What Colorado Sports Betting Could Reveal About The Future Of The US Market

Posted on April 2, 2020

Colorado sports betting looms ever closer, with the state still pushing toward a May 1 launch date despite the lack of sports during the coronavirus pandemic.

The state already handed out more than two dozen licenses, with approved firms ranging from digital giants like FanDuel and DraftKings to more traditional Nevada-style operators like Wynn. 

In fact, CO sports betting could be the market where we first see these distinct operating models compete in a relatively restriction-free market. There are no tethering requirements for online licensees as in Nevada, and revenues are taxed at a manageable 10% of gross gaming revenue (GGR).

Competing models in Colorado sports betting

In the first corner is the New Jersey model, borrowing heavily from Europe. The focus is on recreational players, digital marketing, in-play wagering and a wide range of markets, including derivatives like same-game parlays.

In the second corner is the Las Vegas model, evolving out of brick-and-mortar sportsbooks. Broadly speaking, this includes a tighter betting menu but bigger limits and a willingness to take on all comers.

“More so than New Jersey, Colorado is the first real battleground for US sports betting,” said Robert Walker, the director of sportsbook operations at Nevada firm USBookmaking.

Sportsbook marketing experience on display

Marketing, both in terms of budget and experience, is perhaps the biggest edge held by the New Jersey firms.

FanDuel, for instance, parachuted in digital marketing experts from all over the world, courtesy of its Flutter Entertainment parent company. These operators have also been participating in a mass land-grab in New Jersey and Pennsylvania sports betting. That gives them a useful edge in knowing the best ways to acquire US digital customers.

“That kind of aggressive acquisition is not something that Nevada books have ever really had to deal with,” said Walker.

The mere fact that Las Vegas sportsbooks exist near the Strip is often their best acquisition tool. Likewise, in-person sign-up requirements have limited true digital acquisition campaigns.

Laying a fair bet?

This is perhaps where the Nevada firms can make their hay. Circa Sports, for instance, has exploded onto the Vegas scene over the last year with world-first opening lines and big limits, and obtained a Colorado license.

It’s the type of product that doesn’t necessarily exist yet in New Jersey, but pro bettors have been seeking. If Circa can get word-of-mouth on its side, it could yet compete with the marketing war chests of bigger firms.

“We are very excited about the opportunity, particularly remote registration and remote account funding,” said Mike Van Ermen, who oversees sportsbook business development at Circa. “If you download our app, we feel that all things being equal, we have the product to stand up against anyone.”

Van Ermen also pledges an “out of the box” approach to marketing to help compete against firms who might come in with bigger budgets.

There are questions for Circa and similar books, however. The low-margin nature of the model means it’s hard for more than one market-making book to exist. That’s especially true in a state of just 6 million people. 

Colorado a petri dish for US sports betting

Regardless of the East versus West narratives, Colorado looks set to be a truly open competition for all US operators.

“FanDuel and DraftKings don’t have quite the same database headstart they do on the East Coast,” said Johnny Aitken, the CEO of the Colorado-headquartered PointsBet. “The impact of DFS lessens as you move West, and I think the competition will play out very differently here.”

In other words, when the state’s digital doors open (and sports resume), operators are competing for customers on the levelest playing field yet. As a result, winners and losers could be decided simply by the best product. 

“There’s no need to split the atom here; the best tech will win,” Aitken said. “Whoever offers the easiest, fastest product with some clever marketing will do well.”

Alongside PointsBet, Smarkets fits that profile and could be one to watch out for, Aitken says.

Is this ‘a domino state?’

Beyond the individual winners and losers, Colorado sports betting is an important test case for regulation. Alongside the favorable tax rate and licensing conditions, the regulator itself has been “open-minded and collaborative,” according to Aitken.

That includes no tax on bonus bets and allowing firms to take wagers on entertainment markets like the Oscars. Combine that with the dispersed nature of Colorado citizens, and Aitken expects more than 90% of revenue to come online, matching the trend from New Jersey and Pennsylvania.

“Colorado could be a domino state,” Aitken said. “They’ve listened to operators about what we need to successfully compete with the black market. Hopefully, new states take notice as they open up.”

The Centennial State could ultimately be a fascinating market since New Jersey opened for business. The winners and losers are still to be determined, but one thing appears certain, there should be no better place to be a sports bettor.

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Brad Allen

Brad has been covering the online gambling industry in Europe and the US for more than four years, most recently as the news editor at EGR Global.

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