Published on April 2, 2024
Betting on the Future: Analyzing the Growth of Investing in Sports Betting
From football to soccer, boxing to cricket, NASCAR to e-gaming, online sports betting is attracting a growing number of people drawn into the excitement of the events and the potential financial gain.
Betting online — the placing of wagers on the outcome of sporting events through websites or mobile apps offered by licensed sportsbooks — began about 30 years ago when a Finnish punter placed a $50 wager on an FA Cup fourth-round tie on January 17, 1996.1 Prior to this, bets were limited to phone calls or in-person wagers. The bet, placed through a website run by Intertops, was the spark that ignited a multi-billion-dollar industry.
The Growth of Online Betting and Investing in Sports Betting
Regulations and the Adoption of Online Betting
Betting on sports online wasn’t always legal — or popular with sports leagues. In 2006, the Unlawful Internet Gambling Enforcement Act restricted U.S. financial institutions from processing payments to online gambling sites, significantly impacting the industry's growth within the country.2
Certain states, notably Nevada, maintained legal online betting options. But then a Supreme Court decision in 2018 allowed each state to create and enforce its own sports betting laws.3 Since then, more than 30 states have passed legislation legalizing sports betting and the U.S. sports betting industry.
Turning a Fumble into a Touchdown
Ironically, football, one of the biggest advertisers of online sports betting, was once one of its biggest opponents. The NFL long opposed online sports betting, fearing match-fixing and reputational damage, and even lobbied against its legalization in some states. However, the league pivoted following legalization in numerous states, and proceeded to sign deals with betting companies for data rights and advertising, allowing betting-related content in broadcasts and sponsorship agreements with sports gambling companies, casinos and lotteries. DraftKings, FanDuel and Caesars became sportsbook partners in 2021 after the companies struck five-year pacts with the NFL worth just under $1 billion combined.4
From that first online wager to this year’s Super Bowl, online betting sales have seen tremendous growth. Not only were 1.7 million new accounts added in the two weeks before football’s biggest annual event, but there were also nearly 15,000 transactions recorded per second in the minutes prior to kickoff.5
Monthly Spend for U.S. Online Sports Betting
Innovations in digital infrastructure
The advent of mobile-based apps has not only made online betting more convenient and easier to use but has also changed the types of wagers that bettors can make. By directly increasing the volume and speed of placing a wager virtually all aspects of the game, play-by-play, minute-by-minute can be bet on with the sheer connectivity of data. For those who have placed a wager on one of these mobile applications, you may have experienced how intricate these apps have become, and maybe, have seen lines adjust on an application before most see the play occur on our streaming devices. Users are no longer limited to predictions of the winner or final score, but can also place intricate standalone bets, parlays, teasers, and/or round-robin bets across individual player props, team props, game lines, half lines, (or even next to score). The combinations of bets and props continue to drive engagement, and the platforms that showcase live-streaming technologies enhance the overall user/fan experience.
With applications from multiple providers, mobile and desktop betting is expected to witness rapid growth and present a potential case for investing in sports betting.
U.S. Sports Betting Apps Annual Revenue
Source: Sports betting app revenue and usage statistics (2024). Business of Apps. (2024, January 8)
Increasing number and types of sporting events
There are more ways to bet and more to bet on. The industry saw a dramatic jump during the pandemic, as the ability to attend in-person events was severely curtailed. The return to live events following the end of COVID-19 restrictions did not put a damper on online betting, and in fact, the number of in-person events increased, providing more opportunities to place wagers. From the biggest events, such as the World Series or the Super Bowl, to obscure events, including reindeer racing or a rock, paper, scissors tournament, if there’s an event, there’s likely an online sports wager as well.6
U.S. Sports betting Market size by sports type, 2020-2030 (USD Billions)
A Rising Global Trend
Online sports betting is seeing explosive growth around the globe. Canada legalized single-game sports in August 2021 and growth is expected to be 9.05% (CAGR 2024-2028), with penetration increasing from 48.9% in 2024 to 61.0% by 2028.7
In Europe, online betting is also experiencing a surge in popularity, with an expected CAGR of 12.3% from 2023 to 2032 and an anticipated valuation of $55.50 billion.8
Sports Betting Across the Globe
Source: Grandview Research, Sports Betting Market Analysis 2018-2030
Tax Revenue Implications
The 2018 ruling that declared a ban on online sports betting unconstitutional was brought forward by the State of New Jersey. Following the ruling, 38 states, plus Washington DC and Puerto Rico, have legalized online sports betting.
According to the U.S. Census Bureau, national state-level sales tax and gross receipts from sports betting totaled over $505 million in the third quarter of 2023. New York led by a large margin, accounting for 37% of total tax revenue.9
These added revenues have funded early education, local projects, and, appropriately, treatment for compulsive gambling.10
The Future of Investing in Sports Betting
The industry will continue to be driven by further innovation, such as the ability to target users with tailored promotions and bonuses to increase brand loyalty and attract new customers. The integration of virtual reality, cryptocurrencies and artificial intelligence are just some of the emerging trends.
There’s also growth in firms that provide services to sports betting firms, such as compliance, cybersecurity, and geolocation. Online betting firms have a responsibility to know the identity of their customers and their location given that online betting is not legal in every state. As the industry grows, so will its service providers.
What is the future of online sports betting? While there is a potential for growth, there are reservations. Worries about increasing gambling addictions, particularly among college students, could reverse recent regulatory trends, and instead bring about more mandates. These firms have an obligation to promote responsible gambling to maintain the industry’s integrity -- and this is one more risk factor strongly suggesting that investing in this profitable but nascent industry requires the expertise of a professional advisor.
Sources:
- Gaming International Online. (2021, February 17). Intertops celebrates 25 years since online gambling first.
- Unlawful Internet Gambling Enforcement Act of 2006. (n.d.).
- MURPHY, GOVERNOR OF NEW JERSEY, ET AL. v. NATIONAL COLLEGIATE ATHLETIC ASSN. ET AL. (Supreme Court May 14, 2018).
- Parry, W., & Press, T. A. (2024, February 13). So many Americans were gambling on the Super Bowl online that transactions hit nearly 15,000 per second. Fortune.
- Nfl. (2023, February 28). NFL announces tri-exclusive Official Sports Betting Partners. NFL.com.
- Unusual world sports betting – strange sports that are bet on across the Globe. TheYellowCap.com.
- Online sports betting - canada: Statista market forecast. Statista. (n.d.).
- Europe online sports betting market size, trends, share 2032. Custom Market Insights. (2024, February 26).
- U.S. Census Bureau, Quarterly Summary of State and Local Government Tax Revenue Quarter 3 of 2023 Release. Quarter 3 includes July, August and September.
- Bureau, U. C. (2024b, March 8). Quarterly Summary of State & Local Tax Revenue (QTAX). Census.gov.
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