Month: January 2024

Flutter’s Q4 financial results saw growth in the US push revenue 25% to £9.51bn (€11.08bn/$12.07bn). While Flutter did not delve into too many details, Brazil is certainly on everyone’s mind with the country on the verge of regulating.

Jackson said he was “pleased” with Pokerstars and Betfair’s performances in Brazil. He added, “It’s been some time coming, but we hope at some point the regulation will be signed in Brazil.”

Jackson then outlined Flutter’s three-year performance in Brazil. The group plans to culminate in a race to the finish line for the third year.

“From an igaming perspective, we’re following the strategy we laid out at the capital markets day,” he explained. “We said in the first year there were things that were broken that we were going to fix. We said in the second year we’d get to product parity and in the third year we’re going to get ahead of the market.”

Using M&A as a driver for success

The chief executive said that Flutter has been focused on organic growth “and that’s something we’ve been doing in Brazil”. He also praised the company’s M&A moves in the region. The group sees this as a way of finalising its position in the market.

“But we’ve also used M&A as well as a means of cementing positions on the podium and trying to achieve that gold-medal position,” explained Jackson.

Looking at Q4 as a whole, Jackson said that Flutter had seen a strong performance in sports and casino. This is despite the sporadic nature of the first and final quarter.

“Obviously we’re very pleased with the performance we saw in Q4,” he said. “It’s worth remembering that our business, from a sports perspective, has a degree of seasonality. Q4 and Q1 are always going to be the busiest periods for us.

“Even in Q4, there’s that period where there’s a strong push at the beginning of the football season to make sure we reactivate and re-engage customers.”

Similarly to its strategy for success in Brazil, Jackson said Flutter is making moves to be a leader in the casino space.

“We’re also seeing very strong momentum in casino as well, as we execute on our strategy to move ahead of the pack from a product perspective,” he continued. “We hope to see further gains in that area.”

This is evident in its UK performance, where gaming revenue was up 17% on a constant currency (CC) basis, as well as total average monthly players climbed 5% to 3.9 million.

Flutter competition soars in the US

Speaking on Flutter’s key revenue driver for the year, Jackson acknowledged Flutter’s place within the continually competitive US market.

FanDuel’s sportsbook currently holds a 43% gross revenue market share across all US jurisdictions in which it operates.

In total, revenue rose 38% year-on-year to £3.06bn. Revenue was 19% higher during Q4 at £1.14bn. Its US igaming offering also had a 26% share during the quarter.

However, Flutter noted that that revenue in the period was lower than expected, missing an initial target by £147m.

“From a competitive intensity perspective, every year is competitive,” he explained.

“The launch of the football season, new competitors out there – there’s Fanatics, ESPN, we’ve had Caesars, BetMGM – over the years we’ve had a lot of competitors.

“I think this year was very intense. But I think the quality of our products stands us in very good stead. When I look at the returns we’re seeing in Q4 from the customer acquisitions, we’re very pleased,” Jackson continued.

“We’re right down at the bottom end of our payback periods. The business is in a good place. We’ve got a great product and great momentum to exit the year in the states.”

Hornsletten, a co-founder of EveryMatrix, will move into the new position on 1 February. He will be responsible for driving in-house development and third-party content partnerships.

A veteran of EveryMatrix, Hornsletten started out as CEO of the business when it launched in 2008. He also served as executive chairman and executive director before becoming COO in November 2019.

Prior to joining EveryMatrix, Hornsletten co-founded BetonBet in January 2001.

“If it wasn’t for Stian there would not be an EveryMatrix and I’ll be forever grateful to him for asking me to join him for a drink to discuss the idea of starting this business together 15 years ago,” EveryMatrix group CEO Ebbe Groes said.

“He wanted to take on a new challenge within the business to grow our games offering. He has mine and all the company’s full support. I’m certain he will immediately take it to another level, bringing enormous energy, innovation and passion to the team.”

EveryMatrix added that it will announce a new COO shortly.

Gabelica becomes new lottery lead at EveryMatrix

The appointment is the second major hire of the week for EveryMatrix. The business has also named Nikolina Gabelica as its new head of lottery.

Gabelica joins from the Croatian Lottery, where she worked for more than 20 years. Her most recent role at the lottery was director of the business development and marketing division.

“My 20-plus years of lottery and gaming experience fits perfectly with EveryMatrix, offering a diverse perspective that I will use to focus on strategies for both existing and new WLA member organisations and lottery clients,” Gabelica said.

“EveryMatrix’s modular, API-driven solutions are ideal for global lotteries looking to launch or expand their digital presence and I’m looking forward to meeting customers at ICE 2024.”

On 5 January Arif Mohammed Khan, the governor of Kerala, signed an order officially raising the state’s goods and services tax (GST) on gambling from 18% to 28%.

The decision to implement the new 28% GST in Kerala represents a follow-through for amendments to the Central Goods and Services Tax Act 2017 and the Central Goods and Services Tax (Third Amendment) Rules 2023, which took place in August and September of 2023.

The GST applies to the amount paid to – or deposited with – an online gambling company. This covers casinos, horse racing and online gaming. From the perspective of Nishith Desai Associates, however, the GST should only be applicable to the platform fee.

India’s central government has communicated through the finance minister that the 28% rate will be reviewed after six months. In the meantime, Khanna says the process of enacting the GST is well underway.

“Various Indian states have implemented the GST rate, or are in the process of implementing the GST rate through such state laws, including Kerala,” Khanna explains.

As for whether 28% is simply too high, Khanna believes it could cause some discouragement. Overall, though, Khanna feels it will not hugely affect India’s thriving gambling market.

“The high GST rate may definitely disincentivise smaller operators and gaming startups,” she continues. “However, the existing market is already quite competitive.”

Could the GST be implemented in India retrospectively?

The implementation process for the new GST rate has been far from smooth. India’s tax authorities are seeking to enact the 28% rate retrospectively. They have been issuing show cause notices to real-money operators, alleging GST evasion.

According to media reports, notices were issued to 71 operators, totalling ₹1.12tn.

“GST is only for the indirect tax mechanism,” explains Sharma. “Earlier, the GST of 28% on games of chance and 18% on games of skill enabled it to have a differentiating regime even in the field of indirect taxation.

“The GST department has issued notices claiming that the tax is to be paid from 2017, as the notification was simply a clarification.”

Khanna believes this will have an enormous impact on operators.

“These show cause notices have been challenged before the Indian courts – High Courts of States and Supreme Court,” she explains. “The next date of hearing before the Supreme Court is 2 April 2024.”

The impact is set to be so great that it might overshadow the new GST rate imposition altogether, posits Sharma.

“Just the imposition of the enhanced percentage of GST is not the issue, as it will get offset by the GST via its inputs,” she explains. “However, the interpretation of imposing from a retrospective effect and also on the face value of bets, has put the market in jeopardy, making it prohibitive.”

From here, the legal challenges against the GST rate will only ramp up. The government has told India’s Supreme Court that it will transfer all pending GST challenges currently before the High Courts to the Supreme Court.

“Hence, the issue will come to a head this year before India’s apex court,” says Khanna. “The business impact of this decision will be significant.”

Why now?

State-run lottery is permitted in India as it is run under an independent central law – but private lotteries are prohibited. Rummy was officially recognised as a game of skill – a permitted type of game – in 1968. According to Sharma, though, this is not recognised in Kerala.

“Kerala has not recognised the court directions on rummy and horse racing being games of skill and centre government directions that igaming is the jurisdiction of the centre and not that of the state.”

Khanna explains that games of skill are excluded from gambling-related prohibitions in a majority of Indian states.

“Offering and playing games of skill have also been recognised as a constitutionally protected activity by Indian courts,” she adds.

But there hasn’t been a central mechanism to test whether a game should be classified as a game of skill. Just a few states have implemented laws that class certain games as games of skill.

An attempt to nationalise this system fell flat, says Khanna.

“With the innovation of several new skill gaming formats, there was a need to introduce a regulatory mechanism to test new games as games of skill quickly and effectively,” she explains. “Therefore, the IT Rules were amended to introduce a co-regulatory mechanism with self-regulatory gaming bodies (SRB), whereby such registered bodies would verify games as ‘permissible’.”

But SRBs “were not designated, and the rules were not operationalised”.

“It appears that the central IT ministry is evaluating direct control instead of the co-regulatory framework with SRBs.”

What lies ahead for India?

On top of watching the show cause notices debacle play out, as well as the GST rate take hold, a lot lies ahead for the Indian market in 2024.

For Khanna, one point of interest is how the aforementioned IT rules will be implemented. Of particular intrigue is how this will be regulated by the IT ministry.

But a number of important litigations have also piqued her interest. Last year, the High Courts of Tamil Nadu and Karnataka threw out bans on skill games that their respective state governments had ruled as unconstitutional.

“These have been challenged by the state governments before the Supreme Court,” says Khanna. “Hence, the Supreme Court may also determine the constitutional validity of banning games of skill. This will mould state policy towards such games.”

Sharma believes that India’s gaming market will continue to prove itself to the wider industry.

“India has the potential to emerge as a hub for developers of igaming and will continue to do so,” she says. “India is not just a ground for developers but increasing usage of smart games has also enhanced the access to online games.”

She points to how India’s government has committed to regulating the country’s gaming industry.

“India being a developing economy with low levels of earnings, the government has taken a moral stand to protect the gamers by ensuring information, education, no misleading advertisements, distinguishing game of skill and also the policy for intermediaries to ensure anti-money laundering and other related acts and concerns.”

Much of what could bring groundbreaking legislative change to India will develop with time. For now, the industry watches and waits.

Confirming the news to iGB today (17 January), 888 said the changes will help the business achieve its long-term plans. 888 did not disclose which departments will be impacted by the redundancies. 

“We are making some changes to our organisational structure that will better position the group to achieve its long-term strategic plans,” an 888 spokesperson said. 

“As part of this, regrettably, some roles will be made redundant across some of our locations. We will be offering our full support to those colleagues who are impacted.”

Revenue down despite retail growth

The news comes as 888 also published a trading update for both its financial year and Q4 of 2023. The headline figure from the FY results is an 8% drop in group revenue.

888 said this was driven primarily by a proactive mix shift away from dotcom markets. This, it said, impacted revenues by approximately £80m in 2023.

The operator also noted the impact of customer mix changes in the UK due to additional safer gambling measures. In addition, it referenced changes in its marketing approach to focus more on sustainable revenue and profitability. 

Together, 888 said, these changes have created a “higher quality” and “more sustainable” business mix. This includes approximately 95% of revenue being generated from regulated and taxed markets.

Speaking about the past year, Per Widerström, who took over as CEO in October 2023, was largely positive. He referenced the changes made as being positive in terms of supporting future growth at 888.

“In FY23, the group made important strategic and operational progress in the face of some significant regulatory and compliance headwinds,” Widerström said. “I am pleased to say that the business has enhanced its foundations for sustainable and profitable growth including significantly strengthening compliance, refining its approach to marketing investment and increasing its focus on recreational customers.

“There are clear opportunities to unlock our significant potential, but as a business we know that going forward we must be more proactive in adapting to changes in regulation and technology. 

“We are now taking rapid actions to position the group for future success, reducing our overhead costs and freeing up funds to invest in growth based upon our new strategy and value creation plan.”

Retail goes up, online and international go down

Going into further detail on its performance in 2023, 888 said UK and Ireland online revenue was still its main source of revenue. However, revenue from this segment was 8% lower year-on-year at £658m.

Again, 888 referenced the impact of safer gambling changes and a more refined marketing approach. It said strong customer engagement was more than offset by an 18% drop in average revenue per customer.

However, 888 said synergy delivery and focus on efficient marketing means adjusted EBITDA for UK and Ireland online will be “significantly” higher year over year, despite the reduction in revenue.

Turning to its international business, revenue declined 16% to £517m. 888 said the segment was impacted by compliance changes in dotcom markets but saw double-digit growth in Spain and Italy.

In contrast, retail revenue was 3% higher at £535m in 2023. 888 put this down to a strong underlying performance driven by improved product offering through new investment. This, the operator said, more than offset a 3% reduction in estate size during the year.

More changes at the top at 888 as Walker exits as CCO

Since Widerström arrived as CEO, 888 has announced a series of changes to its management team. The latest has been confirmed today, with the news that Phil Walker will be leaving his role as chief commercial officer of the business.

Walker took on the position in July 2023. He was promoted after Alexis Zamboglou joined the business and took on his previous role of managing director for the UK and Ireland.

Walker only took on the MD position in January 2023. He was previously UK MD for William Hill, continuing in the role after 888 acquired William Hill’s non-US assets. Walker also spent time as online managing director at William Hill.

“After five years in leadership roles across the business, Phil has decided to leave 888,” an 888 spokesperson said. “We’d like to thank him for making a hugely significant contribution over the years. We wish him well in his future endeavours.”  

Other changes in recent months include Sean Wilkins being named chief financial officer in October. He will begin his new role next month.

Rik Barker will also assume the position of chief information technology officer in February. Meanwhile, Ian Gallagher was recently appointed as chief product officer. 

Other senior appointments include Fredrik Ekdahl joining as group general counsel back in October and Jeffrey Haas as chief growth officer earlier this month.

One year on from Pazner’s departure

The trading update comes just under one year since Itai Pazner was removed as CEO of 888. Pazner left the business at the end of January 2023.

His somewhat abrupt departure coincided with 888 suspending its VIP activities in certain dotcom markets. An internal compliance review revealed anti-money laundering (AML) and know your customer (KYC) best practices were not followed for Middle Eastern customers. 

Pazner was appointed CEO of 888 in January 2019, having risen through the ranks during two decades at the operator. As CEO, he led the business through a period that included the acquisition of the non-US business of William Hill in July 2022. He also oversaw expansion efforts across North America in both the US and Canada.

Lord Mendelsohn was named executive chair of 888 in the wake of Pazner’s exit. He moved back to a non-executive position when Widerström joined the business last October.

What next for 888?

With a fresh management team now in place, and other members set to join imminently, 888 said it is upbeat about its prospects for 2024.

The trading update references a “positive” outlook for FY24 revenue, with consistent growth in active players driving confidence in strong revenue growth online in both the UK and international segments. 888 also said compliance and safer gambling impacts will begin to annualise in February 2024, leading to a more positive outlook for average revenue per user.

The operator launched its global cost savings programme in December 2023, with the aim of saving £30m. This will be supported by investment in automation and AI-powered data and insights to strengthen core capabilities. Cost savings will also allow for higher marketing spend in 2024.

888 said the initiatives will improve long-term profitability. However, additional investment means it expects 2024 adjusted EBITDA to be at the low end of consensus range.

Further details about its long-term strategy will appear alongside its full-year results, due to drop on 26 March. 

“I’ve been working hard with the board, our strengthened executive team and the talented people across the business to refine our strategic framework, which is being translated into a value creation plan,” Widerström said. 

“I am confident that we are set to deliver deleveraging and strong shareholder returns in the coming years. I am looking forward to outlining our 2024-2026 plan alongside our full-year results in late March.”

The debate will take place on 26 February after a petition on the measure. It was one of several proposed in the Gambling Act white paper, which passed 100,000 signatures. The BGC said it would support such measures if they do not impact players not at risk of gambling harm.  

Proposals include detailed affordability checks on players losing £1,000 (€1,162/$1,264) in 24 hours or £2,000 over 90 days. Operators would also have to perform checks on players with a monthly net loss beyond £125 or £500 per year.

The BGC stated its position on the matter has not changed, saying enhanced spending checks online are needed. However, it reiterated these should be frictionless. 

“Ministers promised Parliament that checks would be frictionless. They now need to honour that commitment and will the means,” BGC CEO Michael Dugher said.

“At the BGC we supported enhanced checks for online gambling but have been clear throughout that checks should be carefully targeted on those showing signs of problem gambling, or those who are at risk of harm, so operators can use technology to take swift action.

“They must also remain frictionless for the vast majority. Punters have repeatedly made clear they will not submit to intrusive checks.”

BGC: enhanced checks should not push players to black market

Dugher also noted that the majority of players bet perfectly safely and responsibly. He said the government needs to strike a balance between improved checks and not interfering with the experience of players who bet safely and responsibly.

“It is crucial no check is introduced which risks driving these punters to the unsafe, unregulated black market online,” Dugher said. “These sites have none of the standards or protections offered by BGC members and they make no contribution either to the Exchequer or sports like horse racing.

“We continue to work closely with the Gambling Commission and believe there should be a proper pilot before any permanent changes are introduced.”

Dugher to replace Simmonds as BGC chair

The BGC statement comes after the organisation last week announced Brigid Simmonds will step down as its chair in April. Dugher will replace her and his role as CEO will be vacated until a replacement is found.

Simmonds had been BGC chair since its inception in 2019, overseeing attempts to represent the UK’s gambling industry.

Upon taking over from Simmonds, Dugher will be tasked with overseeing the implementation of the white paper.

Total revenue in 2023 was up 10.9% from $5.21bn in the previous year. The New Jersey Division of Gaming Enforcement (NJDGE) noted growth across all three core markets.

Land-based casinos remain the primary source of gambling revenue in New Jersey. These accounted for $2.85bn of all revenue, a year-on-year rise of 2.2%.

Retail slots revenue was 3.3% higher at $2.11bn but table games revenue slipped 0.7% to $736.2m. Incidentally, table games was the only subsection of the market to report lower revenue in 2023.

New Jersey igaming revenue nears $2.00bn

As for igaming, revenue here reached $1.92bn – a new record and 15.7% higher than in 2022. 

Online slots revenue jumped 15.9% to $1.89bn, while peer-to-peer poker increased 5.6% to $28.9m.

Golden Nugget took top spot in the igaming market with $524.8m in revenue for the year. Resorts Digital followed in second with $507.8m, then the Borgata on $489.9m in revenue.

Sports betting revenue exceeds $1.00bn for the first time

Meanwhile, there was more good news for New Jersey in terms of sports betting, Revenue here also hit a new yearly high of $1.01bn, up 31.9% from 2022 and the first time the state surpassed the $1.00bn mark.

This was helped by a higher spend among players in the state. Bettors wagered $11.97bn on sports in 2023, up 9.5% from 2022’s $10.93bn annual handle. Of this, $11.44bn was wagered online and $527.8m at retail sportsbooks.

Meadowlands and partners FanDuel, PointsBet and SuperBook were the frontrunners with $483.6m in revenue. DraftKings and Resorts World were second on $314.5m, then Borgata and BetMGM with $82.7m.

New Jersey ends 2023 on a high with December growth

Turning to the final month of 2023, total market revenue in December was 14.8% higher at $522.2m. 

Land-based casinos win increased 7.8% to $232.4m. This was driven by a 13.9% jump in slots revenue to $175.3m, whereas in contrast, tables games revenue fell 7.3% to $57.1m.

Igaming revenue hiked 19.1% year-on-year in December to $180.3m. Internet slots revenue jumped 19.3% to $178.0m, while peer-to-peer poker revenue was up 4.7% to $2.3m.

Golden Nugget was the igaming leader in December with $52.8m in revenue. Resorts Digital was second on $46.1m, then the Borgata with $40.6m.

As for sports betting, revenue increased 24.8% to $109.4m. This was helped by a 20.8% rise in handle to $1.28bn. Players bet $1.23bn online during the month, in addition to $50.5m at retail locations.

Meadowlands and its trio of partners also claimed top spot in this market in December with $51.1m in revenue. DraftKings and Resorts World placed second on $34.8m, some way ahead of the Borgata and BetMGM in third on $7.1m.

For those encouraged by New York state senator Joseph Addabbo’s filing of a revised igaming bill last week, the exclusion of igaming from the budget spells trouble.

Addabbo’s new bill – Senate Bill S8185 – builds upon his previous attempt to introduce online gaming in the Empire state. But this comes with one key difference – the inclusion of ilottery.

Hochul’s budget for 2025 totals $233bn (£184.20bn/€214.43bn), an estimated $1bn increase on the previous year. She said this will be achieved without raising income taxes.

But while igaming did not form part of the New York budget, Hochul did insert a provision to extend a number of pari-mutuel, racing, wagering and breeding law provisions that were about to expire. The extension accounts for a period of one year.

“In for a fight”

For Brendan Bussmann, managing partner at B Global Advisors, the choice to exclude igaming from the budget delivers a critical blow to the future of online casino. In his own words: “We’re in for a fight.”

To analyse what igaming could bring to New York, he looks at the state’s current sports betting market, which consistently brings in high revenue for the state. And no wonder – sports betting tax is set at 51%. Comparably, Addabbo’s latest bill proposes a tax of 31.5% on gross gaming revenue from igaming.

“Sports betting has generated a ton of revenue,” he says. “But when you’re taxing 50% of revenue it should be. It’s one of most populous states. When you get half of all dollars, that’ll be a big number.

“New York is surrounded by sports betting. They’ve got it in Pennsylvania, Connecticut, Massachusetts, New Jersey – everyone wants to be in NYC because you’ve got a high amount of people. You want to be there.”

Ayers Badan joined Barstool as CEO in July 2016. She previously held senior positions with Bkstg, AOL, Demand Media and Yahoo.

Confirming her exit in a blog post, Ayers Badan did not reveal if Barstool has a replacement lined up. 

“I was trying for a while … to capture everything we have done together and how much it’s meant to me, but I don’t have the right words for it,” Ayers Badan said. “Barstool is and has always been so many different things.

“When I got here the mission was to be authentic, unapologetic and to grow 24/7 – to take on things bigger than who and what any of were or thought capable of. Expectations were low, assumptions of failure were probably high. 

“We blew past our five-year goals in 20 months. As of today, revenue has grown 5,000% since July 2016. In the same time period, audience grew even more. Out of mayhem we created maybe a miracle but most definitely a machine.” 

Ayers Badan praises founder Portnoy

Ayers Badan also paid tribute to Barstool founder David Portnoy, who she had worked alongside since joining in 2016. 

Portnoy founded Barstool in 2003, growing the business from a weekly print publication into a far-reaching digital media company. 

“Nearly a decade working with him gave me more to work on and work with than a lifetime anywhere else,” Ayers Badan said. “I am forever changed by it and grateful for it. I learned a lot and got a chance to do so much. 

“Barstool has always been and always will be what you put into it. There is no one better to make sure Barstool lasts far into the future in the way it was intended than Dave.

“My time at Barstool will forever inspire me.”

Barstool back in Portnoy’s hands

Ayers Badan’s exit comes just a few months after Portnoy took back the Barstool brand from Penn Entertainment. Penn purchased the brand in 2020 and had been running sportsbooks under the Barstool name.

However, in August last year Penn struck up a new partnership with ESPN. This marked the entrance of Disney-owned ESPN into the sports betting sector after years of speculation it would launch some sort of offering.

Ultimately, this meant the end for the Penn-Barstool deal. Penn agreed to sell the brand back to Portnoy for $1 “in exchange for certain non-compete and other restrictive covenants”.

This led to Penn reporting a heavy loss of $923.2m in its third quarter. However, this loss is only expected to be short-term, with the ESPN-Disney deal worth around $1.50bn.

Penn’s existing Barstool sportsbooks relaunched under the new ESPN Bet brand on 14 November.

Speaking to iGB, Mike Morrison, ESPN’s vice-president of sports betting said he sees the launch of ESPN Bet as a natural evolution for the sports broadcaster. 

Hossain, who last played for Bangladesh in 2018, accepted three charges of corruption breaches. One of those included Article 2.4.3, having failed to disclose the receipt of a gift worth over $750 (£591/€690), namely a new iPhone 12.

Hossain was one of eight players and officials linked with the Pune Devils franchise charged. The offences were in relation to attempts to corrupt Abu Dhabi T10 Cricket League matches in 2021. While the attempts were disrupted, the charges have still been brought forward.

With six months of his two-year ban suspended, Hossain will be eligible to play international cricket again in April 2025.

Pune Devils co-owners and staff also facing punishment

Along with Hossain, the ICC also flagged a number of Pune Devils coaching staff, as well as co-owners Krishan Kumar Chaudhary and Parag Sanghvi.

Chaudhary faces charges of breaching Article 2.4.5 on passing information to the relevant authorities on corrupt activities. Chaudhary is also accused of obstructing or delaying an investigation (Article 2.4.7), as well as Article 2.4.6.

Sanghvi, meanwhile, is accused of breaching Article 2.2.1 on placing bets on cricket matches, in addition to Article 2.4.6 and failing to co-operate with investigations.

Others encountering charges include batting coach Ashar Zaidi and team manager Shadab Ahamed. They are accused of breaching rules related to corruption in cricket, as is assistant coach Sunny Dhillon.

Former West Indies star Samuels banned for six years

Marlon Samuels, a two-time T20 World Cup winner with the West Indies, also received a six-year ban from the ICC back in November for anti-corruption breaches.

An independent anti-corruption tribunal found Samuels, who retired from cricket in 2020, guilty of four offences. The corrupt behaviour occurred during the 2019 Abu Dhabi T10 Cricket League. Samuels was also part of the Pune Devils, then called the Karnataka Tuskers.

Samuels is banned from taking part in any professional cricket events until 2029. Authorities also banned Samuels in 2008 for two years after finding him guilty of corruption offences.

The rapid development of US sports betting has been astounding. Currently some 32 states have legalised some form of sports betting and, of this number, 28 provide either mobile or online access.

Within the 32, there are five states where tribal operators provide the only betting option. To date the markets have been characterised by a hierarchy of operators that have gained access primarily via partnerships with land-based casino operators, both tribal and commercial.

A further eight states are considering the issue and could pass legislation in the coming year.  Beyond these is a disparate group of states that have been resistant to passing sports betting legislation – although some have been actively considering the issue.

Among these are three powerhouses of tribal gaming; Minnesota, Oklahoma (with its proximity to Texas) and the behemoth of California. Trouble, however, is on the horizon.

It is now common knowledge that the massive growth in sports wagering has been driven by the intense competition among operators. This has been manifested in the huge sign-up bonuses offered to new players, often in the thousands, which has driven CPA to astronomical levels often exceeding $1,000.

This has resulted in a troubling absence of profitability among major sports book operators. For example, DraftKings lost $1.5bn in 2021 (having lost over $1bn in 2020).

Caesars Interactive reported an EBITDA loss of $476m in 2021, followed by a $576m EBITA loss in Q1 2022, which CEO Tom Reeg said was a high watermark that would reduce going forward. Flutter Entertainment’s US division had a negative EBITDA of over $320m, although CEO Peter Jackson insisted there was no need to reduce spend following its Q1 2022 update. These losses are not sustainable.

These companies largely recognise this and tend to justify these losses as part of a predesigned strategy to capture market share in the early years of market entry. The general aim is to pin future profits on a retraction of CPA costs and maintenance of the market share through heightened brand recognition that they have been able to induce.

Others, among the lower tier operators such as Wynn Resorts, Las Vegas Sands, Churchill Downs/Twinspires, lacking deep pockets, have either pulled out of the sports betting market, or have curtailed their efforts. Many observers have suggested that, under these pressures, consolidation is inevitable.

Market tiers

The US sports betting sector is a muddled and frantic market that has been developing at pace. To gain a perspective of the overall market, it is helpful to address the sports betting market from the perspective of tiers, as each is subject to differing influences.

The following is a rough characterisation of the tiers that sports betting operators fall into. It is by no means complete but does provide a structure from which to view the entirety of the US sports betting market.

Tier one: DFS Kings (DraftKings and FanDuel)

These operators started out in daily fantasy sports (DFS), before pivoting into sportsbook, then into multi-product betting and gaming operators and evolved over nearly a decade of saturation brand-name media buys.

They are leaders in the market and expend huge sums on advertising and in customer acquisition. They will be under increasing pressure to rationalise their business. These operators have fully embraced the “market share now at any cost” approach. Together, these two companies account for over 60% of the US sports betting market.

Tier two: PLC challengers (BetMGM, Barstool/Penn National Gaming, Bally’s)

These operators are looking to secure top-five status, everywhere. They are under the same pressures as the DFS Kings to rationalise their business. Of these Bet MGM, by virtue of being a JV with Entain and its sportsbook prowess, is the frontrunner to punch into the top tier. Should more states legalise other online gaming verticals they would be in a position to benefit the most. They are seeking market share now.

Tier three: Omnichannel converters (Caesars, Golden Nugget, Resorts, Hard Rock, Rush Street)

These operators are associated with their own land-based casinos or with land-based partners through whom they have gained market access. They experience similar pressures to the tiers above, although with a reduced ability to compete in terms of CPA. They are focused on “conversion” and omnichannel success. They are not de facto sportsbook brands but, should the jurisdiction expand to online gaming, they would be well positioned to take advantage and gain market share overall.

Tier four: The newcomers (PointsBet, Kindred, Bet365, PlayUp)

European and Australian brands entering America and boosting their ex-US share prices. Most have a patchwork quilt approach and are largely unknown as brands to American consumers. Of these, only Bet365 has the ability, given its cash resources and rich, tested product line to become an operator of scale while it adopts a “wait and see” strategy.

A move to legalise other igaming verticals could induce greater investment and commitment from these operators. How long can they effectively sit on the sidelines while waiting for expansion of igaming as competitors gain market share in the sports betting realm and heighten their brand recognition?

Tier five: The land-based operators (ribal and commercial, mostly single property with locally recognisable brands but with limited national reach)

Some of the more significant operators in this category include Mohegan Sun and Foxwoods.  Overall, these are focused on “conversion” and driving business to their land-based facilities.

Highly localised but driven to be in the market and to gain knowledge and capability, while acting as a conduit for market access to other higher tier operators. These operators cannot compete on a CPA basis with other tiers, and must deliver positive results for their land-based components. This will be one of the most interesting tiers to watch as it is among this group that innovative marketing will be developed to avoid the high CPA crunch and maximise the omnichannel impact.

Tier six: The ghost tier

The black market cannot be ignored, particularly in sports betting where “high rollers” have had a decades-long relationships with these operators. With the advantage of operating in an untaxed environment they can offer better odds and savvy bettors will recognise this and continue their longstanding relationships.

It takes only a Google search in any state to prove the pervasiveness of this tier and it is unlikely to evaporate simply because sports betting has been legalised. This should be a concern for legal operators and regulators alike.

For the legal operator, this tier siphons off potential revenue. For regulators and legislators, it reduces the potential tax benefits from sports betting. On top of these negative impacts, it exposes more of the population to the harms that effect some bettors and in this unregulated portion of the market there are no consumer protections and criminality is rife.

Illustrative of the pervasive presence of this tier, a recent tweet from a disappointed punter regarding the delayed launch of a mobile app from an Arkansas operator stated: “Well, this got botched I guess Bovada and BetOnline will have to do.”

Regulators have taken no action to effectively protect their markets and few companies are even addressing this issue. Start-up Atropos Intelligence, with its Yield Sec product, appears to be the only company developing a “market protection” system that would effectively achieve this.

The increased advertising since 2018 accompanying legalisation has created more interest in betting and gaming, whether on- or offshore. All ships rise on the same tide – even pirate ships. For operators that have paid licence fees, pay taxes and fees to partners, and are faced with huge marketing costs, this should be a front of mind issue.

Prepare for turbulence

Four areas of turbulence can be predicted in the US sports betting market.

The massive losses experienced by the major companies (tiers one and two), because of profligate spending on bonusing and advertising, simply cannot be sustained. These must be rationalised. This will open the door for other competitors (three to four) to make gains based on the quality of their product and innovations in marketing. There simply has to be a return to sustainable marketing practices, discipline on CPA costs and an increased focus on ROI. This will provide opportunity for companies focused on novel marketing approaches that have as their core DNA a focus on efficient CPA and ROI in what will likely prove to be a rapidly expanding segment.As the sports betting market looks to further its penetration of the tribal gaming market (tier five) there are some troubling signs ahead for major sports betting operators in higher tiers seeking market access through tribal gaming operations. Arkansas sports betting just launched and includes a 51% revenue share for the licence holder (land-based operators) compared to the 5%-15% typical for the brick-and-mortar venue that provides market access for sportsbooks elsewhere. This will further exacerbate the quest for profitability. Of the four land-based gaming licences in Arkansas, two were for existing racetracks (Oaklawn Racing Casino Resort in Hot Springs and Southland Gaming & Racing in West Memphis) and two were for tribal casinos (The Saracen casino, and Legends Resort Casino which is under development). Not surprisingly, both BetMGM and DraftKings opposed the 51% share. While it could be argued that this was the result of a local decision, there are strong indications that the revenue provided to land-based partners for granting access in the tribal market will be under much greater scrutiny.  A recent statement from NIGC presaged this:

 “Generally, if a contract requires or permits the performance of any management activity with respect to all or any part of a gaming operation, the contract is a management contract within the meaning of IGRA and requires the chair’s approval. 

National Indian Gaming Commission

This could signal problems ahead for sportsbook operators in tribal country especially as they look to expand into primarily tribal gaming states such as Minnesota, Oklahoma and California. This bears close watching, as the major tribal gaming states such as Oklahoma, Minnesota and California move to legalise sports betting.

The relatively anaemic generation of tax revenue from sports betting in comparison to igaming in general, will prove a disappointment for state legislators (particularly in those states where only retail = betting was approved). For example, in both New Jersey and Pennsylvania igaming-related tax revenue is more than double that of sports betting (online and retail combined) and retail sports betting alone is minuscule in comparison. Faced with the pressures of balancing a budget, history suggests that legislators will look to expand both mobile sports betting (where they don’t already have it) and igaming options. The latter will benefit a lot of the smaller companies that are outside the tier one DFS related companies and that have a stronger brand and product in the broader igaming segment. For these cross marketing of products will become critical.As budgetary pressures increase on legislators, and as operators look to maximise returns from their marketing spends and seek to return to profitability, coupled with concerns about gambling harm, there should be a focus on the black market. Simply legalising and regulating licensed operators, especially in sports betting where black market operators have the advantage of decades-long relationships, effective ownership of key search terms and a lack of a tax burden, is insufficient. This confluence of self interest from operators, regulators, legislators and gambling harm advocates should lead to greater emphasis on “market protection”. Achieving this will be a challenge, but ultimately could lead to market disruption for the black market. This would benefit all stakeholders.  

Paul Girvan is CEO of PKC Gaming & Leisure Consultancy and COO of A GAME ABOVE (agameabove.com), a company that operates across betting, gaming and lottery products, innovating and creating unique campaigns, stories and solutions that give audiences meaningful engagement and experiences to make them loyal customers.