Are we getting too excited about sports betting in the U.S.?
Last week, the much-anticipated initial figures came in from the New Jersey casinos and racetracks that raced out to launch sports betting in light of the PASPA repeal. This added to the figures we had already seen from Delaware. Of course, all of us in the business jumped on the chance to pour over the figures and report on them, but the real question is: Are we getting too excited about this?
Let’s first look at the numbers from New Jersey. For the month of June (really only 17 days as the first bet was taken on June 14th, the state brought in $16,409,619 in handle and $3,458,668 in gross revenue. Now, there were some anomalies that complicated matters, like winning bets that hadn’t been cashed yet and futures bets that haven’t been completed, but overall the numbers seem pretty promising. We wanted to break things down in a little more pragmatic manner here by looking at the positive and negative feedback on these initial figures.
The Good Stuff
Look, anything more than zero is considered a huge win for the state of New Jersey, which fought this battle all the way to the Supreme Court on behalf of its casinos and the rest of the country for that matter. This is a historic moment for gambling in the United States, and in general, we should all be pleased that there were not critical errors during the first couple of weeks.
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Also, let’s take a second to notice that it was only three properties taking bets during that time period. Monmouth was far an away the leader in collecting bets and generating revenue, but they also had a headstart on the other two properties. We fully expect more casinos to enter the fray in the coming weeks and months after the dust settles and then we will see what happens with the market share of each casino.
Also, this is a dead time in the sports calendar, with the overwhelming majority of the bets taken in June coming on Major League Baseball and the World Cup. This can be considered both a positive and a negative, as there won’t be feverish soccer betting in June again for 4 years.
The next bump that should occur in the numbers will come from the introduction of mobile and online betting, which is not available. This is where we expect o see the majority of the betting in the future (sorry, land-based casinos) so we will watch to see how the numbers play out along the online lines.
The Bad Stuff
Everyone got very excited in Delaware when the first set of numbers were released as a result of the hold figures of approximately 14%. Those of you who know sports betting know that this is a ridiculously high hold figure, with the average Nevada sportsbook holding closer to 5%. This tends to send projections through the roof, and we hope that other states still use the historical figure rather than the small sample size. New Jersey’s hold percentage, sits at 7.8% but that doesn’t take into consideration bets that are still open or uncashed. At least this figure shows that the New Jersey bettor seems to be a little savvier.
Another concern we have is with the initial rush of volume not matching the long-term averages. We know that people are very excited to bet on sports legally in the U.S., but what we don’t know about the initial numbers from New Jersey is what kind of gambler we are seeing. Is it a new gambler, or is it a seasoned bettor who has been betting with a bookie or online in the past? Are there a lot of repeat
bettors, or just some people trying out the novelty item? We look forward to much more of a deep dive into the analytics before we get too excited about these numbers.
Finally, what happens when the football season starts? States are already putting their faith in NFL betting, but what happens if one of the smaller properties takes a bath on some games? Will there be financial peril early on until there is enough handle to compensate for the swings? We believe that there will be a lot of square action on the games which should lead to sportsbooks winning more than losing, but only time will tell how much of the sharp action that is being bet on the black market makes its way to the regulated books.
Look, we don’t want to be the bad guys in all of this – we are thrilled to see positive starts for Delaware and New Jersey. We just want everyone who reads the news to really understand what is happening in these states – these sample sizes are far too small in the slowest time of the sports calendar for us to fully endorse them. Let’s see what happens come the middle of the autumn when all the other major U.S. sports are in season and then we can talk about how excited we are about the future of sports betting in the U.S….you can be sure the other states are waiting for that information before passing their own legislation.