Brave New World: Sports betting in Europe
European sports betting providers and operators will be taking a long, hard look at the U.S. marketplace post-PASPA
It is a quirk of history that the largest emerging market for iGaming is the U.S. Five years after the advent of licensed and regulated iGaming, only four states have gone live. This lag in industry development came to an abrupt end when the Professional and Amateur Sports Protection Act (PASPA) was overturned by the U.S. Supreme Court, kicking the iGaming industry into overdrive.
The rapid growth has already started. While it has taken real-money online casinos and poker five years to expand from three states to four, the overturning of PASPA last May has already led to sports betting establishment in seven new states (Nevada, the eighth state, has had legalized sports betting since 1975), while an additional two more will approve legislation shortly. This new rate of growth is explosive in comparison to the previous five years and will change the structure of the market in terms of new platform providers along with partnerships among casinos, teams and leagues. One should also expect a healthy dose of mergers and acquisitions causing increasing consolidation in the industry.
Casinos desiring sports betting expertise need look no further than Europe—the birthplace and epicenter of innovation for all forms of online gaming for social, real-money and sports betting. Europe has been the leader in online gaming for more than a decade, long before the U.S. even considered entering the market. For decades, smart European operators have been running on licenses from Malta, Gibraltar, Alderney and the Isle of Mann, marketing to players across Europe and the rest of the world. It was a golden era for online gaming operators, but like all good things that era is approaching its end.
THE PROMISED LAND
Today, the European market is heavily regulated on a country-by-country basis. Profits are squeezed by increased regulation, higher taxes, GDPR compliance, advertising restrictions, increasing fines and potential blacklisting. In addition, many analysts and industry watchers must factor the element of increased political and banking risk in Europe. The possibility of hard Brexit is coming closer to reality; the Italian debt load is above 130 percent this year, which puts Italy on a collision course with the EU over its spending plans; right-wing nationalist governments have risen in many former Eastern European countries including Poland, Hungary and Slovakia and recent elections in Germany have rattled Angela Merkel’s fragile coalition.
In other words, the time is right for European explorers to rediscover the New World, manage its risks and seize upon its considerable growth opportunities.
Given the relative dearth of experienced real-money online casino and sports betting operators in the U.S., we can expect casinos to look to European online gaming companies to import their decades of expertise. As you read this, highly-experienced European operators who have grown tired of over-regulation, high taxation and saturated markets are moving aggressively to take advantage of new growth opportunities in the New World.
Those growth opportunities are expected to be substantial. Eight states have already passed sports betting legislation and are offering live wagers and, according to Eilers & Krejcik, given the monthly numbers, it’s safe to expect a compound annual growth rate at $2.5 billion.
Add to this the fact that the availability of sports betting is widely expected to usher in new players while leveraging new technologies such as 5G wireless—imagine what can happen when players can sit on their couch and wager on a game’s next play, goal, hit and more. By some interpretations, the future of interactive gaming may be a bull market.
However we should probably pump the brakes a bit. To start, European operators who come to America are going to need deep pockets and an even deeper well of patience for ultra-competitive state-by-state efforts. Despite the most aggressive lobbyist’s effort, state legislatures tend to move at their own pace and—in some cases—that pace can be nearly glacial. Short legislative sessions, special interests and a host of other factors can make passing a bill a monumental effort while implementation can present its own set of problems if a legislator or two insert requirements designed to benefit a donor or supporter.
Operators who elect to work with tribal casinos may face an additional layer of bureaucracy as the specific needs of the tribe must be addressed along with additional regulations and the occasional challenge of scheduling time before an already busy tribal council.
While any European operator who expects a cakewalk will be sorely disappointed, the payoffs for those who persist will be handsome. Market research analysts including Eilers & Krejcik predict five separate sports betting “waves” of growth 2018-2022, with 26 states expected to go live within three years. An additional 18 states are expected to follow by 2022. We can expect near-explosive growth that ushers in not only new players and technologies, but also broader and more rapid adoption of real-money online casinos as well as social gaming platforms as casinos fully embrace the power of online as a means of generating revenue while building player loyalty.
As in any new market, fortune will favor the bold—the operators who arrive with deep pockets and the fortitude to endure an array of legislative trials, regulatory hurdles and the occasional provocation. The investment may not be palatable for everyone, but the repeal of PASPA presents a considerable payoff for those who can stay the course.