Between the Lines – American Gaming Report – September 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.

Could Florida sports betting return soon?

The possible return of online sports betting in Florida has been the biggest storyline in U.S. gambling at the end of summer. A federal court challenge to the Seminole Tribe compact with the state has failed in the DC Circuit Court of Appeals, leaving open the possibility of a relaunch of Hard Rock’s sports betting app as soon as this month. Online sports betting was live briefly in 2021, before the lawsuit challenging the legality of the compact and sports betting.

The latest: The original plaintiffs in the case have asked for a stay of the appeal court ruling while they prepare to ask the United States Supreme Court to hear an appeal. A stay appears unlikely, which would potentially clear the way for sports betting to commence at some point.

The Supreme Court takes very few cases annually, and it would also require overturning the appeals court’s ruling. While it’s a high bar to climb, a Supreme Court appeal is how we ended up with the expansion of sports betting in the United States in 2018, when New Jersey’s challenge overturned the federal ban.

The Seminoles and Hard Rock hold a monopoly on Florida in a relaunch scenario, should they choose to operate in Florida without competition. There are ways for other operators to serve the state, if they are able to strike a deal with Seminole/Hard Rock.

In the status quo, plenty of products are already live that seek to serve the sports fan looking to have action on games.

• DraftKings and FanDuel have offered their traditional daily fantasy sports contests, which are peer-to-peer, for more than a decade. 
• Daily fantasy sports companies like PrizePicks and Underdog Fantasy that offer player vs. the house games – where you place parlays on player performances – also serve Florida and are turning into big business across the U.S.

The fear of another start and stop like in 2021, in addition to the Hard Rock monopoly, means there is not necessarily a rush to launch sports betting in Florida. The one downside to waiting is the NFL season is already two weeks old, and Hard Rock would be missing out on prime season for customer acquisition.

Florida would be the largest state by population to have online sports betting, should it relaunch, ahead of New York. There is still no legal sports betting in the two largest states, California and Texas.

Data from Week 1 of NFL season

Online gambling vendor Geocomply is a huge part of the sports betting ecosystem as the main provider of geolocation services. As such, its data from the start of the NFL season provides unique insight into what is happening in online sports betting.

The most fascinating data point is that Geocomply logged 242.3 million geolocation transactions in Week 1 of NFL, an increase of more than 50% year over year. That’s interesting because it’s not entirely explained by new states that didn’t have sports betting a year ago, which include Maryland, Ohio and Massachusetts. It indicates more engagement with sports betting apps than in the past, as well as more adoption of legal apps even as sports betting begins to mature in some states.

Also interesting: There were a million geolocation checks from states that have no legal online betting, indicating the opportunity being missed and unserved demand, especially in Missouri, which borders on a relatively new market in Kansas.

Data on revenue and handle from sports betting trails by a month or two, depending on the state, so expect to see some of those numbers from the start of NFL in the next American Gaming Report.

Can Fanatics Sportsbook disrupt the market?

The first real possible challenger to disrupt the DraftKings-FanDuel duopoly atop the US sports betting market in years is finally here in earnest.

Fanatics, best known as the provider of licensed sports apparel in the U.S., is now fully into the U.S. sports betting industry with its launch in several states.

Recent acquisition of PointsBet also immediately plugged into Fanatics’ funnel as well, as the sportsbook is now called “PointsBet, a Fanatics Experience” until further integration of the product, database and licenses can be achieved.

Both apps are offering free jerseys with a deposit and a first bet, which is a pretty compelling offer for almost all sports fans. The big question is will the users stick around or take the free jersey and run? Does Fanatics have a product and customer retention vehicle to make an immediate splash after the initial conversion? It will be fascinating to find out, and we should see how well the promotion is working and if customers are sticking around over the course of Q4.

Zombie Barstool Sportsbook as we wait for ESPN Bet?

Well, this is awkward: Penn Entertainment is still running its sportsbook under the Barstool brand. That’s despite the fact that Penn sold Barstool back to founder Dave Portnoy for zero dollars this summer, and Barstool’s media enterprise and personalities are no longer telling users to sign up or bet there. The sportsbook will relaunch this fall as ESPN Bet after a licensing deal this summer between Penn and the sports media company.

That leaves us with several months of a product that’s getting no promotion in the middle of the most important time of the year for sportsbooks, outside of the Super Bowl. What will that mean for Penn/ESPN?

It’s fascinating to ponder how much of the user base Penn retains while the sportsbook is in limbo. Clearly, some percentage of users were only betting there because of the Barstool presence, and it’s doubtful just using the logo will retain them. Many Barstool fans are probably hyper-aware of the Penn/Barstool split and some (or many?) will leave as a result. Again, the numbers for September and October should be indicative of what’s happening with the sportsbook until ESPN’s name is on the app. Some might stay just because of the inertia of already having a transactional history with the book.

And for those that leave, will Penn be able to reactivate them under the ESPN brand? I am not sure that’s a given unless the product or any offers around the relaunch are compelling. In any event, Penn and ESPN are probably hoping for a decent starting point with the database, and don’t want to start from scratch, especially if they are hoping to make the podium position in the U.S. market within three years.

Does DraftKings have the juice to close the gap or overtake FanDuel?

We’ve talked quite a bit about operators who hope to cut into the top two. But can No. 2 challenge No. 1?

DraftKings has been a clear No. 2 in sports betting for quite a while, but there are at least signs that it’s making in-roads vs. FanDuel:

• DraftKings has been the leader in Massachusetts by a wide margin since that state launched sports  betting in spring. (This gets an asterisk, as it is DraftKings’ home state).
• In the largest market in the country, New York, DraftKings and FanDuel have almost been in a dead heat for much of the summer.
• DraftKings overtook FanDuel in terms of monthly handle for the first time in Ohio this summer.
• In the states in which both FanDuel and DraftKings operate and where we can get clean data that can be attributed to a specific sportsbook without other channel checks, we see DraftKings ahead during the summer months.

Note this is the first time that DraftKings has led FanDuel for consecutive months over the past two years.

Take all of this with a grain of salt, however. The summer months are small potatoes compared to football season, when marketing spend increases and orders of magnitude more money is wagered at and held by sportsbooks.

Beyond the data, it feels like DraftKings has momentum in the US sports betting market that could challenge FanDuel more seriously for its throne. It will be interesting to see if data backs that up this fall.

Things to watch

• Kentucky is scheduled to launch online sports betting at the end of the month, Sept. 28.
• North Carolina’s online casino budget negotiations have been held up for months, in part because of an attempt to include expanded gambling in the state. Now, the budget plan and casinos will be separated, and it sounds like online casino is off the table for this year.
• Michigan cracked down on a sweepstakes/charity online casino that the state said was not licensed to operate. It’s not clear if this is a one-off or a trend that could pick up steam in the state and beyond.

 

About the author

Dustin Gouker is the former Vice President of Content for North America at Catena Media, and currently serves as a consultant and analyst for the company. Gouker started writing and editing at LSR in 2015, reporting on the meteoric rise of DraftKings and FanDuel in daily fantasy sports. He also led coverage of the push for legalization of sports gambling in the US, including being on hand to cover oral arguments in the US Supreme Court as the federal ban was lifted. He’s considered one of the leading experts about the US sports betting space and has spoken at a variety of conferences and with various media outlets about the industry’s development.