California Sports Betting Heats Up Some More | LSR 155
Welcome back to the Legal Sports Report Podcast, Ep. #155! California is where the eyes of the industry are fixated ahead of the November vote in the state, and now some tribes are on the side of the sportsbooks(4:08). We also look at progress in Ohio sports betting (6:22) and Arizona’s rise among states with legal wagering (12:11).
Matt Brown (00:10):
Hello, and welcome to episode number 155 of the LSR podcast. My name is Matt Brown, joined each and every week by the brightest minds in all of the gaming industry. With me, I have but one of those minds. It is Dustin Gouker. You can follow him for free on the Twitter machine. Just smash that button @dustingouker. And if you hate yourself, you can follow me @mattbrownm2. We will talk about someone that was here and no longer with us. It is a brand that is no longer going to be. We thought maybe it had a chance to be, is no longer going to be. We’ll talk about Arizona. We’ll talk about Ohio, but Dustin, let’s kick things off here with the people in California and will or will they not be sports betting with us anytime soon?
Sportsbooks enlist California Tribes to hit back in sports betting battle
Dustin Gouker (00:56):
Let’s put it this way. We’re running a lot of stories about California. It’s July right now, as you’re all aware if you look at a calendar. The competing ballot measures in California are going to be in November. So we’re talking about this all the time in July. This is the amount of money and interest there is in California. Obviously, one of the largest states there is. This is just basically the forerunner to what’s going to be a really, probably brutal run-up for sports betting in California in terms of a fight between sports betting operators that would like to have unfettered access to the market and tribes, which have owned gambling there for a long time and want it under their terms. So the latest news, though, is that the US sportsbooks, which are making this push for online sports betting in California, the campaign group is actually the Californians for Solutions to Homelessness.
The ballot measure actually promises money to homelessness. They actually announced that three tribes are now backing their measure and they’re putting that out there as their campaign. Like, “Hey, tribes are saying they don’t want it, but hey, here are actually some tribes that do.” And this kind of makes sense, because if you’re a little tribe who has an out-of-the-way casino, man, all that sports betting might be good for them. And these three tribes are kind of seeing that; they’re at least saying that publicly, as part of this effort, they’re saying, “Hey, we want online sports betting. This helps our communities because we’re just small operations. If we can get into online sports betting, this makes sense for us.” The larger casinos who are closer to population centers obviously want this on their own terms. They don’t want the out-of-state interests coming in and running this.
So this is actually a pretty interesting dynamic. This is going to be the exception, rather than the rule I think, it’s not like we’re going to see all of the tribes get on board, but we’re seeing a bit of fracturing at least there. And then publicly the tribes, which we thought would be largely just against this in lockstep, are having different opinions about this. Now, we know between the sportsbook operators and these tribal casinos, there’s already, we’re talking nine figures of money that’s being committed to this effort. And again, July not even close to November and we’re seeing new commercials come out all the time, just right now in the middle of summer when there’re no sports going on.
Multiply that by a lot and basically what you see from sportsbook operators in states where it’s legalized, you’re going to see more than that I think for commercials in California, trying to either get one of these bills passed or get them defeated. I mean, this is going to be what Adam and the gang will be covering at Legal Sports Report, pretty much ad nauseam through the end of the summer and fall, because this is the biggest topic in the legalization industry. And one dare I say that the operators really need to get across the finish line, if they’re going to see growth in 2023 and obviously longer term they will. But 2023, California is their best path to a lot of growth.
Matt Brown (04:06):
And Dustin, I mean, like you said, I mean at the end of the day here, this does at least change the narrative of an us versus them. I mean, even if it is only a few of the smaller tribes that are getting on board, there might be a couple of more that kind of join the fray here. Because, as you mentioned, hey, look, maybe this is actually good for their business, as opposed to some of the larger ones that already have basically a monopoly on the gaming over there as it is. And so, it does at least change the narrative a little bit to where it’s not just like, “Oh, OK, it’s the tribes versus.” It’s kind of like, no, no, no, no, no, there are some that are along for the ride in this.
Dustin Gouker (04:42):
Yeah. If anything, it muddies the water, which, again, the fact that this is not a clean yes or no, there’s going to be two ballot measures, some tribes, where some don’t. The tribes would rather probably have the status quo than either of these pass. If they could say, we get no sports betting bill or we get … That’s probably their ideal outcome. I mean, at this point that’s probably the outcome that they’re hoping for more than anything. They’d rather kick the can down the road. They’d rather DraftKings and company not get into the market, and they’d be totally fine with that outcome. A lot of them just see sports betting as net amenity, not worth pain in the ass. And they don’t want, again, all these other companies coming in and taking what they think is gaming money away and out of their pockets.
Now, whether that’s really the case or not, sports betting is a different form of gambling. People are already going from California to Vegas or Arizona, which we’re going to talk about here in a second, or betting offshore. Again, we sit here, it’s not like people from California are not betting on sports. They’re finding ways to bet on sports. This will certainly increase if we were to legalize it either via retail sportsbooks or online sports betting. But it is interesting. The muddying of the waters, I don’t know exactly what that means and we’re going to continue to be handicapping every commercial we see and what every little bit of information we see out of California. But again, infinity money will be spent on this over the next several months. And with an outcome of who knows, but we are still looking at, hey, there’s some chance that California legalizes sports betting in some form in November for a possible 2023 launch.
More applications for Ohio sports betting roll in but many still missing
Matt Brown (06:22):
So let’s shift to a state that we definitely know is going to launch. Certainly a big fish, I mean, this is one that we have been talking about for a while, not only from a population standpoint, but as we said, tons of collegiate sports teams, tons of professional sports teams. So Ohio coming to us in about six months right now, you need to get in and you need to apply to run your sportsbook in that state, which is allowing for up to 46 sportsbooks in the market. Who are we looking at right now and who has kind of joined the fray there, Dustin?
Dustin Gouker (06:59):
Well, applications are starting to trickle in, and that’s kind of the story. There’s only 10 days left to submit applications. And there are a lot of companies that need to still apply for Ohio sportsbooks. And we presume everyone will be in. There can be as many as 46 in the state, which is a fairly crazy number. I will bet the under on 46 online sportsbooks in Ohio. We saw Barstool applied for its online license. We’re famed for our photo choices at Legal Sports Report. I feel like every time we do this, there should be a snail or a sloth or a turtle because it feels like this has taken forever or there’re just dribs and drabs of information. The tiniest little bit of information is, again, reason for us to write about Ohio.
But we are coming up on this deadline where we’re going to know how many people are in, where the licenses are coming. Exactly what the landscape is going to look like for Ohio sports betting. So, in the summer, but Ohio is kind of heating up. And unfortunately, even this application deadline isn’t going to change things. We’re still looking at this January 1st simultaneous launch date for anybody who wants to go live for an online sportsbook in Ohio. So unfortunately, not great news, but all these things have to happen before we actually have a real launch in Ohio, but we’re going to talk about this a little bit. Penn National is one of the leaders here; Barstool will be big there, we think. Penn National has a lot of access to share. It has casinos in the state and is going to be a major player one way or another in how sports betting shapes up in Ohio.
Matt Brown (08:34):
So, as we sit right now, it looks as if you mentioned there’s still a lot to go in because it looks like only four have actually submitted from a mobile standpoint: BetMGM, PointsBet, Crown Ohio Gaming, which in parentheses says DraftKings, and then Pin Sports Interactive. So it looks like you said, I mean one would think here that you’re going to probably get applications from pretty much everybody that we’ve talked about somewhere along the way. I mean there might be a couple of stragglers, but I can only assume with Ohio and as we said, the rabid sports fan base that they’ve got there, the population that they have, we’re going to see pretty much everyone?
Dustin Gouker (09:16):
Yeah. I’d say Colorado is kind of the model here. Colorado, as we sit here, I believe still has the most online sportsbooks in the US in a regulated market. New Jersey, I believe slightly behind that, but we’re going to see every brand is going to probably find a way into Ohio. It’s not that hard to get into. It’s fairly easy to conduct business there. You obviously have to secure licensing, market access through an existing licensee or some other way. But this might be the market where we see the most online sportsbooks possibly at the end of the day. It’s going to be tough to rival Colorado. I don’t have my secret decoder ring. I don’t know exactly how many you are, but Colorado right now has the most. And with that ceiling in Ohio of 46, we could see, I don’t know if there are 30 that could possibly launch, but we could see the most of any market, and that ends up being good for consumers for sure. You get the choice of anybody you want.
Matt Brown (10:13):
And listen, as you mentioned, Colorado being really awesome about all that. I mean, listen, just me personally I know of several people who have relocated to Colorado and they’re not even professional sports betters. They’re very, very avid sports betters. And they certainly make a decent amount of money doing it, but they have other primary jobs and things as well. But just the access to all of the different ways to get in, all of the different providers, everybody coming after your business, Colorado has attracted at least — again, me personally — some people that I know. So with the Ohio market kind of being the same like that, I can definitely see some real, real success for this Ohio market.
Dustin Gouker (10:58):
I mean, sports betting is important to you, if this is what you do either professionally or you just really like it. Yeah, having more options is great. I mean even every time I’m in another state and I’ll do a plug for this, Adam and I will be in New Jersey, New York next week for the SBC conference that is there. But every time I’m in New Jersey or anywhere else, I was just in New York as well. It’s just nice to have all those options. You look around whatever you have, it’s not even price shopping, which again, we’ve had dissertations on that, on this podcast.
But just having whatever odds boost, whatever specials going on, whatever deposit bonus, that’s cool to have if sports betting is important in your life. I’m not saying a whole lot of people are moving for it, but this is what is best for consumers. Bottom line, is having as many options as you can — that are again, legal, above board, regulated — but I think what’s going to show through. Now, you don’t need 20-30, but this critical mass. And again, we get into the numbers here with Arizona in a little bit here. Having options and having most of the best options is really what we see making for the best markets in the United States right now.
Arizona sports betting continues maturing with $500M April handle
Matt Brown (12:10):
Yep. I’m glad you brought that up, because I do want to talk about Arizona here. It was one of the states that, listen, we thought that it had the potential to be a pretty big market. That said, it kind of shot out, rocketed out of the gate and surprised even the operators themselves. I talked to a couple of different people who run books, and they were really, really shocked at how quickly the Arizona market really ramped up and got going. And here we are not a very mature market Dustin, and we are seeing Arizona kind of solidify its place as one of the big boys.
Dustin Gouker (12:48):
Yeah, absolutely. I don’t know how surprising it is, but it’s a little surprising. Arizona already number six, in the most recent numbers we had, this is actually for April, they’re kind of behind. There are a lot of states, again, snail, sloth, turtle, whatever in terms of reporting their numbers. But Arizona in April was number six. We have New York obviously leading the way, biggest state with legalized sports betting. New Jersey — been around a while, just under a billion. Arizona now number six, just over half a billion, but trailing Illinois, another big state. Nevada, which historically does well, and then Pennsylvania, again, another fairly mature market. But it’s ahead of these other similar sized states that have had sports spending a little longer. It’s ahead of Virginia, Michigan the aforementioned Colorado and Indiana.
I mean, you could see a scenario where it’s pushing Pennsylvania for that top five position, I think. And this is April when things are kind of drawing down. It will be interesting to see where all this shakes out and which markets are the biggest again when NFL seasons starts, but I suspect Arizona will again, without a whole lot of launches coming here — all we have is Kansas in the near term — Arizona can very well be a top, surpass even Nevada possibly. Be a number four market in United States, which is fascinating and less than a year old.
And Michigan’s the one that’s interesting to me. And I don’t know whether that means Michigan is undersized or Arizona is oversized, but Michigan has been kind of slow on the uptake on sports betting. They also have online casino there, but that shouldn’t really affect how sports betting gets adopted there. And they have quite a few choices, and most of the best ones are there as well. So just interesting Arizona again. We’re lagging on time, but once we get to September, October, see what their numbers are. It’ll be interesting to see whether they’re pushing into the top five and maybe be like the number four state in the US.
Matt Brown (14:40):
As we look at these numbers a little bit more in depth: DraftKings, FanDuel, BetMGM and Caesars make up 92% of the market, but there’s still some to be had for Barstool, for Wynn, BetRivers, SuperBook, Betfred, all of which, again, made a little bit of money in the state there. And if you can keep going all the way down, Hard Rock, Unibet, TwinSpires. There’s all of those that are available down there as well. But 92% of the market between DraftKings, FanDuel, BetMGM and Caesars. And Dustin, that seems about right. That probably is going to be that way in just about every single state moving forward until there is somebody that comes in and we think could be a potential game changer. We keep mentioning Fanatics. We keep mentioning maybe a 365, if they really make a push or something like that. But until then, it probably is going to be DraftKings, FanDuel, BetMGM and Caesars.
Dustin Gouker (15:36):
I mean, getting into the micro of Arizona, DraftKings is often a number two. They are at least holding ahead of FanDuel, at least right now. Although not revenue-wise, they have the most handle, but only $2 million revenue versus FanDuel’s $16 million in revenue. But right now, it’s still early days, still in customer acquisition phase. Revenue is important, but the fact that DraftKings is at least competing here better for number one and not a distant number two, is interesting and good for DraftKings as it tries to solidify its spot, at least as number two overall in the market. And if they ever hope to push past FanDuel, they have to have some leads and some edges in some states.
Penn National pulls plug on theScore Bet US operations
Matt Brown (16:22):
We knew that Penn National had made the acquisition of Barstool and that was going to be the brand that they went with. But then they went ahead and acquired theScore, as well. And we were saying, “OK, I wonder how this is all going to shake out?” Dustin, well, we figured out how it’s going to shake out.
Dustin Gouker (16:39):
I mean, this is announced, but this is official: theScore Bet, no longer taking bets in the US as of the end of last week, I believe, July 1st. So that means all of Penn Nationals eggs are now in the Barstool Sportsbook basket. That is their brand for online sports betting in the US. Maybe not surprising, maybe surprising that basically theScore is now a Canada-only operation. I mean, they’re also going to be using the tech for Barstool. So that’s part of it, but it was a lot of money. I think we’ve said this: again, Penn bought theScore for $2 billion. You’re now basically only operating theScore Bet in Ontario, which we’ve talked about many times, has not been a great market so far. And we don’t even know, because we have zero revenue numbers and don’t really know what’s going on there.
But we know, I think, that the existing gray market sites have really done a lot better than some of the new brands that are just now coming in the market as regulated operators. Now, theScore is a brand in Canada that is known through its existing sports and media app, but it’s a $2 billion price tag. It’s worth repeating, this is a lot of money for some tech. It’s a brand in Ontario and for the legacy media, which Penn National derives some money from media. It now owns part of Barstool. It owns theScore. It’s a sports media company in addition to a gambling company, I suppose. Now, most of the money is still from its regional casinos. Interactive online casino, online sports betting are increasingly a part of their business and part of what they’re doing moving forward.
But it is interesting to just keep thinking about that number in retrospect. And I don’t know, maybe it all works out. Maybe the tech is very good and the UX improves at Barstool, but shuttering the US business and just saying, “Well, that’s it and we’re just in Ontario. We’re certainly not done in Canada.” TheScore could be deployed in more provinces as things go down, but that’s all it is right now. And maybe that future-looking strategy of saying, “We’re going to be able to deploy theScore in more markets and it’s going to be a good brand.” Maybe that all works out. But, right now, it’s maybe looking a little dicey.
Dustin and Adam are going to New York. What’s going on over there?
Matt Brown (19:05):
So we’re going to have to take the week off next week, as you mentioned, and we’ll get a full report when you and Adam get back, but you’re heading over to New York. What’s going on over there? What’s in store? Are you doing anything? Are you attending anything? What’s going on with SBC?
Dustin Gouker (19:21):
Adam and I think Pat Evans from the LSR team, I’m going to be there. We’ll actually have a little space where we’re going to do some interviews and probably putting together the famed mega podcast from G2E several years ago. We’re going to just talk to people, try to talk to people, cut it into something that’s hopefully listenable for you guys. But we’re not staffing a booth there, so don’t come by. But all of us are around. You want to talk to us, we’ll be there at SBC and hope to see you there. And that’s it for me for the conference circuit. It’s been an aggressive conference circuit, but SBC, they put on a great show. Lots of good people, as you know you’ll see the Mattress Mac is at SBC.
Matt Brown (20:05):
Oh yes. I’m sure he’s going to tell everyone how to be an expert sports bettor, right?
Dustin Gouker (20:13):
Yeah, maybe not, but people like the Mattress Mac.
Matt Brown (20:17):
They do. It’s a great story. Every single time there’s a major sporting event, everybody wants to talk about Mattress Mac. Guys, everything we talk about here on the podcast, you can find over at legalsportsreport.com. So please head on over there and take in all the great words that the team is putting together over there. If you’re listening to us on audio, go ahead, subscribe, rate and review. We do appreciate that. And again, it helps us climb those charts, and it helps more people find this thing. And if you’re watching us on YouTube, hello, and go ahead and hit that subscribe button down below. We’ll certainly be doing more with this channel here in the near future. If you want to follow Dustin on the Twitter machine, it’s @dustingouker, it’s free, smash the button. Go and do it right now, for Dustin. I’m Matt, talk to you guys next week.