Ever since the U.S. Supreme Court vacated a 1992 federal law that severely limited sports betting, the vast majority of state legislatures have been grappling with how to react.
The first issue, of course, is whether to legalize sports betting at all. Don’t hold your breath waiting for Utah or Hawaii, for instance, given their blanket resistance to all things gambling.
If the lawmakers in a state want to go ahead, the next question is usually where do you want adults to be able to make wagers? Casinos and/or racetracks generally come to mind.
Another preliminary question: How high a tax rate would be best?
And what about mobile betting? A number of states are sticking with brick-and-mortar, at least for the first year or two. For those that want to forge ahead — sensible, given the monster numbers racked up in New Jersey — the next issue is often how many “skins,” or online betting partners, your operators can have.
NJ Sports betting handle for December: $557.8 million
record is Nov 2019, : $562.7 million
Dec online/mobile betting: $488.9 million (87.6%)
Dec gross revenue: $29.4 million
— John Brennan (@BergenBrennan) January 14, 2020
New Jersey model worth studying
That’s where New Jersey’s quick jump on sports betting — the first wagers were made just 31 days after the court ruling — is instructive.
Garden State lawmakers elected to allow each of the nine Atlantic City casinos up to three skins. Same went for the three operating racetracks, as well as for two defunct racetrack sites.
More than 18 months later, a mere 19 of those 42 slots have been filled — and that’s counting British bookmaker William Hill three times for its deals with Monmouth Park, Ocean Casino, and Tropicana.
A sports bettor and gambling industry expert who publicly goes by the pseudonym “Captain Jack Andrews” was asked by NJ Online Gambling for his thoughts on what those numbers mean.
“I think we’ve seen that 42 is an unrealistic number [of skins] for a market of 9 million,” Andrews said. “The right number is probably fewer than we have now, in fact. There are a lot of skins in New Jersey who are only here to get their stamp of approval to speed the plow forward in other states.”
Too many, not enough — or just right?
Andrews continued: “However, I think it benefits consumers, regulators, and even the industry as a whole to have too many skins available, rather than not enough. If you don’t have enough, then there is incentive for a big operator to buy up as much of the market as they can to create monopolistic economies of scale. If there are more skins than needed, then those big operators will never be able to buy up enough of the market.
“There will always be a window open for competition. So as we’ve seen, 42 licenses may be too many, 13 licenses in Pennsylvania may be too few. Soon we should have enough data to come up with a formula to right-size the licensing game.”
New Jersey regulators said from the start that they didn’t expect all of the skin slots to be filled. So far Freehold Raceway and the defunct Atlantic City Race Course and Garden State Park sites have not gotten into the game at all, accounting for nine missing skins.
Penn National, a 50% owner of Freehold, last summer announced a massive deal that includes DraftKings, PointsBet, and other key players as national partners.
The Garden State Park site is immersed in a complicated lawsuit that partly involves Greenwood Racing, the other half-owner of Freehold. Greenwood also happens to own the Atlantic City Race Course site, which actually is located about 15 miles from the city itself.
With all that intertwining, it’s possible that unraveled logjams could quickly lead to multiple sports betting app announcements.
Penn National, meanwhile, reportedly is in talks to acquire Barstool Sports, an online brand that caters mainly to millennial male sports fans — the ideal audience for a sports betting app. One might picture a skin going to the Barstool brand if the deal is consummated.
Other betting operators with skins still on the table
Caesars Entertainment, which owns three Atlantic City casinos — and which may this year be swallowed by AC Tropicana-owning Eldorado — has utilized only two of nine skins, for CaesarsCasino and 888sport.
Resorts has maxed out on skins with its own brand and deals with DraftKings and FOX Bet, while Monmouth Park’s work is done per agreements with theScore, Play SugarHouse, and William Hill. Hard Rock is in the same boat, pairing with Unibet and Bet365 as well as its own brand.
At this point, Ocean Casino and Tropicana have stuck just with their William Hill deals.
Viva Las Vegas
With so many major players getting a foot in the market — including BetMGM, Bet America, among those not mentioned — who is left to claim a first skin?
Andrews said Nevada bookmakers such as Westgate, Southpoint, and Circa have not yet gravitated to New Jersey.
“They are all extremely proficient bookmakers with a model that scales upward nicely. However, for various reasons, they haven’t made the leap into other states yet.”
Andrews added that those books’ best course of action might be to take over a struggling current operator.
“There would be a synergy there that would be cheaper to accomplish than any of those brands attempting to enter this saturated market on their own,” Andrews said.
How good are the odds so far in NJ?
Andrews says it is too soon to gauge the long term impact of having more than a dozen betting apps available to the consumer.
“It’s tough to make a reasonable judgment about market influences so early in the life and maturity of that market,” he said. “A newer market is influenced by different things than a mature market would be. Right now, we’re still new enough in New Jersey that the market influences are largely promotional spend and marketing spend.
“Pricing differentiation is a sign of a more mature market, in my opinion. If you look at Nevada, there are far less signup bonuses or free bet promos. The prevailing promotions are of the reduced juice/vig variety.
“That said, we’re starting to see some New Jersey operators attempt to differentiate based on price, as reduced juice promos are becoming more popular.”
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