Podcast Overview And Hosts
EPISODE 194 | LSR Podcast
Five Years Of Expanded Legal US Sports Betting
48 min
Five Years Of Expanded Legal US Sports Betting | Sports Betting News Today | LSR Podcast 194
The LSR team takes a look back and forward five years after the date the federal sports betting ban fell in the US Supreme Court. They also talk about Fanatics acquiring PointsBet, DraftKings’ CEO talking parlays, and Texas sports betting being described as dead as a doornail.
Full transcript
Dustin Gouker says that they are here to talk about all the sports betting news in the United States and beyond. He notes that listeners might have been expecting the A team, but instead have the B team with himself and Eric Ramsey, while Adam and Matt are considered the A team.
Eric Ramsey responds that when Matt says the brightest minds in sports, he is mostly talking about himself most weeks.
Dustin Gouker continues that Matt really does love himself and his opinions, and then shifts to say they will talk about PointsBet and Fanatics, acknowledging that by now everyone already knows about that. He mentions he will yell about one story that still makes him a little mad.
They are sitting five years after the fall of the federal sports betting ban in the US Supreme Court. Eric reminded Dustin of that and of the time when it was just the two of them covering the daily fantasy sports and sports betting industries in the US, before sports betting was really an industry outside of Nevada.
Remembering PASPA’s Repeal And Early Coverage
It was just them making Legal Sports Report, along with Chris Grove, the founder of the site. For a long time, it was Dustin and Eric, and then Adam started right around the few weeks before the Supreme Court decision came down. They decided to take some time to think back on that period.
Dustin recalls going to the Supreme Court, covering the case, and listening to oral arguments where recording was not allowed and only notes could be taken. He still has the notepad with dozens of pages of notes he tried to write in real time while arguments were going on.
They knew when decisions would drop for the Supreme Court and would log on at 10 a.m. to see if it was the one. When they saw that New Jersey beat NCAA et al., everybody’s world was flipped, turned upside down.
Dustin notes that when he started writing in 2015 and Eric came in later, they were sometimes scrounging for things to write about, often focusing on daily fantasy sports and the growth of DraftKings and FanDuel. That morning, they pivoted the site to being a sports betting site.
Legal Sports Report broke because so many people were visiting it that morning. They had a story pre-built and quickly updated it when the decision came down, but the site was not ready for the influx of traffic.
Rapid Legalization And Market Expansion
After PASPA fell, everything changed. Legislative efforts started almost immediately. Delaware began taking single-game bets in early June. New Jersey jumped into legislation to fine tune what it wanted to offer, even though the case was really about New Jersey and its plans, while striking down a federal law in the process.
Dustin recalls famously saying that FanDuel and DraftKings were going to have a hard time becoming sports betting operators right away, a cold take he now owns. FanDuel was bought by Flutter, which changed things quickly, and DraftKings had been working behind the scenes on sports betting and was ready for New Jersey on day one.
Eric says that DraftKings and FanDuel are the real story of the first five years of widespread sports betting, noting their dominance and a great success, but he hopes the next phase will bring more exciting and differentiated products rather than just more state launches.
Eric agrees that if a state does not have sports betting by now, there is probably a complicated reason. He mentions Georgia and Missouri as states that have come close, but notes that others like Utah, Idaho, and Alaska are unlikely to consider the issue.
He says that product has been good enough so far, with FanDuel and DraftKings winning the product race, but their products are not yet best-in-the-world level. He suggests that a truly world-class product from someone like Bet365 or Fanatics could shift the operator landscape and potentially challenge the current duopoly.
Fanatics Acquiring PointsBet
Dustin transitions to the business of sports betting and the news that Fanatics plans to buy PointsBet for $150 million, noting that the deal is not 100% official yet but appears likely to happen.
His first reaction was that the price seemed pretty cheap compared to earlier expectations of around half a billion dollars, which already sounded low given past M&A activity. Eric says he had been asked to guess valuations and thought several hundred million would be reasonable, so the final price looks low but perhaps fair given PointsBet’s lack of a clear path to profitability.
Eric explains that PointsBet had a good and differentiated product but struggled to gain meaningful market share in the US. Despite aggressive marketing and branding, including a deal with NBCUniversal, they were not able to compete effectively and ended up with only a small share of the market.
Dustin notes that if PointsBet had sold two or three years earlier, it likely would have fetched a multiple of $150 million. He recalls that PointsBet was long seen as an M&A target and that its heavy spending on marketing and customer acquisition did not translate into significant adoption.
They compare the PointsBet deal to other acquisitions, such as theScore for $2 billion and Penn’s purchase of Barstool, which was driven by the belief that Barstool’s media empire would propel it to the top of sports betting. In retrospect, some of those valuations now look inflated.
Dustin says the Fanatics-PointsBet deal makes sense for Fanatics, which can absorb the NBC deal, gain in-play tech, and acquire a user database and strong product. He expects the PointsBet brand to disappear once the deal is finalized.
Fanatics’ Database And FanCash Strategy
Dustin expresses skepticism about the strength of the Fanatics brand as a driver of sportsbook loyalty, questioning whether people are truly loyal to Fanatics or simply buy jerseys and hats because of the licenses it holds.
Eric is more bullish on the FanCash promotion, describing it as essentially getting sports memorabilia in return for betting. He compares it to the PokerStars gift shop era, where players could redeem loyalty points for significant rewards, including a Porsche.
He suggests that FanCash could be an attractive cross-sell, allowing bettors to earn jerseys or sports cards as a form of rakeback. Dustin agrees that this could be a strong retention tool and possibly an acquisition tool if the email database is activated effectively.
They discuss whether anyone can truly disrupt the DraftKings and FanDuel duopoly. Dustin notes that Fanatics and Bet365 are among the few with a realistic chance, while Penn and Barstool are unlikely to reach tier-one status soon, even with more marketing spend.
They also point out that European brands have limited name recognition in the US and would struggle to justify large customer acquisition spends without a clear product edge.
DraftKings’ CEO On Parlays
Dustin brings up comments from DraftKings CEO Jason Robbins, who said that they have seen no decline in demand as they have increased hold rate, emphasizing that they are not making odds worse but are pushing more parlay mix.
Dustin notes that gambling commentators often warn against parlays as bad bets, but he argues that people clearly want parlays. He compares them to lottery tickets and slot machines, which are also poor value but remain popular because they offer a chance to win a lot from a small stake.
He challenges the industry to stop simply saying parlays are bad and instead recognize that they are the product customers want. He acknowledges that fast in-game parlays could be problematic from a responsible gambling standpoint, but believes same-game parlays and parlays in general are here to stay.
Eric finds it amusing to hear agreement with Jason Robbins but shares a similar view. He says he does not have the appetite to grind straight bets every night and is happy to place small same-game parlays for entertainment. He does not fault operators for leaning into parlays, given customer demand and shareholder pressure for profitability.
Dustin describes parlays as the product that has disrupted traditional Nevada-style betting, which focused on sides and totals. Same-game and cross-game parlays, and the ability to combine them with other bets, have changed the landscape.
He wonders what the next product will be that captures bettors’ imagination and notes that any product that is good for operators will, by definition, take money from users. However, he believes many bettors are happy to lose money through parlays because of the excitement and occasional big wins.
Eric compares the pain of losing a large straight bet to the pleasure of winning a small parlay with a big payout, saying it makes sense that bettors gravitate toward parlays.
Texas Sports Betting Stalls
Dustin and Eric then turn to Texas, where sports betting legislation had passed the House but is now effectively dead. Eric explains that once the lieutenant governor says it is not happening, it is effectively over, and the measure is unlikely to reach the Senate floor.
He notes that the argument from supporters is to let voters decide via a ballot measure, but that is not going to happen this cycle. With no session in 2024, Texas is likely on the shelf until 2025 at the earliest.
Dustin comments on the political dynamics, noting that the lieutenant governor said the bill was carried by a Democratic majority in a Republican legislature, implying that bipartisan support is now a barrier rather than a strength. He laments the inability to pass bipartisan legislation and wishes the country were not in that state.
Comparisons To The Opioid Crisis
Dustin then addresses an article from an Australian publication that claimed sports betting is worse than OxyContin. He strongly rejects that comparison, pointing out that the opioid crisis has claimed hundreds of thousands, if not millions, of lives in the US and worldwide.
He acknowledges that gambling causes harm, including ruined families and suicides, but insists that sports betting is not killing tens or hundreds of thousands of people. He argues that such comparisons are not a serious way to start a conversation about harm and that they demean both the real harm from gambling and the scale of the opioid crisis.
He notes that there are parallels between the two issues, such as states benefiting from legalization and doctors pushing OxyContin without reining it in, but stresses that equating them directly is irresponsible.
Eric agrees and recalls that not long after PASPA, a lawmaker in Tennessee compared sports betting to slavery on the Senate floor. He says that while there should be a deep conversation about gambling harms, invoking such extreme comparisons is not the way to have it.
Closing Thoughts
Dustin wraps up by reflecting on the past and future of sports betting, noting that the pace of news did not slow down for a couple of years after PASPA and that they are only now starting to have some breathing room to revisit topics.
He mentions that the podcast has been a labor of love since 2019 and that they are approaching episode 200. He thanks listeners for their support and notes that many people at conferences mention the podcast as something they enjoy.
He encourages listeners to rate the podcast and provide feedback if there is anything they would like improved, and then signs off with Eric, saying they will see listeners next time.
