July Sports Betting Index (SBI)

In the chart below, we present our RubinBrown Sports Betting Index (SBI). The SBI is based on our proprietary index of the leading sports betting states in the U.S. To continue to best reflect current market conditions, we’ll occasionally adjust the components of the index. To better compare competitive conditions, our index numbers focus in on a group of mature, competitive states. Therefore, a state with an index score of 1.15 had a raw index score of 15% greater than the average, while a 0.90 index score shows a 10% lower than average result.

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For July, increases in handle continued as 30 of 32 eligible states saw increases in July ’24 handle versus July ’23. Many states experienced increases of over 20%, with Washington D.C. witnessing the most significant percentage change following the recent approval to open its online/mobile market to greater competition. Adding FanDuel, BetMGM, and Caesars to the mix paid immediate dividends as YoY handle increased over 250%.

The upcoming college and NFL season is a crucial period for sports gambling operators, as this year may hold even greater significance due to industry consolidation. For some operators, this could be a pivotal moment for their survival. Almost all operators have introduced new products and gameplay features to differentiate their offerings and maximize profitability. As tax rates become a growing point of contention and operators prioritize profitability, we anticipate the continuation of the moderate decline trend in promotional offers compared to last season’s football kickoff across the industry.

Data released by GeoComply for the first week of the NFL season underscores the industry’s significance during this time. Total transactions increased by 73% year-over-year, and unique users on opening night reached nearly 11 million. Mature states that legalized online sports gambling before 2022 experienced a 54% surge in unique users, highlighting the industry’s continued growth. The betting increases far surpassed the strength seen in NFL viewership as NFL Week 1 TV ratings were up 12%. TV ratings have soared since 2018, so regulated sports betting has clearly driven overall interest in the NFL and as a result, team valuations and player contracts have reached unprecedented levels.  

Sweepstakes sports betting operators continue to be a hot topic in the industry. Not only are sweepstakes operators making headway into the sports betting sweepstakes arena, but several existing sportsbooks have chosen to forego the regulated sports betting market and shift to a sweepstakes model. 

A key advantage of the sweepstakes model is the ability to operate on a near-national scale, avoiding only 5 to 10 states. This widespread accessibility is essential for certain business models, such as exchanges, which require a broad customer base rather than being limited to individual state markets. Sweepstakes operators are also able to tap into many states that have not legalized sports betting, such as California and Texas. 

Sweepstakes operators also save the significant costs of licensing, compliance and tax requirements. This type of market access and tax avoidance has raised the ire of many traditional sports betting operators, the AGA, and state regulators. Both Delaware and Michigan have already issued cease and desist letters to sweepstake operators. While other states may follow suit, the number of operators willing to exit all markets where they are asked to leave remains uncertain. The sweepstakes operators have recently responded by forming their own trade association, the SPGA (Social and Promotional Games Association). 

This is reminiscent of what the gaming industry saw in the past with Class 2 bingo machines and historic horse racing (HHR) machines, two variants of gaming machines which now appear very similar to standard slot machines. In both situations, as technology improved and game designers better grasped what patrons wanted, products were created to serve markets that resisted legalization. Oklahoma (Class 2) and Kentucky (HHR), are two states where lawmakers have consistently refused to consider legalizing casinos.  Now both have robust gaming markets with tens of thousands of gaming devices in lively gaming facilities, yet neither state has formally approved “casinos”. 

States with robust regulated sports betting markets are probably not worth fighting over for operators. For states without legalized sports betting, operators may challenge cease and desist letters or other actions taken by state authorities. The examples of Class 2 and HHR could play out again as residents of every state appear to have great interest in being able to participate in sports betting. Evolving business models are making this offering more accessible to adults in a manner they prefer, and operators are exploring alternative models to enhance their economic viability. Ultimately, states appear to be obligated to make further legislative decisions on how the future of the industry will play out. 

Published: 09/16/2024

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