The Top Sports Betting Operators Are Only Gaining Power Over Competitors

Despite a persistent arms race in the battle for control of American legal sports betting, FanDuel and DraftKings are increasing their stranglehold on the market share.

America’s top two operators are responsible for roughly three-fourths of the entire online betting handle, according to investment banking firm Jefferies. BetMGM is next in line with 9%, which is still a fair distance behind FanDuel (45%) and DraftKings (30%). Caesars, the fourth of the “Big Four” operators, is around 6%.

The numbers are bad omens for competitors within the sports betting space, many of which have already or are considering shuttering their businesses.

Jefferies’ report revealed that despite there being dozens of other operators in other states with active sports betting, companies not named FanDuel, DraftKings, or BetMGM had just about a 16% share of the market. That’s a significant decrease from the 31% they enjoyed as of Q1 2021.

“We do think there's going to be consolidation at some point," FanDuel CEO Amy Howe said at the SBC Summit North America conference last July. “When that occurs, how that occurs, is still to be seen. I think the big question is, if you look at some of the operators right now, to what degree are they going to need financial backing and capital to continue to get them through this period of time?”

With every passing month and revenue report, Howe’s prediction becomes more nailed on.

The streamlining of bettors to the industry giants has led to many changes and withdrawals. While many companies have had to redefine their budgets for advertising and promotions, others such as Fubo and MaixmBet have permanently closed their doors.

PointsBet also recently agreed to sell its North American assets to Fanatics for $225 million (Fanatics previously looked ready to purchase them for $150 million but was displaced by a $195 million bid from DraftKings).

Sports betting was legalized in America in 2018 when a federal court decided to repeal the PAPSA decision. Since then, 38 states (and Washington D.C.) have legalized sports betting.

There are several reasons for the growing shift towards the Big Four. One is that companies were so eager to join the sports betting landscape that they incorrectly predicted or overestimated their long-term sustainability in the market, and once they left, their customers turned to the top operators.

Another is that because the companies at the bottom of the pyramid are fighting for scraps, the ones at the top of the food chain are investing in their product and attracting even more customers. For example, FanDuel offered every new customer that signed up ahead of the Super Bowl a share of $10 million in bonus bets if Rob Gronskowski attempted a 25-yard field goal (which he did).

The sports betting giants also have an easier time acquiring licenses in new states and expanding to new jurisdictions. As proof, FanDuel and DraftKings are both legal in 22 states and Washington D.C. Compare that to companies such as WynnBet, which is in 10, or Unibet, which is in five. 

States have made attempts to help protect smaller sportsbooks from folding. Maryland in particular put safeguard in place when it legalized sports betting last year, though over 90% of its betting handle still flows through FanDuel, DraftKings, and BetMGM.

Sportsbooks’ busiest time of the year, the NFL season, is fast-approaching. The six-month stretch of football will help drive revenues and will be the primary window to attract customers and grow the platform.