Sports Betting in America 2019: A Q2 to Remember

Sports Betting in America 2019: A Q2 to Remember

As everyone expected, sports betting has continued to gain a foothold in the U.S., but few predicted the giant leap that occurred in the 2nd quarter of 2019. For all the concerns about how quickly states would adapt to pass laws to allow a regulated sports betting market to thrive, the fact that six new states (Illinois, Indiana, Iowa, Montana, New Hampshire, Tennessee) passed laws in Q2 alone should provide ample proof that sports betting is on the right track in the United States.

With these new state laws, 25 million more Americans are on the path to gain access to legal sports betting. If you’re a sportsbook operator or service provider, you must be overjoyed at the prospect of so many new business opportunities.

Not only was Q2 wildly successful in terms of state legislatures turning ideas into laws, it also saw a handful of states take leaps forward in the implementation of mobile sports betting. New Jersey still leads the charge when it comes to mobile sports betting, with a steady 80 percent or more of all handle coming from mobile. In fact, New Jersey briefly outshined Nevada to become the top sports betting revenue state in the country in the month of May.

New Jersey will face increasing competition from Pennsylvania, which also got into the game with a handful of mobile sports betting apps in Q2.

Here are some major takeaways from Q2:

1. Lawmakers Get the Message – Mobile is a Must

In May, Tennessee passed a sports betting bill that is the new gold standard for U.S. sports betting regulation. The Tennessee bill eschews bricks and mortar and focuses only on mobile gaming, which positions the state perfectly to benefit from the future of regulated online gaming in the US.

This bill should attract a significant number of online sportsbooks, including those who may be experiencing market access issues created by the need to pair with a casino license partner in other states. For a conservative state such as Tennessee with no casinos to pass a law with unlimited mobile sportsbooks is truly a sign of the times. Tennessee has set the bar high, and hopefully other states take notice.

Indiana and Iowa are two other states that should have equally robust mobile markets. In these states, the ability to operate a mobile sportsbook is tied to the casino license, but each casino license can offer multiple “skins” or online brands.

The end result is that each of these states could see more than 30 distinct online sportsbooks for customers to choose from, more than adequate for two states just getting into the game. Combined with low taxes and reasonable fees, these two states should get off to a roaring start when they open for business.

2. Colorado and Maine Pass Sports Betting, Sort Of …

These states both passed mobile sports betting legislation in 2019 but fell victim to some unique circumstances. In Maine, the governor chose not to sign the bill, and she now has until the third day of the 2020 legislative session to either veto or let the bill become law. The industry certainly hopes for the latter -- this bill would create the best competitive free market system for online sports betting yet.

In Colorado, mobile sports betting was passed by the legislature, but with one pretty big catch – the voters have to approve of a new sports betting “tax” in November or the legislation is nullified. Sports betting and particularly taxes do not poll well in the general public so this could be a tough initiative to win come November. If it passes, Coloradans could be betting on the next Super Bowl. But if not, it’s back to the drawing board for the legislature in 2020.

3. Illinois Reaches for the Cash

The fact that Illinois passed a sports betting bill on its first try was pretty remarkable, but this impressive feat is less stirring when you start to take a look at the excessive fees operators will have to pay just to get in the game. Want to offer online sports betting without an existing licensed casino? $10 million up front. How about through a sports team’s venue? That will be $10 million as well. The tax is at least a somewhat reasonable at 15 percent, but these major up-front costs are going to artificially limit the number of sports books that can actually afford a license to compete in Illinois.

Don’t be surprised if in the next legislative session lawmakers attempt to recalibrate these costs as well as the rule that delays mobile registrations for 18 months. Some smart tweaks here will help Illinois become more competitive with neighbors Iowa and Indiana, where fees and taxes are drastically lower.

4. New York Punts to 2020

Many people assumed New York was going to jump on the mobile sports betting bandwagon at the earliest opportunity, but Governor Andrew Cuomo had other ideas. Citing an aversion to gambling and downplaying the revenue that sports betting would bring, Cuomo pumped the brakes just enough to keep mobile sports betting legislation from reaching the checkered flag in 2019.

Instead, New York took the wholly inadequate step of authorizing upstate casinos to offer sports betting. Are football fans going to drive a few hours from the city to a casino to place a bet on a Sunday morning? No. New York’s loss is New Jersey’s gain – the Jersey border will be every Giants and Jets fans’ primary destination this football season. Hopefully a few months of disappointing casino sports betting revenues will give mobile gaming proponents in the New York Legislature additional ammunition to finish the job in 2020 and bring sports betting to where the people are – on their phones.

5. Some States Still Have Work to Do

A small handful of states have decided to keep sports betting in the 1970s – stuck behind the counter at a casino. But these states are seeing the future with each passing month as their revenues stagnate. Mississippi’s casino-only sports betting seems to have already leveled off. While neighboring Arkansas just authorized casino-only gaming and sportsbooks, it’s only a matter of time before they realize the size of the opportunity they are missing by waiting to go mobile.

Similarly, the North Carolina Legislature passed a law to allow sports betting at two tribal casinos but everyone knows that this won’t increase tax revenue or solve the state’s worries about illegal betting. I expect these states will authorize mobile betting in the coming 12 months, and that fewer states will repeat these mistakes as the US sports betting map begins to fill up.

Rhode Island passed a law to allow mobile this year after in-casino revenues failed to excite. This is a step in the right direction, but unfortunately Rhode Island is still committing two other insurmountable sins: they require customers to set up their account at a casino and they’re still using the same old generic platform. Having mobile should help somewhat, but the casino registration component and lack of any semblance of sportsbook variety is going to send most Rhode Islanders offshore, perhaps never to return.

It has already been a very eventful year for state legislation, but remember, not every state is done. We could still see legislation in Michigan, Ohio and even Massachusetts before the end of the year. And with Iowa launching sports betting in August and five other states expected to go live over the next several months, the revenue in Q3 should be stronger than ever. In addition, states like New Jersey that now have a year of experience will be ready to reach new heights this football season. Could Jersey outpacing Nevada become the new normal? Pass the popcorn.

Charles Gillespie is CEO of Gambling.com Group

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