The Rundown - Deep Dive: The Duopoly Driving America’s Sports Betting Obsession

Episode Date: January 11, 2025

In this deep dive, we explore the booming business of online sports betting, a multi-billion-dollar industry reshaped by a landmark 2018 Supreme Court ruling. From the dominance of FanDuel and DraftKings to the untapped potential in states like Texas and California, we uncover the winners, the risks, and the financial toll on bettors. Plus, we draw a surprising link between sports gambling and investing habits and discuss how instant gratification fuels high-stakes decisions. Whether you’re a fan, a bettor, or just curious, this episode unpacks the big bets shaping the future of gambling.The content of the video is for general and informational purposes only. All views presented in this show reflect the opinions of the guest and the host. You should not take a mention of any asset, be it cryptocurrency or a publicly traded security as a recommendation to buy, sell or hold that cryptocurrency or security. Guests and hosts are not affiliated with or endorsed by Public Holdings or its subsidiaries. You should make your own financial and investment decisions or consult respective professionals. Full disclosures are in the channel description. Learn more at Public.com/disclosures.Past performance is not a guarantee of future results. There is a possibility of loss with any investment. Historical or hypothetical performance results, if mentioned, are presented for illustrative purposes only. Do not infer or assume that any securities, sectors or markets described in the videos were or will be profitable. Any statements of future expectations and other forward-looking statements are strictly based on the current views, opinion, or assumptions of the person presenting them, and should not be taken as an indicator of performance nor should be relied upon as an investment advice.

Welcome back to the rundown for a weekend deep dive. Today, we are tackling the booming business of online sports betting. It's become a multi-billion dollar industry that's transformed dramatically since the landmark Supreme Court decision back in 2018 that opened the floodgates. Fast forward to 2025 and sports betting is embedded in American culture and it's expanding deeper across international markets as well. So who are the biggest winners in this space? And what's the financial tolls on bettors who now have?

access to a 24-7 sports book in their pockets. That's what we're discussing on today's show. So let's get into it. I want to first start by talking about how we got here. How did sports betting become so popular? Well, we had to go back to 2018. There was a decision by the Supreme Court in a case called Murphy v. NCAA. And in that decision, the Supreme Court struck down the Professional and Amateur Sports

Betting Protection Act. That was a law passed in 1992 that prevented states from legalizing sports betting, except for the state of Nevada. there was an exception made for them. But since 2018, 38 states, plus the district of Columbia, have legalized sports betting now. And the marketing around this has been insane. If you're a listener from the U.S., you know what I'm talking about, because you can't watch a sporting event for 30 seconds without being blasted with a commercial about sports betting.

Commercials for these sports betting apps like Draft King, Fanduel, ESPN bet with celebrities and famous athletes are constantly being shown during a sporting event. On top of that, you have sports broadcasts now mentioning point spreads. and actively promoting these sports books as well. And I got to say all this marketing is definitely working. Americans wagered nearly $150 billion on legal sports betting in 2024. And 40% of Americans now say they have bet on sports. And a lot of that betting is happening on just two apps.

The U.S. sports betting market has become dominated by just two apps, Fandul and Draft Kings. And these two essentially have a duopoly over the market. Fandul, whose parent company is Flutter, leads the U.S. market with a 45,000, percent share, while Draft Kings controls 35 percent. And their aggressive marketing and early expansion efforts have squeezed out many smaller rivals and shrunk the playing field. The growth happening at these companies is crazy. Like, just look at Flutter's U.S. revenue. It tripled since 2021, going from $1.9 billion to $5.8 billion in 2024. And Draft Kings is having a similar growth

story. Their user growth climbed from $2.6 million back in 2020 to over $9 million today. But, you know, But 2024 hasn't been so great for these sports books, and it has to do with the NFL. The 2024-2020-5 NFL season to date has been the most customer-friendly season since the launch of online sports betting with the highest rate of favorites winning in nearly 20 years. And that's bad for sports books because fans like to bet on favorites. So favorites winning all these games caused fan duel to take a $370 million hit to their 2024 U.S. revenue. And Draft King sounded the alarm earlier back in November, saying the NFL result caused a $250 million impact to the revenues. But, you know, the losing streaks for these books is not expected to be a long-term trend.

After all, most betters don't quit when they're ahead. And in the end, like, what's the saying? The house always wins, right? So they're going to make that money back. And they're getting creative with ways to generate even more winnings from betters and increase their hold, which is the percentage of money that sports books keep from every dollar that's wagered. One way that Draft Kings is doing this is by launching a subscription service in New York. Even sports books are addicted to subscription services.

The subscription service costs $20 a month. It was launched on New Year's and it gives players access to boosted odds on parlayes. And this is a two-fold strategy for Draft Kings. For one, it generates reoccurring revenue, which businesses like. It also encourages more gambling activities by offering better boosted odds. And on top of that, it also builds user loyalty, right? Because players are more likely to stick. with drag kings if they're paying for a monthly subscription and getting boosted odds.

Parleys are another way these sportsbook try to squeeze more money out of betters. Parleys are multiple bets on the same ticket, so you only win that bet if all those things on that parlay hit. And sportsbooks love to promote these because it shows huge payouts, so a $10 bet can result in a $90,000 winning. But the thing is, these are sucker bets because the odds of winning these bets are so low that it ends up being a pretty profitable bet for the sportsbook, which is why they promote. it all the time. Now, it's not just sports books like Fanduel and Draft Kings that are cashing in

on the popularity of legalized sports betting. State governments are also big winners here. States have collected a significant tax revenue from these sports books earnings in 2023 alone. That was about $2.5 billion, which is a 35% increase from the previous year, giving states a strong incentive to embrace legalization. And since legalized sports spending is being enacted state by state, there's still plenty of untapped potential. Like New York is the largest market right now. followed by New Jersey, but states like Texas and California still haven't legalized sports betting yet. If they one day do, that would unlock massive new markets for these sports books. And let's not forget about the black market.

The American Gaming Association estimates that Americans wagered nearly $64 billion annually through illegal bookies and offshore sites. So that could range from sophisticated underground websites to, you know, more of a casual operation like your cousin running a bookie business from his basement. But you know, for legal operators like Draft Kings and Flutter, this represents a pretty big opportunity. You still have a lot of big states that haven't legalized sports betting yet, like Texas, California, and Florida. And you still have Americans betting on underground websites. As more states start legalizing sports betting, the industry could start chipping away at the underground market, bringing more players to these legalized apps and growing that share of the pie.

Now, there's actually an interesting connection between sports betting and investing. More betting is leading to less investing. According to new research from the professors at the Kellogg School of Management, shout out Northwestern, their findings reveal that nearly 8% of households are involved in gambling, with better spending an average of $1,100 annually on online bets. And as sports betting becomes more popular, net investments in those same households dropped by nearly 14%. In fact, for every dollar a household spent on betting, it invested $2 less into accounts like

retirement funds or the stock market. And to be fair, it's not just sports. forged betting that is vying for these dollars, right? We've seen a growing appetite for speculative plays. A couple years ago, it was NFTs. We still have meme coins that are popular, like fart coin and other names that I can't say on this podcast, but you get the idea. And I think what's really driving this is people's desires to get rich quick and the need for instant gratification. Like, why wait years for compound interest when you can just do a 12 team parlay and try to turn $12,000 into $12,000, you know? And some of this betting has gotten full on D-Gen. You

You can bet whether the next play in a football game will be a pass or a run. You can bet on the outcome of a jump ball and a basketball game. I mean, there's people out here betting on what colored tie Jerome Powell is going to wear during his press conference. And the answer is usually purple. He almost always wears purple. You know, I've heard some people say that investing in the stock market is also gambling. But let's set the record straight here, okay? Long-term investing in the stock market is not gambling.

In fact, it's the opposite. Because while the odds at a sports book, slot machine or blackjack table turn increasingly against the player the longer you play, the stock market historically rewards patience. Over the past 96 years through the end of 2023, 94% of all 10-year periods have delivered a positive return for the S&P 500. You're not going to find that stat about a sports book. All right, it's time for me to wrap up this week's deep dive. I just wanted to end by saying that it's pretty clear to me that sports betting is quickly sneaking its way into mainstream culture. and it's attracting billions of dollars in the process.

And look, as someone who's a huge sports fan, I get why sports betting can be fun. But there are consequences of millions of people having a 24-7 sports book in their pocket. And I think they could have huge impacts long term, especially for young people. That being said, if you are betting on the NFL playoffs this weekend, good luck to everybody.

And if you happen to win big, maybe consider putting that money towards the stock market. Thank you guys so much for listening to today's weekend, deep dive. Hope you guys enjoy today's episode. If you did and you have like 12 seconds, consider giving us a five-star rating on Apple or Spotify. And if you have any recommendations on topics we should cover in future weekend deep dive episodes, let us know in the comments.

Some of you guys have already left recommendations on previous episodes, so thank you guys so much for that. Shout out to Mike and the fantastic team over at Public for all the help behind the scenes. I'll see you guys back here on Monday.