NEWS

December 21st, 2023

Between the Lines – American Gaming Report – December 2023

Catena Media is offering North America gambling industry insights via Dustin Gouker, a former vice president of the company who has been at the forefront of coverage and discussions in the United States for much of the past decade. Catena will offer Dustin’s in-depth look at the US industry every month with trends and news in regulation, legalization and the companies involved in the space.

In January’s edition of the AGR, we’ll provide trends to watch in 2024.

Florida Sports Betting is Back

The biggest news of the year in US gambling came late, as Florida is now officially a sports betting state again.

Amid more legal challenges and victories in court, the Seminole Tribe decided to relaunch Hard Rock Bet fully in early December. In November, Hard Rock allowed bettors to place wagers as long as they already had an account. Six retail sportsbooks are also open for business now; part of the law also allowed for craps and roulette at physical casinos as well.

Florida opened to sports betting briefly in 2021 after a new compact between the Seminoles and the state authorized it, but before a court challenge forced it to go dar.

Legal sports betting in the state is not free and clear, yet. The case that originally stopped sports betting faces a potential appeal in the U.S. Supreme Court as well as a new case at the state level. There is some chance that a negative outcome in either case could force sports betting to go dark once again. But the Seminoles felt it would be safe enough to turn on the lights at Hard Rock Bet again.

Florida is now the largest state by population to offer sports betting, ahead of New York. However, it seems likely that the monopoly run by Hard Rock will fall short of maximizing customer acquisition and revenue.

There is at least the possibility of other sports betting brands entering Florida by striking a deal with the Seminoles, but that might be unlikely with the legal uncertainty still hanging over sports betting in the state.

Two New Sportsbooks On The Block

While plenty of brands have entered and left the US sports betting industry in its first five years, 2023 is the first time since the early days that we saw two new entrants who can viably compete for a podium position. Perhaps ESPN Bet and Fanatics Sportsbook can even dream of eating into the market share of the top two of FanDuel and DraftKings.

ESPN Bet

The brand with more buzz right now is ESPN Bet. That’s the new offering from Penn Entertainment that “launched” in November; the launch was really just a rebrand of Barstool Sportsbook.

The machinations around ESPN Bet are one of the biggest stories of the year. Penn had promised to compete in the upper tier of sportsbooks with its acquisition of a minority stake in Barstool in 2020. After years of failing to gain meaningful market share, Penn decided to pivot in 2023, signing a massive licensing deal with ESPN. As part of the ESPN deal, Penn then wrote off Barstool as a loss and sold it back to founder Dave Portnoy for $1.

Barstool had reached what appeared to be a ceiling of less than 5% of the market; it’s clear that ESPN Bet’s floor should end well above that. Whether its ceiling reaches the publicized target of 20% market share remains to be seen.

What have we seen so far from ESPN Bet?

The download numbers have been impressive in the early days – ESPN Bet was No. 1 in the App Store for a good amount of time, but some of that needs to be tempered. Old Barstool Sportsbook users needed to download the new app to migrate to the new platform and claim a $200 bonus. And we’ve also never seen a single sports betting app go live in 17 states simultaneously. And all of the above came with a push from ESPN’s broadcasts, site, app and personalities. The numbers were certainly good, but anything short of massive initial adoption should have been viewed as a failure.
ESPN Bet was only live for about half of November, but we’re initially seeing upticks in handle and revenue in the few states that have reported data. Again, I think we’d expect to see that with both new and existing users getting a significant bonus, along with whatever activity was still going on in early November as Barstool. We’ll learn a lot more about ESPN Bet’s staying power and potential growth in the coming months.
Integration of ESPN Bet into the ESPN app/site/written content has been relatively slow and minimal, so there’s tons of upside if and when that flywheel is set in motion. Most of ESPN’s editorial content doesn’t provide calls to action, and it’s hard to find any ads or links to the sportsbook app from the core ESPN app. It’s worth noting that this was also a problem (or an oversight) with Barstool and Barstool Sportsbook.
There is a hope, perhaps both internally and externally, that ESPN Bet will be able to expand the market instead of just taking market share from incumbents. The strength of the ESPN brand on top of the media entity’s huge footprint in the world of sports drives that thinking.

Fanatics Sportsbook

Fanatics Sportsbook is also live, now in nine states, but has garnered far less buzz than ESPN in the back half of 2023.

Fanatics generated a lot of buzz earlier when it bought the U.S. assets of PointsBet, which had settled in as a mid-tier operator around the country. Fanatics still operates the PointsBet brand in some jurisdictions as well.

Instead of coming in with a giant splash, Fanatics looks like it will be content with a slow burn and trying to grow its business organically on top of the tech and users it acquired with PointsBet.

The initial thoughts on Fanatics:

We still only have a few months of data from the initial Fanatics Sportsbook launch in August, but those show signs of growth. It’s more likely we’ll see a big push from a more fleshed out Fanatics Sportsbook heading into the 2024 football season.
The most interesting thing about the sportsbook is its tie-in with Fanatics’ core business of selling licensed sports merchandise. Fanatics’ loyalty program can be used for bonus bets or apparel, a dynamic that the company believes will set it apart in the marketplace. FanCash allows Fanatics to achieve, in theory, a level of loyalty and retention that other sportsbooks cannot.
Fanatics was an early adopter of BetVision, a product that allows bettors to watch low-latency streams of NFL games right in the app.

In addition to being one of the biggest stories of 2023, the fates of these two sportsbooks will be a major story to follow in 2024 to see if they are either growing the market or able to surpass No. 3 and 4 operators BetMGM and Caesars.

Athletes and gambling

The intersection of American athletes and gambling fell short of full-on “scandal,” but it was a major storyline in 2023:

Ten NFL players were suspended this year for betting on NFL games or while on team property. Meanwhile, wide receiver Calvin Ridley was reinstated; he was the most high-profile player suspension since the expansion of U.S. sports betting.
More than a dozen college athletes from Iowa and Iowa State have been charged in connection with a sports betting investigation. The investigation does not appear to involve any issues related to match-fixing.
NHL Shane Pinto player was suspended for 41 games with very little information about the nature of what he did in relation to gambling.
Two minor-league pro golfers were suspended for betting on the PGA Tour.
LeBron James’ business partner was allegedly involved with an illegal bookmaker.
While not an athlete, a Jacksonville Jaguars employee allegedly racked up millions of dollars in losses playing daily fantasy sports with money he got from defrauding the team.

It all adds up to the most negative gambling-related activity involving athletes that we have seen since the fall of the federal ban. And it’s hard to believe that all of this just cropped up within the past year; Occam’s razor would lead us to believe that this kind of thing has been going on for some time and going undiscovered.

It’s also logical to conclude that more of it’s going on in other professional sports and across college athletics, Major League Baseball and the NBA both remain relatively untouched by gambling suspensions in recent years. The Iowa situation, in particular, highlights a problem that is almost certainly going on at colleges and in states around the country.

The outcome is more concern and action around athletes in gambling, even though it’s been reactive rather than proactive. The biggest development has been the development and adoption of Prohibet, which seeks to identify athletes and prohibited individuals before they bet on the wrong thing. We’ve also seen evidence of at least the NFL and the NCAA (and its member schools/conferences) taking education around gambling more seriously. That’s something that should have happened as soon as sports betting started expanding, but it’s better late than never.