May marks the fifth anniversary of PASPA's repeal, and US sports betting proliferating at pace. iGB's principal data partner H2 Gambling Capital analyses the current state of the market, and the forces that will drive continued growth.
Over the week starting 30 January, iGB will release H2 Gambling Capital’s latest in-depth analysis of the US sports betting market. Read part one here.
H2 Gambling Capital have assessed the major trends and developments of the past year of US sports betting which has seen over $85bn legal bets made across 33 states – 90% of which has taken place online.
The gross win generated over the same period totals over $6.3bn but H2 estimates that free-bets make up around 39% of this, indicating that net win came in at $3.8bn.
Commercially regulated sports betting is now available to 43% of the US adult population across 26 states which have a combined GDP of over $10tn. With this considered, H2 estimates that the average gross win per adult over the past 12 months is around $60 with actual net win around $37.
While the growth of US sports betting has been very strong since 2018, the market still remains relatively small in the global context, with substantial runway for future growth.
US betting in its infancy
H2 forecasts the US sports betting market to grow by 50% year on year in 2022, and then more than double between 2022 and 2027.
However, this would still equate to only 17% of the global sports betting market, whereas it currently accounts for 50% of the land-based global gaming market gross win and over 30% of the land-based global lottery market gross win.
US vs non-US sports betting gross win ($bn)
Looking ahead, H2 forecasts US sports betting gross win to reach $23.2bn by 2030. In terms of confidence in future forecasts, H2 has not had to alter its forecasts on the US sports betting market by more than 5% in any of the past four years, when excluding the impact of the Covid-19 pandemic in 2020, a significant uptick in free bet activity in 2021 and the pushing back of a handful of new state launches in 2022.
While it is impossible to forecast a “black swan” event such as the pandemic, H2 believes that promotional activity has now become more rational. And although the timing of new state launches is inherently subjective and potentially subject to change, 57% of our projected future growth is from states where sports betting is already legal. Only 43% of the market growth will come from states where sports betting is expected to legalise in the coming years.
Live betting to drive future growth?
One of the key drivers of growth going forward is expected to be the higher adoption of in-play wagering in the US. The focus of US sports betting operators over the past year has been on parlay wagering, which accounted for 15% of handle but, due to its stronger hold margin of c.20%, made up 37% of gross win.
However, H2’s analysis suggests the driver of gross win is repetitive wagering opportunities rather than hold margin. This is evidenced by the higher average spend of igaming over sports betting.
Igaming is a high turnover, low margin product, and the average annualised gross win per adult in states where igaming is legal in the US is currently at c.$160, compared to c.$60 for sports betting.
In-play betting accounts for well over 50% of betting activity in Europe. Data reported in Oregon suggests it is similarly popular in the US market, accounting for 49% of handle – although in-play betting on US sports is currently lower than this, with the overall market number inflated by tennis and soccer. Given the stop-start nature of US sports H2 expect that over 80% of US Sports betting handle could come from in-play bets going forward.
A new variation on live betting?
Micro betting could be a key driver to increase in-play wagering of US sports to levels of that seen in Europe for basketball and tennis, with the majority of wagering activity being incremental to existing spend. H2 estimates that micro betting could generate up to $3.3bn of gross win by 2025, with the base case being $2.5bn of gross win.
The battle for market share in the US has been fierce but a clear winner has emerged in the online arena over the past 12 months. H2 Gambling Capital produces state by state, monthly online, retail and total US sports betting market share data by operator, utilising state reported data and estimates for states where data isn’t reported, as well as incorporating company reported data.
FanDuel has gained a substantial lead in online gross win market share thanks to its superior parlay product and arguably best in class risk management which deliver a structurally higher margin than its competitors. When looking at net win, its lead is even greater.
The factors that shape US sports betting’s future
However, market share can change over time, and H2 believes that there are three events that could drive material change in the market:
- a change in market dynamics as operators look to shift from top line growth to profitability, leading to a reduction in promotional spend and potentially lower investment in product by some operators in an attempt to balance the books
- the increasing sophistication of customers, meaning that product becomes even more important than promotions or brand – this could be driven by the growing significance of a strong and diverse in-play product offering / micro-betting
- M&A activity to generate scale through inorganic means
H2 Gambling Capital is widely recognised as the leading authority regarding market data and intelligence on the global gambling industry. Our team of analysts have been tracking the value of the sector since 2000.
The intelligence generated by H2’s industry forecasting model has become by far the most quoted source regarding the sector in published company reports, transaction documentation and sell-side analysts’ notes, as well as in the trade/business media.
The H2 Subscription service is used by the vast majority of the sector’s operators and suppliers; its major financial institutions, governments and regulators; and also, its media outlets in their benchmarking of performance to shareholders.
H2 North America is a new subscription service to cater for those specifically focused on the North American market.
H2 North America offers detailed data going back to 2003 / forecasts going out to 2027 on all aspects of the land-based and online gambling market, including detailed by-state monthly market share of the sports betting / igaming market, and financial models / news flow of over 80 companies across the gambling space. This new product also includes monthly and quarterly reports specifically focused on the North American sports betting and igaming market.
H2 is the lead data partner of Clarion Gaming and iGB.