Sports Betting A Huge Risk to the Growth of Gaming Online

The LA Rams won the Super Bowl LVI in a pulsating final against a talented Cincinnati Bengals team in February 2022. The last time the team from Los Angeles lifted the coveted Lombardi trophy was in the year 2000. Back in those days, if wanted to put some money on your team legally in the US, you had to go to Vegas. 

These days, depending on where you live, you can place a bet on any major sporting event from the comfort of your home. Over 25 states have legalized sports betting as of 2022. The US Supreme Court legalized sports betting in a landmark decision in 2018, opening the floodgates for a sports betting frenzy never seen before. 

In the lead-up to the Rams – Bengals showdown, 23 million Americans placed bets worth a whopping $4.3 billion on the Superbowl. More than 35% of those were expected to be online bettors. The year-on-year increase in online betting stood at a massive 63%. These numbers are troubling, for multiple reasons. 

The Rapid Rise of Sports Betting

With five of the most profitable professional sports leagues in the world, the US has always had massive potential in sports betting. In many ways, the ban on sports betting under the Professionals and Amateur Sports Protection Act (PASPA) was like the prohibition – driving a huge market underground, giving opportunities to criminal syndicates. 

Meanwhile, in other major gambling markets like the UK and Australia, legalized sports betting thrived, bringing billions of dollars in taxes to governments and generating thousands of jobs. With state governments staved of revenues after the economic crisis, sports betting presented a lucrative opportunity to earn extra tax revenues. 

And the recent numbers have proven that theory correct. After the 2018 Supreme Court verdict, numerous states have legalized sports betting and online gambling. The latest to join the club was the state of New York in January 2022. Within 15 days, gamblers had wagered $1 billion through mobile sports betting apps, adding $58 million in tax income to the state coffers. 

In neighboring New Jersey, the state’s online sports bettors have routinely broken monthly records all through 2021. In October, the total handle peaked at $1.3 billion. For reference, the total betting handle across the US that month was $7 billion. That in itself represented a 20-fold increase since 2018. Annual revenues total around $1 billion but could increase to $40 billion within a decade. 

The Relationship Between Sports and Casinos

For decades, casinos were the main source of gambling in the US. Even in Nevada, where sports betting was legal, slots and table games brought in the bulk of revenues. The sports betting counters were just an additional source of revenue. 

Even with the rise of online betting, the equation remains the same. The major casino operators like Caesar’s and MGM still rely on their resorts to bring in the big bucks. Nothing beats the complete experience a Vegas casino provides, with live shows, fine dining, and other forms of entertainment. 

The 2021 Nevada story is a testament to this fact. After a grim year of lockdowns and pandemic-enforced shutdowns, the city of Vegas came roaring back in 2021. The $2.1 billion revenues from Q4 2022 represented the biggest take ever in the city’s history. 

Further, all the big casino companies are investing heavily into the online betting industry in the US. Caesars, MGM, and Penn National are all major partners in online betting brands alongside others like FanDuel and Flutter Entertainment.

The Tenuous Position of Online Gaming

If the rise of sports betting is a risk to any particular industry, it has to be the long-suffering online gaming sector in the US. Online gaming or iGaming includes gambling platforms that offer online video slots, blackjack, baccarat, live poker, live bingo, and more. 

For decades, major casino bigwigs like Sheldon Adelstein lobbied against the legalization of online casino gaming in the US. They perceived it as a threat to the Vegas casino monopoly. The US Justice Department crackdown on online poker and casino companies in the US resulted in a virtual freeze on the industry in the 2000s. 

While iGaming thrived across the world in regulated markets like the UK and EU nations, it remained an illegal activity in the US. Thousands of online casinos offer no deposit bonuses and free bets to attract new players in a highly competitive sector experiencing double-digit growth. 

Unlike sports betting, online gaming still has a lot of legal hurdles at the federal level. The Wire Act and the UIGEA make it hard for companies to offer online casino services across most states. Only a handful of states like New Jersey, Delaware, and Pennsylvania allow online casinos under strict local laws. 

Why Sports Betting is Bad News for Online Gaming

In the six states with legal online gaming, the annual revenues amount to $3.71 billion in 2021, an increase of 139% on the previous year. The monthly betting handle on sports in New Jersey exceeds the annual revenues from online casinos in the state. 

Online gaming sites have to compete with sports betting for players. And they are losing the battle. Sports betting is legal in more states than iGaming. The online gaming industry’s growth prospects are much lower when compared to betting on sports. 

It is an unequal battle and one that is getting lopsided with each passing year. Even among the states that still don’t have legal online betting, more are likely to favor sports betting in the future over online casinos. Gambling seems to have a stigma attached to it that sports betting does not have. 

In the long run, sports betting will likely dominate the online gambling landscape in the US. Gaming will still find takers but will remain a secondary activity tied to established Casino brands. 

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