Thinning The Herd

Betway and SaharaBets are the latest casualties in the US sports betting market, as the rich (the top operators) continue to get richer.

The list of failed US sports betting brands is growing, with two more names, Sahara Bets and Betway, added to the defunct sports betting operator list this week.

My (non-exhaustive) list of defunct brands now reads:

1. Churchill Downs

2. Barstool Sportsbook

3. FOX Bet

4. Maxim

5. Fubo

6. PlayUp

7. WynnBet

8. Bally Bet

9. Kindred/Unibet

10. Tipico

11. Sahara Bets

12. Betway

JMP Securities posted some remarkable numbers about the carnage in the US sports industry in a recent note:

“We estimate 74 companies have entered the legal US online gambling market since 2018. Of the 74, 43, or 58%, are still operational, 18 (24%) have shut down operations, 10 (14%) have significantly pulled back (like Wynn) or are shutting down, and three (4%) have been acquired.”

JMP’s 18 shuttered brands likely include companies like NoVig and Prophet Exchange.

In this column, I’ll look at the factors that have led to two operators controlling nearly three-quarters of the US market, how it compares to other sports betting markets around the globe, and whether we might see parity in the future.

---

SPONSOR’S MESSAGE - Sporttrade was borne out of the belief that the golden age of sports betting has yet to come. Combining proprietary technology, thoughtful design, and capital markets expertise, our platform endeavors to modernize sports betting for a more equitable, responsible, and accessible future.

Sporttrade’s newest feature, The Tape, prints all trades made on the app in real-time.

---

It’s a Top Heavy Market

The US sports betting industry definitely skips leg day, as all of the success is up top.

Ryan Butler put this into perspective on X, noting that roughly 99% of the market is now controlled by just nine brands:

1. FanDuel

2. DraftKings

3. BetMGM

4. Caesars

5. Hard Rock

6. bet365

7. ESPN Bet

8. Fanatics

9. BetRivers

And Butler was very nice in expanding his list to nine. According to JMP estimates. “The top seven companies control ~98% of sports betting revenue… with the remaining 36 active operators competing for a small pool of players.”

And that pool is getting smaller with every exit.

Who Benefits from an Exit?

So, what the hell is going on?

The US sports betting industry is stuck in an endless loop.

The consolidation of market share at the top is forcing operators to throw in the towel. Every time an operator exits, the bulk of its player base, even if it’s less than 1%, appears to migrate to the top operators, further increasing the pressure on the remaining operators at the bottom.

The JMP team believes the exits will drive incremental growth at FanDuel. “In the current industry format, we believe Flutter/FanDuel is the most equipped through its global platform, strategy, and balance sheet… to drive an advantage over mid- and small-scale competitors.”

It’s hard to argue with that forecast. FanDuel’s product (ranked #1 in newsletter sponsor Eilers & Krejcik Gaming’s app testing), team, and war chest make it the likely landing spot for bettors searching for a new home. Further, after dealing with at least sportsbook closure (not exactly a small annoyance), these bettors might also be looking for stability, and they know FanDuel isn’t closing its doors.

There Is also a Structural Flaw

Eilers & Krejcik Gaming’s Chris Krafcik pointed out a factor that isn’t discussed enough, in my opinion: the barrier to entry, let alone the barrier to competing in the US market.

“This top-heaviness is the result of underlying state policies (think: market access) that make it impossible for all but the largest companies to operate,” Krafcik tweeted. “It’s likely that the US is both the largest *and* the least competitive regulated online gambling market in the world.”

The moat erected around many US markets is difficult to cross and would put the fortifications of medieval castles to shame.

Here are some of the factors stifling competition and contributing to the top-heaviness of the market: