Could College Player Props Ban Really Cost Sportsbooks $200 Million?

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Banning college player props could cost sportsbooks roughly $200 million in annual revenue, according to a financial note from Citizens JMP Securities.

If that lofty estimate is accurate, it would equate to roughly 1.8% of the $11.1 billion total US sports betting revenue generated last year, according to LSR analyst Eric Ramsey.

The financial note comes after the NCAA‘s request for a national ban on college player props in the wake of multiple betting scandals across college sports, MLB and the NBA last month, whilst a record number of bets poured in on March Madness.

College player props already less bet

Ten of the 38 states to legalize sports betting already have outright bans on those types of bets, while many more have different sets of restrictions on them.

That makes player props as a percentage of bets placed on college sports lower relative to other sports. JMP estimates they typically account for 50% of wagers at some sportsbooks.

Collegiate betting across all formats represents around 15% of the national totals, or about $1.7 billion for the last calendar year. Under JMP’s assumptions, college player props would represent about 12% of all collegiate betting revenue.

More states ban college props

Ahead of March Madness and the national spotlight it puts on collegiate sports, regulators in Maryland and Ohio elected to remove college props from their lists of allowable wagers.

Other states like Connecticut and New Jersey ban college prop betting only on in-state teams. Some lawmakers have advocated for similar bans as safeguards against prop manipulation, but that could drive more action offshore, where illicit betting largely goes undetected, said Jordan Bender, a senior equity research analyst at Citizens JMP Securities.

“At the end of the day, bettors will find a way to wager on events and players, and we believe the effort to ban individual player betting will likely only push players back offshore, while we estimate over 50% of wagers today are in the United States,” Bender said.

Largest operators would be most affected

DraftKings and FanDuel would be most affected by the ban, as their sportsbooks rely more on props and prop-driven same-game parlays than other operators, Bender said.

“We estimate the long-term, worst-case scenario on EBITDA is $45M for DraftKings and $55M for FanDuel if the ban is implemented across all U.S. states. Therefore, the loss in market value does not reflect the potential EBITDA loss for the two sports betting leaders in the space. That said, we believe these operators have the pieces in place to shift wallet share from prop-style betting into traditional game outcomes.”

DraftKings advised $460 million adjusted EBITDA for 2024. FanDuel parent Flutter is advising between $635 million and $785 million adjusted EBITDA in 2024.