EPISODE 194 | LSR Podcast

Five Years Of Expanded Legal US Sports Betting


48 min
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Five Years Of Expanded Legal US Sports Betting | Sports Betting News Today | LSR Podcast 194

The LSR team takes a look back and forward five years after the date the federal sports betting ban fell in the US Supreme Court. We also talk about Fanatics acquiring PointsBet, DraftKings’ CEO talking parlays, and Texas sports betting is dead as a doornail.

Full transcript

Dustin Gouker (00:09):

Welcome to the LSR Podcast number 194. We’re here to talk about all the sports betting news in the United States and beyond. Sorry if you were expecting the A team. You got the B team. You got me, Dustin Gouker. You got Eric Ramsey. I’m sorry I put you on the B team, but let’s face it. Adam and Matt are the A team. We’re the B team here.

Eric Ramsey (00:31):

Yeah, we know when Matt says the brightest minds in sports, we know he’s really mostly talking about himself most weeks.

Dustin Gouker (00:36):

Totally true. Even though he says follow him on Twitter if you hate himself. I think Matt really does love himself. He loves his opinions. No more Matt Brown slander here. Talking about a few things-

Eric Ramsey (00:47):

He’s been fired. No, no. He’s not been fired. He’s just off for a few weeks.

Dustin Gouker (00:51):

No, no, no, not yet. Not yet. We’ll talk about PointsBet and Fanatics. By the time now, everybody, unless you’re living under a rock, already knows about that. We’ll talk about that a little bit. I’ll yell. I’m not as mad as I was when I first saw this one story, but I’m still a little mad, so I’ll yell. But we’re sitting here, Eric and I, five years after the fall of the federal sports betting ban in the US Supreme Court. Eric reminded me of that and the fact that it was once upon a time — for you, young ’uns — once upon a time, it was Eric and I covering the daily fantasy sports and sports betting industries in the US. Sports betting before it was an industry in the United States, really outside of Nevada.


It was just us hanging around, making Legal Sports Report, and of course, Chris Grove, the founder of the site. But for a long time, it was you and me. Then Adam, I think, started right around the few weeks before I believe the Supreme Court decision came down. So, we just thought we’d take a little bit of time and think back on that. It was a wild time. Eric even dug up the Slack conversation we were having with each other the moment it had. You were working on a story, apparently, and I was like, “Eh, I don’t care anymore. Sports betting’s legal, start over.”

Eric Ramsey (02:04):

Decisions were at 10 a.m. that morning, and I didn’t realize I had worked through the 10 a.m. hard line. It was 10:06 when I messaged you, and you didn’t really care about what I was writing about Genius Sports at the time. Although it has turned out to be an interesting story in retrospect. Yeah, it’s funny how looking back at our conversations, just how sudden it was, even though we had a sense that maybe it would happen. Literally at 10 a.m. on that day, everything changed for us personally and professionally. The whole industry changed. It set off something that we’re still trying to wrangle with, and at the time, we were trying to figure out how to cover this industry really.


We were among the first doing it, certainly at this depth and hopefully at this level of expertise. Everyone was learning this. Operators were learning how to offer sports betting, regulators trying to learn how to regulate it. For the most part, through five years, it’s been a pretty successful endeavor on everyone’s part. There’s obviously no shortage of nits to pick, little things that have gone wrong here and there. We could chalk it up to growing pains or maybe something larger than that. But taking a step back, overall broad view, five years, really impressive where we’ve come from to where we are today.

Dustin Gouker (03:23):

It’s fun to think about what we were doing. So, I actually went to the Supreme Court, covered the case, listened to oral arguments where you can’t have recording. You can only take notes. So, I think I still have it. I think I have the notepad of dozens of pages of notes I tried to write in real time while arguments are going on, so I could remember that. Then yeah, we’re sitting around every morning. We knew when decisions would drop for the Supreme Court. It’s like people who come to the Supreme Court know this and live through it. We know the date.


So, we’re like 10 a.m., log on. Is it the one? Oh, here it is. Oh, New Jersey beats NCAA, et al. Then everybody’s world’s got flipped, turned upside down. Yeah, I mean, it’s hard to believe that once upon a time, when I started writing in 2015 and you came in … I don’t know. When did you start? About a year later, little longer than that?

Eric Ramsey (04:13):

Late ’16, I think. Something like that.

Dustin Gouker (04:16):

You and I were sometimes scrounging for stuff to write about some of the nonsense we had to write about. It was a lot of daily fantasy sports. To be fair, there was a lot of news around DraftKings and FanDuel and their growth in those days. But it then changed, because that morning, we’re pivoting the site to, “Oh, we’re a sports betting site now.” It was not just we covered the news. Also, fun caveat, Legal Sports Report broke because so many people were visiting it that morning. Yeah, I think we had a story pre-built and we just slapped in. Oh, this happened. We’re like, “Go.” Then, of course, the site breaks because we’re a small little operation back then, and we weren’t ready for the influx of traffic that we would get that day. So, that’s a fun little story.


But then everything changed, and all of a sudden, we’re like, “Oh, we’re pivoting to … Oh, legislative efforts are starting almost immediately.” It was in June, I think. Delaware just said, “Oh, we’re taking single-game bets almost immediately.”

Eric Ramsey (05:13):

Yeah. Early June 6th, I think, or June 5th. Yup.

Dustin Gouker (05:17):

Yeah. New Jersey jumps into legislation to fine tune … The case was really about New Jersey and what it wanted to offer, but it struck down a federal law in the process. New Jersey jumped into it. We’re trying to figure out who are the operators going to be. I famously cold take myself. I was like, “FanDuel and DraftKings are going to have a hard time becoming sports betting operators right away.” So I’ll own that. But to be too fair, just to me, FanDuel got bought. I don’t think they were ready when they got bought by Flutter, the larger gambling company. Things changed for them really quickly, and DraftKings was doing this behind the scenes. They were all in on sports betting.


For a year, they had been apparently working on this and then, oh, we’re ready. Then they were ready for New Jersey on day one. I think they were the first operator, right, in New Jersey. So it’s crazy to think about where it’s all gone and where we sit now. So I guess that leads us to what … This is a really broad question, just lets us riff a little bit, but what’s been good? What’s been bad? As we sit here five years later, maybe what’s the biggest success you’ve seen out of the market?

Eric Ramsey (06:25):

Well, it’s DraftKings and FanDuel. It’s your cold take. We may have had some reasons to believe that they could succeed in this. It’s obviously a lot easier looking back now, but they had gone from state to state, lobbying lawmakers, embedding themselves in these state houses around the country, getting customers familiar with their product, building out product, building out teams of people geared toward product. They were putting the pieces in place for this, whether or not it happened. So, in some ways, it does seem like it was inevitable in retrospect, but it’s still a pretty big surprise that these two fantasy sports companies were able to come into this sports betting industry and really supplant the giants of the Las Vegas strip, the Caesars and the MGMs and those guys.


So, for me, the real story of the first five years of widespread sports betting is the story of DraftKings and FanDuel and their dominance. That’s maybe one of the things that’s not so good about where we are today. We probably could use a little bit more competition in this marketplace. Some new parties, some new faces and new brands. I think that maybe the next five years, we could look to expand in that realm. But the way those two guys have stolen the show of sports betting is what sticks out to me the most, I think.

Dustin Gouker (07:46):

Yeah, and again, I don’t think I’m overstating. There are reasons to believe that DraftKings and FanDuel could win. Even after … OK, we learned that they’re ready for sports betting. FanDuel gets acquired, all of that. I still don’t think people believe that this was going to be the way it was. Like, oh, these are daily fantasy companies. They’re not really ready for this. The big overseas companies are going to come in here and do this. Again, MGM and Caesars already had online gambling operations. They were in New Jersey with online casino. We thought, “Oh, they also have all the advantages because they often have and some of the other regional casinos.”


We knew this was going to run through casino licensing, land-based casino licensing, which is what happened in most of the country. I don’t think people really understood that. OK, it’s not going to be just open season, whatever state legalized it. It’s going to be tethered to casinos almost everywhere. MGM and Caesars, I think, and to an extent, Penn and Boyd and other ones, had they had this ingrained advantage that they were going to have the market access right away and that market access turned into whoever wanted to pay for it. DraftKings and FanDuel would pay for it or there was enough access for everyone or what have you. So, some of that early advantage went away. To me, the biggest success is just legalization.


It’s also maybe one of the downfalls is the pace of legalization. I’m sure I’ve said this on the podcast before, but if you had told me we’d be sitting at dozens of states have legalized either in-person and/or mobile betting, I would’ve called you crazy five years from now. This is not just the gambling thing. It is hard to think of something on a state-by-state basis that has passed legislatures at the speed and good commercial terms in most cases that this has passed. You were right that DraftKings and FanDuel being already ingrained, they went barnstorming around the country getting DFS laws passed. The lobbying they had already done, were already familiar. The companies they already worked with on lobbying were saying, “OK, now we’re in here for sports betting. We’re back with the larger coalition, and here we are. Let’s pass some sports betting laws.”


Again, it is so hard to pass legislation on anything, especially something slightly to very controversial in gambling. We’re seeing some of that pain now, but it’s just crazy. We’re just like, “Oh, sports betting’s up here, it’s going to pass.” It’s nuts in retrospect, and I don’t think people appreciate how easy it is to do that and how easy it was in retrospect to get these many states to say, “OK, we’re going to have online sports betting again. We’re going to have online gambling,” many times the first form of online gambling these states have had. They’re like, “Yup, sign me up. Let’s do this.” That’s crazy in retrospect, really.

Eric Ramsey (10:33):

A lot of that movement was fueled by unrealistic revenue projections in a lot of the state houses, which was an amusing thing to watch, watching these absurd numbers get thrown out. Finally, people have started to come back to earth on that, but that also permeated the M&A part of sports betting, the evaluations. This is a big industry, bigger than most people expected, but it’s not as big as people in 2019 would’ve argued it was with these evaluations and with these revenue projections. We saw some monumental acquisitions and mergers that have played out to varying levels of success. We spent a lot of time talking about FanDuel. Did you remember that it was May 14th that the FanDuel acquisition happened?


That was a busy day in a lot of ways, including the first news that Paddy Power was going to be acquiring FanDuel. Yeah, really has set off their charge in the US. We had a $2 billion acquisition of theScore tech from Penn, several up in the billion-dollar range and in the high hundreds of millions. Obviously, that becomes interesting. We’re going to talk later about the PointsBet acquisition, and what the valuation is today, but apart from the legislative side of things, it’s been amusing to watch this M&A ship, this tide ebb and flow over the past five years too.

Dustin Gouker (11:58):

Which leads us to what’s been bad or what we think are the worst parts of it. I think that speed has also been a downside because I’m not sure how many of these states are taking sports betting regulation real seriously. They passed it. Yes, they regulate it, but on a state-by-state basis, what is any single state really doing other than rubber-stamping a license? Now, yes, everybody’s doing something. I’m sure there’s some regulators who listen to this that would take issue with that, but I don’t see regulators coming out and being an active voice, which is crazy when we see Ohio come out. Ohio, of course, legalized, passed the law last year, launches on January 1st.


All of a sudden, Ohio gaming, they are leading the charge. They’re creating change in the marketplace in a good way I think. Some of this is like, “Man, if we had been doing this five years ago in every state, maybe we’d have a little cleaner industry now.” New Jersey I think has done a good job all along, but they’ve been the proxy through which everybody else has said, “Yeah, OK, we’re going to New Jersey’s regulated it. These guys are good.” It’s crazy to me we had New Jersey on the lead end has done a good job. I know. Then on the back end, we have Ohio suddenly coming in and cleaning up some of the mess we’ve seen, and it’s getting rid of risk-free bets and free bets and cleaning up the fantasy sports versus sportsbook era.


They’ve just done a lot of good things, and it’s like the dozens of other states that have passed sports betting legislation and regulation, where have they been? Because you don’t hear a whole lot about them, and we have several instances. We have the college betting scandals and we’re not sure in any single state, how much are they doing on this? What are they doing? We have this Washington Post story about MGM and a bet and the Virginia regulator is like, “Yeah, well, I don’t know what to do for you when a customer comes and complains” and just kind of had no comment.


I understand some of this happens in the background, but this is a new industry, and we need strong regulators to really make this work. I’m not sure we’ve seen that and certainly not in every state in the union. Now, again, there’s exceptions. I’m painting a very broad swath, and I’m sorry if you’re on the good end rather than the end that’s not doing a whole lot, but there’s some of that out there.

Eric Ramsey (14:24):

Yeah. Most of the regulation has been good. When we’re not hearing about problems, it’s probably OK, but the fact that these operators have gone into Ohio and Massachusetts is another one that’s really turning the screws on, really imposing strict regulation in a way that these operators apparently have not had to deal with in the other 33 states around the country. So, that’s interesting. Unfortunately, to your point, most of the regulatory news we’ve had over the first five years was really bad. It was the stuff out of Tennessee with the payday loan company having their license in jeopardy. It was the whole debacle in DC with the DC lotteries contract and they’re the regulator as well.


So we had a couple instances of really, really big lapses in the regulatory process, but hopefully, these recent crackdown, for lack of a better term, in Ohio and Massachusetts, hopefully, that’s a sign that regulators are learning as well too. Hopefully, knowledge is getting passed from state to state over time. As the body of regulators, the national body of regulators becomes more educated, hopefully, we’ll start to see a little better oversight of this industry too.

Dustin Gouker (15:42):

For some reason, we still have monopolies out there, including the one here I experience in Oregon. You mentioned DC. We have New Hampshire. Maybe that makes the most money for the lottery or whatever or the state, but at the same time, we should be creating that choice that you talked about. Running monopolies for sports betting is another one. That’s just dumb. Stop it. The amount of money, sure, maybe you collect a little bit more money, but you could lower the tax rate, let a few people in. Anywhere you have FanDuel and DraftKings, you should be doing better.


Again, DraftKings holds a few of these monopolies, but I do wish we’d realize that this is not just to make money for operators and states at all costs. Let’s have the best options out there for everyone. Have a free market. That’s what the US has always been about. Instead, we’re creating monopolies where they don’t need to exist. So, that’s another one of the bad things. Anything else you see on the bad end of the spectrum over the years?

Eric Ramsey (16:50):

I mean we certainly had a rise in gambling addiction or reported instances of gambling-related harm, and that’s something that the industry’s going to have to take a real hard look at over the next five years, hopefully with some increased funding. The regulatory pressure is a part of what’s helping address that. It’s something that operators should be eager to get out in front of before we start to go down the path that other global jurisdictions have gone down with more significant repercussions on the way they do business. Certainly, the spread of this industry has at least laid bare the need for better education around responsible gambling from everyone, from operators and regulators to other customers.

Dustin Gouker (17:36):

Again, I’d almost argue Ohio was the leader on this front by making everyone examine the language we’re using for promos. Heck, the media industry is guilty of this too. Everybody was saying risk-free bets. These were not risk-free bets. Everybody went along and said this is OK. I mean, it’s risk free-ish, but there was always strings attached, and that it was quite honestly not honest advertising.

Eric Ramsey (18:07):

That’s part of a bigger bad thing too, just around advertising in general. We’ve seen pretty poor behavior overall in operator advertising, just poor taste I guess for lack of a better way to put it. Some things that maybe aren’t against the laws of the regulations but really are just not the way we want to see this industry being promoted and marketed in the future. So, that’s another thing that sticks in my craw about the first five years is some of the really big letdowns in social media in particular. Organic marketing on social media has been overall low quality so far.

Dustin Gouker (18:45):

Which all this leads us to what’s the next five years or in the future. I’ll give you some time to think about that because I’ll take a stab at this. I was just at the SBC conference in New Jersey and New York, and it was actually an event sponsored by GeoComply. It was much smaller event with some startups and all of that. One of the founders in the fantasy sports space called wave one of sports betting baked, and I’m like, “You know what? You’re right.” This wave one is over. Everybody’s going to take this time I think to evaluate what’s next, because we have Kentucky launching probably in the fall, probably before NFL season where we may get North Carolina across the finish line here this year.


But after that, man, there are not launches coming quick and fast and furious again just because we’ve already legalized a lot of places. If you’re counting on California, Texas or Florida, good luck to you. Again, I’ll zoom about it on this podcast, but I’d be surprised if we’re even five years away at this point. That’s the best-case scenario I think for passage. Texas, we’ll talk a little bit more about that. That’s dead for this year. So, now we’re two years out from even trying again in the legislature, and Florida is caught in federal courts, probable monopoly run by the Seminoles and Hard Rock there.


So, it’s baked and we have a bunch of product — same-game parlays have been a great success and all of that — but we have a bunch of homogenous product here in the United States that it’s a bunch of lines. You bet. I mean it’s a fine experience, but there’s been very little innovation in our space in these five years. I hope and pray that that’s what comes next is OK, everybody’s not chasing their tails. Oh, we’re going to legalize. What’s the next state to legalize? What’s the next state to legalize?


This goes pretty much to the entire industry, but what is next for all of us to grow the industry from where it is without just launching states? I think that’s on a lot of people in all of this, and I agree with that assertion that it’s baked. I want to see hopefully wave two, version 2.0 of sports betting is a little more exciting than, “Oh, now it’s here.” It’s exciting that we have it. Now, what’s next?

Eric Ramsey (21:01):

On the legislative front, if your state doesn’t have sports betting by now, there’s probably a complicated reason that it doesn’t have sports betting. There’s a few that we could pick off the map that seem a little easier than others. Georgia has been in the works for a long time. Missouri has gotten real close to the finish line. Those maybe are the next wave of likely states, but you start thinking about states like Utah and Idaho, Alaska that just are very unlikely to even consider the issue, let alone get something across the finish line. Yeah, we’re at where we’re going to be on the legislative front for the most part. Then product has been good enough. I think you and I have had this conversation recently. It hasn’t really taken much to win the product race right now.


It’s FanDuel and DraftKings winning that too, and their product is really good, but it’s not at best-in-the-world level yet. I think there’s a sense among some of us in the industry that someone might come in with a best-in-the-world product, whether it be someone like Bet365 or someone like Fanatics building something from the ground up. Product hasn’t been especially important to date, but I get the sense that the next wave of product developments might really shift the operator landscape in this country. If anything is going to shake up the current duopoly, it’ll probably be an innovation on the product side.

Dustin Gouker (22:20):

Yeah. Again, I’m excited about the next wave. I think everybody will have time to do it, too, and there’s going to be more consolidation. Again, we’re going to talk about PointsBet and Fanatics here in a second, but there’s going to be time to think about this product. What does the consumer want? I don’t even know what I want, but I know the sports betting experience as it exists in the United States isn’t that exciting. It is like betting sides, putting it into parlay together. As you know, I’m quite successful at taking the pre-built same-game parlays.

Eric Ramsey (22:58):

So I hear.

Dustin Gouker (23:00):

I dismiss these people who go out there and do pre-built same-game parlays and lose. I bet them fairly regularly because I’m lazy and not a sharp sports better, and I win some of these. I’m sure I’m not a loser overall, but there’s just a lot. I think there’s just more to come, and that excites me to see what is next in version 2.0 sports betting in the United States. Before we move on to the news of the week, any other final thoughts about where we’ve been for five years and where we’re going?

Eric Ramsey (23:33):

No, not really. Again, another conversation we have, it seems like it was yesterday that this all happened that PASPA was repealed and, in some ways, it seems like it was decades ago. A lot has happened in the last five years, almost overwhelmingly so. The pace of news really didn’t slow down for a couple years after PASPA. We’re finally just now starting to have some breathing room and starting to revisit things that we haven’t had time to. So, yeah, no real thoughts other than utter exhaustion. I hope Adam will let me have a nice long vacation here sometime this summer to relax.

Fanatics acquiring PointsBet

Dustin Gouker (24:11):

Again, once upon a time, you, me and Adam on a hope and a prayer to LSR. Now, Adam runs a large team of people gathering all the news and again, the version 2.0 of news-gathering is also like the industry. It was very easy and all we could really do is just regulation, legalization. That was all of it. So now we turn to the business of sports betting, and that’s just as fascinating and I think a good segue into Fanatics and PointsBet here. Again, unless you’re under a rock, you saw the news that Fanatics, this is not 100% official yet, but Fanatics plans to buy PointsBet for the sum of $150 million US.


There’s still some t’s to be crossed and i’s to be dotted before all this happens, but it looks like it’s going to happen, which again, fascinating deal. My first reaction was, man, it’s pretty cheap. The number being floated that everybody had been heard is like, “Oh, half a billion dollars for PointsBet,” which even that sounds low given some of the M&A that’s happened in the past five years. But what were your thoughts when you heard the news?

Eric Ramsey (25:22):

Yeah, same thing. I had several people reaching out as this was materializing over the few weeks before, asking me to spitball valuations. I didn’t have a guess. I was thinking probably several hundred million was a good number. Then yeah, you see the price tag. It looks low, but maybe the best-case scenario for PointsBet financially. They really didn’t have a path to profitability in this market, hadn’t really demonstrated that they were able to compete despite having a product that’s good and differentiated.


They just didn’t have it going for some reason in the US, and probably this is probably a fair value for their operation at this point despite all they’ve invested in it. So I think probably just a disappointing result for everyone on the PointsBet side. I think this is probably not what they had in mind when they began this voyage in the US a few years ago, but in a lot of ways, I’m not as surprised as we’ve watched their story fail to progress.

Dustin Gouker (26:26):

I think somebody should go back in the podcast and figure out the first time we said PointsBet was an M&A target. It was probably not quite near the beginning of the podcast in 2019, but certainly a couple years ago, I’d imagine. Certainly, if PointsBet had sold two to three years ago, it would’ve been multiple of the $150 million it’d end up selling for. Hindsight is 2020. But I think we all say PointsBet is spending a lot of money on branding, marketing, customer acquisition, had a pretty good product but it was just not gaining. Again, you sit in the numbers all day long, not really gaining meaningful market share anywhere. It was getting market access and getting its percentage of market share. At last count, what’s its US market share look at?

Eric Ramsey (27:14):

Maybe three. Yeah, on the high side, three.

Dustin Gouker (27:21):

Two percent of the market? Again, they were getting that market share with again marketing pretty aggressively. They have this deal with NBCUniversal for hundreds of millions of dollars of branding and over the years. I think we all just think, “What is the end game? If they’re already spending this and they’re just not getting a ton of adoption, what is different?” Again, they did this with a pretty good product, I’d argue one of the best products in the US market right now. Even points betting, which is a differentiated product that really didn’t catch on and maybe we aren’t just ready for or isn’t that great of a product, but at least different than a lot of what we have in the US space.


So, to me, yeah, the number is what stuck out because we already mentioned most of the things, theScore for $2 billion, I don’t think theScore would be selling for $2 billion. TheScore is a media organization as well, but I mean it was bought to be a Canadian sportsbook and for the tech. I don’t think … it doesn’t need to spend that. Again, Barstool, Penn Entertainment finished the purchase of that. Again, a successful media empire on top of that, but they were really buying it for … I think they believed they were going to be number one in sports betting because of well, slap Barstool on there, have all their media personalities say, “Go Barstool Sportsbook,” and this is going to work. That was the frontal purchase price of that was over half a billion dollars. It’s crazy in retrospect.


Again, I don’t know if we’re quite making up numbers for valuations not that long ago, but it makes me feel like that way. Yeah, to go to the Fanatics side of this, it certainly makes a lot of sense. The aforementioned NBC deal they have, it’s not cheap, but it’s also not that expensive for a very large company like Fanatics to eat that while they’re doing this. They have the in-play tech in the background that I think is probably one of the more valuable parts of this. They have, albeit a small user database that PointsBet has already put together, again a better product. All the money that PointsBet has spent on marketing and branding is up in smoke because we’d all presume that PointsBet goes away once the deal is final. I don’t see any reason why it wouldn’t.


So, I mean it makes a lot of sense for Fanatics. They’re apparently, by all accounts, maybe bidding against themselves. They’re really the only legit buyer. On the PointsBet side, it sounded like … Yeah, I think you alluded to this. They were just out of money. They were going to continue losing money this year, and it was reported that they have to go raise just to keep going. PointsBet had to exit. Fanatics values everything it’s going to get out of the PointsBet deal, and it’ll be fascinating. I think it makes Fanatics a better player in the short term too because I continue to go on record again, will cold take me in five years, that I’m not sure the database that Fanatics has is that great. I know we beat this one. Maybe you don’t beat this dead horse on the podcast, but I do.


Are people loyal to the Fanatics brand or do they just like the stuff that Fanatics makes and the licenses they have? I don’t think people are like, “Yay, Fanatics is a great brand.” They happen to make the jerseys and the hats, and they have these relationships that everybody has. I don’t feel like, “Oh, Fanatics. Yes, I love Fanatics. I’m going to bet with them too.” Is that a thing or am I crazy?

Eric Ramsey (30:49):

I’ll tell you, I’m more bullish on this FanCash promotion than most people seem to be. You’re essentially getting your sports memorabilia for betting with Fanatics. Doesn’t matter what the brand is; you’re going to get your jersey as rake back for your parlays. Look, I collect sports cards on the side. If I bet $500 on Fanatics, they’ll send me a box of sports cards for free. There’s something to be said about that. I think we could talk for hours about how this was handled in the poker days, but I think about the way PokerStars attracted its VIP customers with the insane PokerStars gift shop. You could buy a Porsche from your time spent playing on PokerStars.

Dustin Gouker (31:31):

Is your Porsche still running?

Eric Ramsey (31:35):

It’s gathering snow right now.

Dustin Gouker (31:38):

It’s still in New Hampshire. Is it stuck in New Hampshire?

Eric Ramsey (31:43):

I do, but I do think FanCash is an intriguing promotion that does bridge this gap. It does salvage the brand because you’re essentially betting on the sportsbook of your home team. You don’t see Fanatics advertisements a ton on TV. They’re not a strong brand in this space in the same way DraftKings and FanDuel are, but I think what they have to offer on that side, their core business, I think that’s an attractive cross-sell.

Dustin Gouker (32:08):

Yeah, I definitely agree with you and there’s been a lot of this has come out. I think that a certain amount of your bets seems like you’re going to go to being able to buy products on various team stores or league stores or what have you. It’s interesting. I mean, if that’s the way they’re activating the email database, I’m with you. I’m a little more bullish. I think some of the other inherent stuff, I get a lot of emails from Fanatics, and I ignore them or the team store or what have you. I still think the conversion is tough, but I think the retention is going to be great.

Eric Ramsey (32:43):

Yeah, I agree.

Dustin Gouker (32:43):

Yeah, I’m already betting here. Oh, I got a free jersey last year. I’m going to keep betting here. That’s an attractive retention and maybe upfront acquisition tool too, but we’ll see. I know again, going back to the top of the show, people say, “Oh, it’s not over. DraftKings and FanDuel haven’t won.” They’re not that right. As we sit here, who’s going to really disrupt it? Fanatics has a chance to disrupt it even if I’m bearish on it. They’re one of the few companies that come in here and do that. Bet365, again, we say that all the time. If they get serious, they can definitely disrupt as well. Right now, it’d have to be almost somebody who’s not in the space at all that comes in and disrupts or takes a product.

Eric Ramsey (33:27):

We have all the Europeans telling us that this isn’t how it’s going to be. They’re the loudest contingent telling us these guys aren’t going to be the leaders in five years, but I agree. There’s no evidence that anyone has what it takes right now to challenge in this space but we will be having a different conversation come 2028. Everything will be different I’m sure, but it’s really hard to connect the dots and find who’s going to get to 25% market share in this country other than those two.

Dustin Gouker (33:58):

Yeah, I mean there’s a lot of space between … It’s not over to, “OK, who’s going to come in and do it and how?” Again, Fanatics is the only one as you sit here. 365 has been more aggressive but is still not like, “Oh, we’re going to go take DraftKings and FanDuel and launch Fanatics.” Again, Penn Entertainment, Barstool, they’re not. It’s clear, yes, they could spend more on marketing, but I mean that’s just shuffling the three behind DraftKings and FanDuel. That doesn’t get them into tier one anytime soon. Yeah, the European brands, too. It’s like, “What are you going to do?” Your brand has no value. Your name doesn’t mean anything here, number one. What are you going to do?


You’re not going to come in and spend a lot on customer acquisition. Your product is good, but we’ve already learned that’s really maybe in the next five years, 10 years, that becomes way more important if you have a really good, differentiated product. But anyway, we’ve gotten far afield from the original Fanatics and PointsBet. But it does take us to this interesting dynamic that happened in the last five years as same-game parlays. We have DraftKings, Jason Robbins. Again, he says the quiet part out loud quite a bit for all of us to hear, and I’m not sure that’s the best thing to do, but he does it and he is not going to change obviously.

DraftKings’ CEO talking parlays


But recently said at a conference, he said, I’ve got it up here, “We’ve seen no decline in demand as we’ve increased hold rate. The important thing is that we’re not increasing it by making the odds any worse for customers. It’s just by pushing more parlay mix and things like that.” Again, for me, gambling Twitter, gambling industry loves to say, “Don’t bet on parlays. They’re awful for you.” At the same time, people just want parlays. You can say they’re bad for you all you want. Buying lottery tickets is also awful. People do that. People put money in the slot machines. That’s also awful. People do that. Yes, it’s bad for us. The entire universe of sports bettors is going to lose money and a lot of money at parlays. That does not replace the fact that it is what people want.


They want a chance to win a lot from a little bit from placing a small bet. They don’t want to grind -110 sides at $25 a pop. What they want is to bet a dollar to win 1,000 and they’re going to lose all the time or once in a while they will. This is the product they want. So, I challenge us all in the next five years to stop saying, “This is bad. Parlays are bad.” Yes, they’re bad. Doesn’t matter. It’s what people want. Yes, they’re being advertised and being pushed to people, but it’s also clear this is what they want at this point. What are we going to do about that?


I mean I think the fast in-game parlays is probably a bad idea from an RG standpoint. Trying to get people to churn through parlays more often is a bad, bad idea. But at the same time, same-game parlays and parlays, they’re here to stay. They’re bad bets, but I actually agree with Jason here. They’re good for the operator because they make more money and they’re exactly what the user wants. You can go ahead and disagree with me now if you’d like.

Eric Ramsey (37:05):

No, it’s just amusing to hear you say you agree with Jason Robbins. There’s not a ton of things, I think-

Dustin Gouker (37:09):

First time, maybe first time in history.

Eric Ramsey (37:12):

No, I have nothing really to add. I think it’s well-said and I’m in the same boat. We might get a different voice if we had Matt hosting this week who’s a little sharper bettor than both of us, a little more avid bettor. But same thing for me. I just don’t have an appetite to sit in and grind straight bets every night for the most part in every game or games I’m not watching, but I’m happy to splash a little disposable money down on a same-game parlay or something like that. I certainly don’t fault operators for leaning into it both because it’s what the customers want and it’s what their shareholders are demanding.


That’s what’s driving this push toward profitability really is the increased holds fueled by same-game parlays. So, if the customers are getting what they want and the operator is finding a way to make profit from it, I just have a hard time taking too much issue with it.

Dustin Gouker (38:05):

I mean the challenge is this was the product that has disrupted … I mean disrupted is maybe the right word. This is the thing that Nevada was like, “OK, parlays, yes, you do parlays in Nevada.” In the beginning, it was just sides. It was just totals. But same-game parlays, cross game parlays, now in FanDuel and DraftKings, you can have same-game parlays and then tack on some stuff outside. You can do all this now, but what’s next? What’s the next product that’s going to really capture people’s imagination? That is, again, exciting to me. If you could do something that is good for the consumer but also makes a lot of money, you’re brilliant. Because anything that’s good for the operator is also going to be taking money from the user.


So, people worry about churn, but people are happy to lose their money this way I think. Once in a while, you win one. Again, you take 10 bucks, you win 150. That’s exciting. Whereas you could bet something really long odds, one single long shot, sometimes you’re going to hit, you’re not going to hit. But when you’re doing a parlay, there’s a buildup, there’s some excitement. That’s a cool product. It is a cool product. Again, go ahead and disrupt that. Find something better than same-game parlays. But yeah, I’m over, “Stop betting parlays.” People want to bet parlays, bet parlays. I also think people understand that these aren’t great bets. I don’t think people think they’re going to win. They understand this is a lottery ticket.


Again, everybody lines up for Powerball every week. That is no better for you. It’s way worse actually, because your odds of winning that are in the hundreds of millions. Gambling is about winning a lot of money from not risking much or ramping it up. Again, to do it coin-flip style on -110 sides, that’s a grind. Even though our friend Matt Brown is very good at it, I think.

Eric Ramsey (40:00):

It hurts a lot. It’s the same thing that happens in poker, too. It’s the risk. It’s the pain versus pleasure, the pain of losing versus the pleasure of winning. The pain of losing, say, $1,000 bet on a -150 favorite, that sucks, man. There is no fun in that. When you’re betting $1,000 to win $700 and you lose, that sucks. Conversely, betting $5 and winning $150, that’s great. That is a great experience for a bettor. So, yeah, it makes a lot of sense that everyone seems to be gravitating toward that.

Dustin Gouker (40:32):

Or you lose the $1,000 slowly betting 200 $5 parlays. That you can argue is almost fun. It’s not fun to lose that much money no matter what you do. Oh, I started at $1,000 and now I’m down to 0. But again, it is more exciting than losing $1,000 every single time on a side. Again, people can eat that. Again, I feel dirty saying this, but sports betting is an entertainment. Again, this is what I think Jason Robbins has been spouting for a long time.

Texas sports betting is dead as a doornail


It is entertainment, but then the more entertaining product is the same-game parlay that gives you this chance to turn a small amount of money into a larger amount of money. If that’s more entertaining to the customer, and I think it’s born out that it is, then by all means have at it. So, we’ll pick up. Last week, you guys talked about Texas had passed the House. It is now by all accounts dead. Maybe you can catch us up with whatever’s going on in Texas right now.

Eric Ramsey (41:28):

Yeah, I mean I think we figured as much as a topic that has been off and on this podcast a lot over the last couple months. Texas, I say officially, it is not quite official, but it’s really dead. Once the lieutenant governor says that it’s not happening, it’s not happening. The lieutenant governor has said it’s not happening. It’s probably not going to make it onto the Senate floor this year. You can read into it what you want. The story from the lieutenant governor is he doesn’t have the votes in the Senate to even bring it up for an issue.


The flip side of the argument is let the people decide whether or not you want sports betting in Texas. This is merely a vote to put a measure on the ballot, essentially. I would let the voters decide. That is not going to happen. I think Dustin mentioned earlier, no session in 2024 in Texas. So, we are probably on the shelf in the Lone Star State until 2025 at the earliest. Sorry.

Dustin Gouker (42:27):

I’m going to get a little political for a little bit because I can be, and it’s not going to be super political, but lieutenant governor basically said it was carried by the Democratic majority in Texas. This is a Republican legislature. We’re going to do what we want. I’m like, “When did we just not be able to pass bipartisan legislation? When did that happen?” I mean I know when it happened, but again, we used to be able to work together across party lines. Oh, yeah, you guys like sports betting. We’ll do something else. It’s OK. The fact that it’s just, “Oh, Democrats carry this.


We can’t possibly move this now because Democrats liked it,” take sports betting out, stripped that away from it, it was just defeating to hear Texas just say, “Oh, well, Democrats voted for this. We can’t possibly vote for this now.” That’s just boneheaded thinking. I wish our country wasn’t in this state, sports betting or no. So, that was that. I’m going to rant on the thing that I wanted. People were disappointed because I wrote about this in my little Substack. I’d probably come on this podcast every year and say, “This is the worst thing I’ve ever read about sports betting.” I know I did at least one other time about a column about college betting and things like that. This is from an Australian publication apparently or at least an Australian writer saying sports betting is worse than OxyContin.


I’m here to tell you that symbol, stop it. OxyContin and the opioid crisis has claimed hundreds of thousands, if not millions, of lives in the US for the hundreds of thousands, millions probably worldwide. Any kind of gambling, yes, it comes with harm. It comes with people who commit suicide probably because they get in too deep and can’t. But sports betting is not killing tens of thousands, hundreds of thousands of people. To put that on a headline, and again I think you can say, “Oh, it’s just about headline.” The content of the story doesn’t get much better. It leans into that headline, if anything. We can have a real serious conversation about harm from gambling without just going over the top and saying it’s the opioid crisis.


Now there are parallels with the opioid crisis in that the states have legalized it and benefit from it. The OxyContin was pushed by doctors and didn’t reel it back in. But the top level, let’s have rational conversations. If you are going to tell me with a straight face that sports betting is the opioid crisis, stop. That is not a serious conversation or even the start of a serious conversation. Again, I think you can have that conversation in a more nuanced way, but just to say bad as OxyContin, stop. The gambling is not that bad. Again, also, it almost demeans the real harm that does come from gambling.


The fact that there are issues that we need to work out that it ruins families, it does claim lives, but it is not like this. The opioid crisis has touched everyone, right? I think I’d be hard-pressed to find somebody who hasn’t known somebody doing this. Again, maybe gambling is the same way, but it’s not the same. People are losing their lives daily from OxyContin and opioids. Sports betting and the harm that it does, it is not that. So, anyway, I wanted to rant about that. You’re welcome to chime in if you would like.

Eric Ramsey (45:57):

No notes. I appreciate you saying that. It’s not the first time we’ve heard really bad comparisons with sports betting. It was not long after PASPA, we heard a lawmaker in Tennessee compare it to slavery on the Senate floor. You’re right. We should have a real deep conversation about the harms that gambling can cause. This is not the way to have it by invoking these other terrible things that we have plaguing this country.

Dustin Gouker (46:28):

Well, with all that ranting over and thinking about the past and the future of sports betting, we’ll call it a day. Wherever you listen to the podcast, we’d appreciate it if you give us a five-star review. Rate us. If there’s something you’d like us to do better, please just tell us. You can find us. We have emails. We have Twitter handles that we sometimes use. You can find me on LinkedIn. Hell, whatever you want to do, but we’d appreciate your reviews to continue to get this out. This is a labor of love that we’ve done since 2019. We’re coming up on episode 200, which is crazy to think of that we’ve been actually doing that this long. But we appreciate all listeners.


Again, I was at the conference in New Jersey. I hear more people talk about the podcast than anything we do. People like to listen, and we appreciate you listening over the years. So, with that for Eric, I’m Dustin. We’ll see you next time.

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