There’s little doubt that 2019 will be a year of tremendous growth in the sports wagering industry. A year ago I wouldn’t have expected that we would already have eight states with some form of legalized sports books. Many analysts predict we’ll have upwards of double that number by the end of 2019. We’ll do another round up of what’s cooking among emerging states in a future column. In the meantime, I’ve compiled my wish list of things I’d like to see happen in the industry in 2019.
More Competition
There’s no doubt that the consumer benefits when there’s a healthy amount of competition in any industry. Sports wagering is no different. To be sure, there are significant barriers to entry in the sports wagering space; however, there’s also no shortage of companies wishing to get involved. So far, companies better prepared for this gold rush dominate the market. Specifically, European companies and DFS companies have taken the early lead. Hopefully, some US-based bookmakers will begin to crack into emerging states. New competition should bring about promotions and bonuses to entice players to try their brand. Competition also breeds innovation.
A second component to this would be to see more companies compete based on pricing. So far the approach by the mostly European bookmakers has been to compete with gimmicks — promos tied to a low limit or a loss rebate. All the while, the core product is priced higher than what is readily available in offshore markets. Price straddles beyond the standard 5% vig and derivative pricing even beyond 15% vig. As consumers become more educated someone will need to attempt to be the low-cost provider to grab the enlightened consumer. For example, -105 pricing, even if just as an occasional promotional tool would be a welcome component for many.
Transparency and Uniformity in Revenue Reporting
There’s a wealth of knowledge in reading monthly revenue reports released by state regulatory bodies. Unfortunately, it can be pretty hard to mine the data. States have different timetables for releasing information. That’s acceptable given the task. Where states really diverge is in the transparency in their reports. In Nevada, you’ll never get more granular than by county or tourism area (Strip, Downtown, etc.). Mississippi reports its revenue based only upon three geographical categories: North, Central, and Coastal. In New Jersey, you get revenue by casino. However, with each casino having the ability to offer multiple online skins, you have little idea as to which skins are successful.
Nevada reports sports betting as Football, Basketball, Baseball, Parlay Cards, or Other. New Jersey, in an effort to copy that, reports the categories of Football, Basketball, Baseball, Parlay, or Other. However, New Jersey’s Parlay is not the same as Nevada’s Parlay Cards. New Jersey’s parlay interpretation is any multi-event wager regardless of sport. Then we have New Mexico where sports wagering takes place on tribal land and there’s no state reporting at all.
I could go on and on about the particulars of my frustrations, but it would be pointless. Here’s why my frustration matters, though. There are a lot of stakeholders looking to this first batch of emerging states for direction on how this industry should go from here. Lawmakers need to see what works and doesn’t work in terms of policy, taxation, and regulation. Casino companies need to see which approaches are profitable and which result in stagnant growth. Entrepreneurs need to see where niche markets are forming. Analysts need to see the value that comes from having a granular view into revenue. There’s never a valid argument for providing less data when trying to grow an industry. If we can quantify what excites and stimulates the American sports bettor, there will be meteoric growth in this industry.
Minimum Bet Limits
The idea of requiring bookmakers to take a minimum bet amount from every bettor first surfaced in Europe. It began after many bookmakers resorted to completely cutting off any player who displayed the slightest hint of being a sharp bettor. Sharp bettors in Nevada have long complained of similar treatment. It didn’t take long in emerging states for bettors to begin complaining about being severely limited in what they could wager. In an ideal world, the idea of requiring bookmakers to take a minimum bet from any bettor should be laughable. After all, against 95% of players, they’ve got a significant edge. If they understand and profile their bettors they can use that information to always be weighted on the proper side, and consequently, profit nicely. However, many sports books don’t operate as an efficient market should and choose to treat sharp bettors with harsh restrictions.
Requiring a sports book to take a minimum stake on a published line, even if it’s as low as $100, would go a long way. It would create a fairer marketplace and in the long run, a more efficient one. Unfortunately, this idea is probably too advanced for 2019. Most emerging states are oblivious to how bookmakers attempt to shake down the betting public.
Time for a Heavyweight State
So far, the advent of legalization of sports wagering in the U.S. has been something of a Goldilocks tale. With each state, we’re seeing regulations and developments that are sometimes “too small” and at other times “too big.” No state has been able to get it “just right.” This is probably a good thing because we’ve been refining the market in anticipation of a real heavyweight getting into the ring — a state with enough population to really move the needle when it comes to the liquidity of sports betting markets. One with just the right number of casinos so it wouldn’t be solely a casino-controlled industry. A state with enough forethought to create a viable competitive market rather than use it as a tax-revenue stopgap.
Three large-population states immediately come to mind: California, Florida, and New York. California has a complicated casino environment between its tribal compacts and its card rooms. Plus, California likely has bigger needs than what sports wagering can fix. Florida is even more complicated. The lobbying of the Seminole Tribe and Disney dominates the state. Those two forces combined to hoodwink voters a couple months ago. It’s also why widespread sports wagering in Florida won’t happen anytime soon. New York has an emerging casino industry and a growth plan. It also technically has the ability to open sports wagering via current law. However, it restricts betting to four upstate casinos. New York represents the best chance for legislation to create a massive sports wagering giant in 2019. Hopefully the state’s legislators can make it happen.
More Innovation
There’s a world beyond betting simply on which team you think will cover the spread at -110. I wish that in 2019 we will see more innovative operators willing to pursue betting options beyond standard sports book fare. The possibilities are almost endless and the best ideas are the ones that haven’t even been broached yet. Increased involvement could make tournament play more popular. Perhaps players don’t want to spend money betting on just one game. Instead, they want to invest money in trying to accurately predict the results of multiple games. Similarly, just as DFS has large-scale tournaments as well as head-2-head match-ups, we could see head-2-head sports betting contests become a reality.
Derivative betting could reach new heights through innovative in-game prop betting. In-stadium betting could also prove to be popular. The prospect for sports wagering subsidizing the rising cost of event tickets is a very real possibility. Hopefully someone will develop exchange betting in the U.S. Exchanges typically offer a low-vig environment that would be great in higher liquidity markets.
Innovation requires companies willing to bring their products to market. It also requires regulatory bodies open to providing a market that fosters innovation. Lastly, it requires consumers willing to find value outside the box in new products. I hope that by the time 2019 ends, the landscape of legal betting in the U.S. looks vastly different than it did at the close of 2018. That will be the true indicator of how far we’ve come.
What are your wishes for the coming year? What would you like to see happen as legalization spreads? Feel free to express your thoughts in the comments section below.
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