Analysis: Why Offshore Sportsbooks Are Thriving Despite Regulated Competition

Posted on September 20, 2021
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Written By on September 20, 2021

Getting solid information on the offshore betting market is not easy.

As one industry consultant told LSR: “Those guys, they won’t talk to you. They are terrified that if they get any media coverage, it will prompt a crackdown.”

As a result, nobody is quite sure how big the offshore sports betting market is. Estimates from the American Gaming Association, Eilers & Krejcik, and H2 Gambling Capital peg it between $50 billion and $200 billion in annual wagers.

But how has that changed since the fall of PASPA in 2018? Has the explosive growth of regulated US sportsbooks hurt offshore rivals?

Back to black

A scan of the headlines in recent years might suggest so. Bovada pulled out of New York this year, presumably to avoid irking state prosecutors. Fellow offshores Bookmaker and BetOnline withdrew from New Jersey back in 2019, a year after the state legalized sports betting.

Elsewhere, 5Dimes shut up shop entirely to try and make the switch onshore. Is that indicative of a wider decline?

Not so, according to search data and multiple sources with knowledge of the offshore world.

Upward trend for offshore sportsbooks?

Benjie Cherniak, investor and former MD of Don Best, said his impression is that business was booming.

“When PASPA was repealed, there was concern about how long they had, but business has never been better,” Cherniak said.

The stats appear to back this up. Google search data for the year-to-date shows Bovada is the most-searched brand among US-facing books at a 19% share. DraftKings is a relatively distant second at 11%, with FanDuel at 9%.

US brands’ share of search for 2021 year-to-date, via Google Dashboard.

Likewise, Similarweb data shows an upward trend for Bovada in the last six months compared to FanDuel. There is also an upward showing for offshore books like sportsbetting.ag and BetOnline.

Some of this is noise. Sources suggest there is “click bait” low-quality traffic in those numbers. However, there is also genuine growth in the offshore world.

The offshore market has taken off like a rocket since PASPA,” said one Caribbean-based bookmaker who asked not to be named.

Customer confusion between legal and illegal

Brand confusion accounts for some of the issue.

“The most important thing is that customers still have difficulties telling which bookmaker is licensed and which is not,” said Manuel Stan, Kindred US senior vice president.

Penn CEO Jay Snowden said similar last year.

“A lot of people just don’t know,” Snowden told analysts.

Offshores cause the problem

Some of that is deliberate subterfuge from offshore books. But the media also has a role to play. 

To use one example from a regulated state, The Denver Post has a page titled “Best gaming apps for real money gambling” that directs to Bovada and offshore casinos.

“Media overall is doing too little to separate the good from the bad,” Stan said.

It is worth remembering too that sports betting is already part of mainstream sports coverage. MLB hosts sports betting shows on MLB.com. The NFL has hatful of official betting partners for the 2021 season.

But around 60% of US customers do not have access to legal betting options. They naturally turn to whatever sportsbooks they can find.

Product gap to offshore sportsbooks

Another problem is the product itself. Offshores can offer markets on some funky stuff like push-up contests. They might also offer credit betting, lower vig and higher limits.

“’I’ve heard from VIP managers that their players still have 80% of bankroll offshore due to a trash local product and restrictive betting,” said the Caribbean bookmaker.

US books are trying to close the product gap although they face various restrictions. Offering 50+% tax to New York, for instance, might result in worse odds for the consumer.

Regulation matters

In general, though, a regulating state does impact offshores.

Google Trends data in Pennsylvania shows FanDuel attracts 96% of searches versus BetOnline. In California, it is much closer to a 50/50 split between the two.

But offshores are not disappearing in regulated states. As Cherniak explained it:

“If an offshore firm has 1,000 customers in Illinois, do they lose half of them when it regulates? I don’t think that’s what we are seeing. A good chunk of those customers open regulated accounts but the vast majority keep their existing offshore accounts as well.”

Sports betting is going mainstream

In addition, sports fans in states like Texas are seeing sports betting content everywhere.

And the only place they can bet is offshore. It is a similar story with online casino: banned in most states and generating boatloads of cash for illegal operators.

Until that changes, the cash will continue to go offshore.

What next for offshore sportsbooks?

So, the offshore industry appears stronger than ever. And it might not be going away anytime soon, even as regulation spreads across the US.

Other mature sports betting markets usually have a black market that persists in some manner.

“Looking five to 10 years out, I don’t envisage offshore disappearing,” Cherniak said. “They are benefiting indirectly from the regulated advertising spend and the cultural shift in attitudes towards sports betting.”

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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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