A gambling industry analyst said fantasy sports operators DraftKings and FanDuel are best positioned to capitalize on the nationwide expansion of sports betting, and predicted there will be competitive pressure for books to offer a greater variety of bets over the next five years.
Christopher Grove, managing director of sports and emerging markets with research and consulting firm Eilers & Krejcik Gaming, said significant changes are coming as more states add sports betting to their menus following the U.S. Supreme Court’s overturn of the federal ban on sports betting in May.
“In New Jersey, where you have six to seven million adults, you can conceivably have up to 40 online sports betting brands contesting that market,” said Grove, who spoke on the future of sports betting at the Global Gaming Expo. “That creates an intense pressure to stand out from the crowd, and I think that pressure is going to reshape the landscape, or at least put a forth an attempt to reshape the landscape through more bets and more kinds of variety that regulators and policy makers are likely to resist.”
That includes bets on presidential elections and Oscars and a greater variety of sports-related bets, Grove said.
“I think a lot of people would like to bet on elections. As politics and entertainment continue to emerge, you have a recipe for betting markets that would draw a lot of attention.”
In five years, if there’s a similar panel discussion at G2E, Grove said sports betting as we know it today would likely be called traditional sports betting and get its own acronym.
“I think the product universe that we’re going to be looking at for sports betting is going to be something closer to what I call sports gaming,” Grove said. “I think it will be a broader selection of products that that can truly speak to the mass market as opposed to the narrow slice of the market that traditional sports betting speaks to (now).”
Grove said people will be surprised by just how strong Draft Kings and Fan Duel will be in five years in a regulated sports betting market. Those operators have a head start and a “core competency” that regulated casino operators don’t have, he said, and they were built with the purpose of digitally acquiring customers who are interested in the intersection of sports and entertainment.
“They have a narrow field of focus on this opportunity that can’t really exist at companies like MGM or Caesars,” Grove said. “A lot of people are going to be surprised at the dominant role companies like Fan Duel and Draft Kings will play. I am not going to say they will be the only winners, but I think they will be among the winners.
“(They offer) very specific skills and a focus that are not necessarily shared by operators up and down the Strip,” Grove said. “(Strip) companies have a much larger business to run. (Fan Duel and DraftKings) are in a better position to move quickly on the opportunities, and I think moving on those opportunities now creates a persistent advantage that will carry through on the near and long terms.”
Offering fantasy sports contests as they do is part of it, but Grove said that over the last year the companies have also rolled out games that “aren’t quite fantasy and aren’t quite sports betting,” such as bracket-style games and pick-em-style games.
“They’re trying to create engaging experiences at the intersection of sports, entertainment and money,” he said. “It’s not necessarily wagering, but the opportunity to win a prize. A company thinking in that frame for the last couple of years (has) a meaningful competitive advantage over companies that haven’t.
Grove said competitive pressures will force conversations about these different types of betting, whether that’s “politics or entertainment or within sports or around sports that we haven’t thought of yet,” he said.
“I think that kind of pressure isn’t necessarily (going to lead to) pie-eating bets, but the pressure to do something to stand out… will be intense,” he said. “And I think that pressure has significant implications for policy makers and regulators as they decide how to shape these markets.”
Grove emphasized that the future of the fantasy operators assumes they can get market access, which he called a “big if.” Current licensees tend to be the gatekeepers, he said. Boyd Gaming has done a deal with FanDuel; if DraftKings finds a similar partner, that would guarantee market access, he said.
As for betting exchanges, Jennifer Roberts, associate director of the UNLV International Center for Gaming Regulation and moderator of the discussion, asked if there is a market for the types of betting exchanges popular in Europe. New Jersey has authorized such exchanges.
Grove said he believed exchanges will be “niche” in the U.S. It would take more widespread national betting for that model to work, he said.
“I think there are some cultural and regulatory issues,” Grove said. “We are looking at a market that is highly fragmented for the foreseeable future, if not for the entirety of everybody’s life in this room.
“A betting exchange requires liquidity to thrive, and I think that liquidity will be a tough goal to achieve in the near term.”
