Sports Betting: Fasten Your Seat Belts!

Sports Betting: Fasten Your Seat Belts!

The sports betting world was abuzz when the news broke last week that the Supreme Court made a landmark ruling 6-3 in favor of the State of New Jersey, striking down a ban on sports betting outside of Nevada and paving the way for other states to legalize betting on professional and collegiate sports. Are we ready?

Recode reported that with the floodgates open, within five years, as many as 32 states could offer legal sports betting, with Delaware, Massachusetts, Mississippi, New Jersey, Pennsylvania, Rhode Island and West Virginia already at work on bills. “And virtually no one will be ready for this amount of supply.”

Laws written and passed aren’t all that needs to be accomplished. Says Recode, technology, and brands need to be built, and products and pricing determined. From traditional gambling participators like bettors, regulators, casinos, lottery companies, racetracks, Native American tribes to players, media properties, league sponsors, tech providers and more will want in on the exploding market.

“Consumer expectations are going to be way too high, and supplier expectations will be equally crazy because no one knows what the true demand really is.”

Recode also reports on the possible numbers: Currently, Nevada sees about $5 billion a year in legal sports betting while legal horse racing pulls in about $11 billion across the country. The estimates on the expanded sports betting market are from $10 billion to an eye-popping $150 billion a year. But here’s the problem, according to Recode:

“Sports betting is a very low-margin business. The take rate of sports wagering is around 5 percent, while it’s closer to 20 percent in horse racing. And in unregulated markets (which will occur somewhere in U.S.), the price of the product is going to get close to zero. It’s going to be hard to make any money, and customer loyalty will be basically nonexistent without pricing power.”

Bottom line: There won’t be enough pieces of the pie for everyone who wants in.

Recode concludes that the Supreme Court’s ruling will not only radically affect the sports betting industry, but also related media, tech, finance and law.

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