As regulated online sports betting continues to spread across the country, the market is producing some clear winners and losers. And, no, we’re not talking about the gamblers.
While actual profitability is still a question for many online sportsbooks in the United States, the majority of the total amount bet and the revenue those wagers produce is almost exclusively being funneled to a handful of operators.
FanDuel and DraftKings are in a class by themselves. The two daily fantasy sports sites have parlayed their existing appeal among younger sports fans into a massive market advantage. Behind them are notable brands, such as BetMGM, Caesars, ESPN/Penn and Fanatics, who are likely grateful to have other viable sources of business revenue to rely on.
When it comes to online sports betting in New Jersey, that leaves more than a dozen operators vying for what essentially amounts to scraps.
Does that mean the NJ sports betting market is oversaturated?
Growth, decline of sportsbook operators in New Jersey
Today, there are 19 digital sports gambling operators in the Garden State.
Believe it or not, there are actually fewer online sportsbooks in New Jersey now than there were just a couple of years ago. Between January 2023 and January 2024, the number of NJ online sports betting options has dropped by more than 33.3%.
In no particular order, household names, such as Wynn, Fox, Maxim and Barstool have exited the NJ market.
The latest casualty of Jersey’s ultra-competitive legal sports betting market is SI Sportsbook, which was a part of 888 Holding plc’s US portfolio before the latter sold some of its US assets to Hard Rock Digital.
There are also (mostly unfounded) industry rumors about the BetRivers brand being up for sale, with DraftKings pegged as a likely suitor.
Does this mean the sports gambling market has reached a tipping point?
Drop in New Jersey operators relatively predictable after launch in 2018
After a mostly unobstructed, wildfire-like spread in the six-year span since the US Supreme Court decision on PASPA (Professional and Amateur Sports Protection Act), it is a legitimate question to ask.
It may also be focusing on the wrong thing.
The dip in the number of NJ sports gambling operators was, by most accounts, predictable. For starters, NJ was the first state to launch a regulated online sportsbook when DraftKings went live in August 2018. Another reason internet operators flocked to the Garden State is, surprisingly, taxes.
NJ’s low tax rate (13%) is appealing to most operators. Nearby states, such as New York (51%) and Pennsylvania (36%), look unreasonable by comparison.
But the biggest reason NJ is an attractive jurisdiction for licensed operators is the state’s gaming agencies and their unrivaled reputation as the “Gold Standard” of digital regulations.
Everyone wanted to get in on the New Jersey party
Being vetted and approved by the NJ Division of Gaming Enforcement and the NJ Casino Control Commission is the ultimate seal of legitimacy for gambling operators. Given that most other states with legalized sports betting either directly copied or closely followed NJ’s regulatory structure, operators who are authorized to do business in the Garden State find few, if any, licensing obstacles in other jurisdictions.
These factors — along with several other objectively less critical elements — helped NJ become the nation’s largest legal sports gambling market between 2019 and 2021. New York overtook its neighbor across the Hudson River when it launched mobile sports betting in January 2022.
Nonetheless, NJ’s sports betting industry is thriving. Any expected decline in business volumes following NY’s launch never materialized.
January 2024 was the best month ever for NJ sportsbooks.
So, why are NJ online sportsbook operators closing shop?
Bottom line: Legal sports betting is a competitive business
Well, it has less to do with Jersey and more to do with what is happening in other states.
New York, for example, has a strict limit on how many online sportsbooks will be licensed. So, if an operator is not among the nine NY licensed operators, it is losing out on a sizeable amount of revenue from the nation’s biggest market.
Even when an operator is live in NY, for example, going against the likes of FanDuel and DraftKings may prove to be too daunting. Wynn Resorts, which operates two of the highest-grossing casinos on the Las Vegas Strip and one of the best-performing casinos outside Nevada (Encore Boston Harbor), threw in the towel on mobile sports betting after less than two years.
The good news is that there are new players who are looking to change the game for NJ sports gamblers.
Exchange markets and player-friendly bookmakers are now part of NJ’s sports gambling landscape. And, while it is still too early to gauge their impact on the industry, the fact that a new way of offering online sports betting is available will, hopefully, contribute to a better overall experience for consumers.
The bottom line is this: sports betting is a competitive business. There will always be winners and losers.
And, as much as we in Jersey like to believe the world revolves around us, it actually doesn’t. Jersey is why most of the country is able to have legal, regulated sports gambling, but the Garden State is no longer driving the bus. At this point in the journey, we’re just along for the ride.
