Connecticut, meanwhile, has authorized online casino games in addition to mobile sports wagering.
Overall, the rapid pace of expansion for sports betting is right on track with our forecasts, with only a stalled debate Kansas failing to match our expectations. As we also outlined in a recent report, a series of lobbying challenges mean the pace of adoption for iGaming is set to remain a lot slower than online sports betting for the foreseeable future, despite the legislative breakthrough in Connecticut.
What We’re Watching For in H2 2021: With their state legislatures in session for several more months, will Massachusetts and Ohio join the Class of 2021 for legal sports betting? On the iGaming front, we will be watching to see how major casino interests respond to draft regulations to permit interactive casino games in addition to online poker in Nevada.
New Markets, New Models:
As we recently explored, states are now ripping up the New Jersey playbook of tying licenses to land-based casinos and requiring specialist online sportsbook operators to partner with incumbent gaming interests as their ‘skins’.
Despite state constitutional restrictions, New York bypassed its land-based casinos for mobile sports betting, with potentially just two standalone licenses available through a competitive bid process. Maryland is likewise enabling online operators to secure their own licenses without a casino partnership, but with up to 60 available under the state’s more expansive law. Pending federal approval, Florida will also be running all online sports betting through platforms controlled by the Seminole Tribe with any partnerships struck on radically different terms to skin agreements in New Jersey, Pennsylvania and other states.
What We’re Watching For:
Which operators will emerge as the victors from New York’s RFP process, amid the prospect of major brands teaming up through a series of joint bids? Will Massachusetts and Ohio follow the trend of decoupling sports wagering licenses from incumbent casinos?
Two Tracks For Tribal Sports Betting
One of the key policy trends to watch we flagged in January – the different legal pathways for how Indian tribes will participate in online sports betting – is now very much front and center thanks to regulatory developments in H1 2021.
The first few months of the year have seen both Arizona and Connecticut follow Michigan’s model by allowing tribes to conduct sports wagering in their tribal casinos as sovereign governments, but requiring state licenses for mobile betting involving players beyond Indian reservations.
In stark contrast is Florida’s new compact with the Seminole Tribe, which permits the tribe to conduct online sports betting throughout the state via on-reservation servers as a form of tribal gaming subject to 1988’s federal Indian Gaming Regulatory Act (IGRA).
As we explored in our May U.S. Sports Betting Tracker report, if Florida’s compact survives federal and court scrutiny, it will establish a new regulatory model for how mobile sports wagering might be constructed in other major tribal gaming states such as Oklahoma, Minnesota, Washington or even California. If the Seminole Tribe’s path to online betting is blocked, then calls for Congress to update IGRA for the post-PASPA era are likely to be amplified.
What We’re Watching For: Will the U.S. Department of Interior approve or reject the Seminole compact, and will its provisions for online sports wagering survive a likely legal challenge before federal courts?
Sports Teams Become Major Players
Virginia made history in January 2021 when regulators awarded the first sports wagering license to a major U.S. pro sports team in the shape of the NFL’s Washington Football Team and its partner FanDuel. However, Arizona became the first state to adopt that licensing model at scale through legislation that enables all major in-state teams to control access to online betting licenses.
While Arizona sports teams will not run their own sportsbooks but instead partner with leading operators as their “designees”, the state’s law breaks new ground in terms of direct team participation in the sports wagering market.
What We’re Watching For: Will Ohio sports teams succeed in their lobbying efforts for similar treatment to their counterparts in Arizona, and as was also proposed under failed legislation in Texas? Meanwhile, H2 2021 should also see more market-access partnerships between teams and sportsbook operators in Arizona, Maryland and potentially Illinois.
Roaring Revenue Growth
According to VIXIO GamblingCompliance estimates, total U.S. sports betting gross revenue through the first four months of 2021 was $1.25bn, up 363 percent year-over-year. The sharp increase was driven not only by the absence of sporting disruption caused by COVID-19, but also fast starts in new markets such as Michigan, Tennessee and Virginia, plus strong underlying growth in the somewhat more mature jurisdictions of New Jersey, Indiana and Pennsylvania.
Based on our latest forecasts, which are updated monthly, we project total revenue to reach $9.4bn to $12.7bn by 2025, depending on whether legislative and regulatory trends align with our base- or bull-case scenarios. Reflecting strong legislative momentum and market performance, those numbers have seen a significant upgrade from the $7.3bn to $10.0bn we forecasted in early January.
What We’re Watching For: How much will the return of in-person registration suppress further market growth in Illinois? Can new markets such as Arizona, Connecticut and Maryland get up and running in time for NFL season? In terms of operator market-share, will BetMGM continue to close the gap on FanDuel and DraftKings? And will Barstool be able to establish itself as part of a ‘big four’ as it makes a bigger marketing play?
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