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State of the Union: US Sports Betting Update – New Jersey Governor Throws Down Sports Betting Gauntlet

New Jersey Governor Phil Murphy has declared that the Garden State will soon dethrone Nevada as the sports betting capital of America. His bold proclamation comes after its sportsbooks reported a handle of $318.9 million in May as the NBA and NHL playoffs raged on. Nevada enjoyed its best-ever May trading period in 2018 by taking $315.5 million in sports bets. It has not yet released its May 2019 figures, but it will have to improve upon that figure if it is to retain its crown ahead of New Jersey.

Last month, New Jersey took $313 million in wagers, and Nevada just about held if off by bringing in $328 million. Yet the gap is closing and Murphy believes it will not be long before the Garden State rules the roost. “New Jersey – yes, New Jersey – can very soon and will very soon dethrone Nevada as the sports gaming capital of America,” he told the East Coast Gaming Conference this week.

Murphy was sworn into office in 2017 and he inherited predecessor Chris Christie’s sports betting litigation. It sought to vanquish PASPA, the federal ban that prevented all states apart from New Jersey from offering legal sports wagering. The major professional and college sports leagues were fighting back and it became Murphy v. National Collegiate Athletic Association. New Jersey ultimately prevailed in the long and bitter battle as the US Supreme Court decided to axe PASPA in May 2018. Since then somewhere between $9 billion and $10 billion has been wagered legally across the country.

Competitive and Professional Market

New Jersey was the second state after Delaware to roll out legal sports betting after the Supreme Court’s decision. Mississippi, West Virginia, Pennsylvania, Rhode Island, New Mexico, Montana, Iowa, Indiana and Tennessee have all since legalised sports wagering in one way or another, while Illinois will soon join the revolution. Yet New Jersey has emerged as the clear leader out of that bunch as it has a large, affluent and sports-mad population, while the nascent industry has been run in a competitive and professional fashion.

The only other state of a similar size to roll out legal sportsbooks right now is Pennsylvania, but it has been hit with all sorts of teething problems. Online books are only just launching now, months after bricks and mortar sportsbooks opened their doors for the first time, and some operators have been put off or stifled by the $10 million licensing fee and 36% tax rate it charges. New Jersey has motored ahead of the competition and it is already in a position to challenge Nevada.

It took $373 million in wagers during March, thanks largely to the March Madness college basketball tournament. That dipped to $313 million in April due to a lack of big sporting fixtures and then increased slightly to $318 million in May. Online was king once more, as it accounted for 82.6% of wagers. FanDuel and DraftKings accounted for more than four in five online sports bets between them, showing just why Illinois casinos are so keen to exclude them from the state. It was a promising month overall for New Jersey, although revenue dropped by almost $6 million to $15.5 million as bettors proved savvier than normal.

A Safe Bet

A burgeoning sports betting scene is taking off on the east coast, but none of Nevada’s neighbours has legalised sports wagering and it still stands as a key west coast hub. It is enjoying a record-breaking year thus far, as it took a handle of $497 million in January, $459 million in February, $597 million in March and $328 million in April. Perhaps it is benefiting from the increased exposure that sports betting has enjoyed since PASPA came crashing down. It is on course to record a handle of $5.5 billion in sports bets this year and that would shatter the previous record.

Yet long-term, New Jersey does look like a safe bet to seize its crown. It is far larger in terms of population and the industry is maturing all the time. Pennsylvania and Illinois are likely to rival the Garden State in the bid to be named top-dog in the American sports betting industry, at least until New York or California take the plunge. Either way, there is a wealth of opportunity for US-facing operators right now.

Leading Operators Reflect on a Strong Year

“Overall the first year in New Jersey has been spectacular, but to be honest, I couldn’t give you enough positive adjectives,” said Johnny Avello, head of digital sportsbooks for DraftKings. “The future is mind-blowing, and with eight states active and an additional seven authorized to offer sports wagering in 2019, DraftKings is positioned to capitalize on these and subsequent markets.”

FanDuel, part of the Flutter Entertainment empire along with Paddy Power and Betfair, is equally pleased and excited. “New Jersey has shown how sports betting can benefit the state by setting up a competitive marketplace with retail and online operators working to better serve their customers and other states should be taking their lead from New Jersey,” said chief executive Matt King. “From a company standpoint, we went through a merger, opened a retail destination and started online all within months of PASPA’s repeal and a year later, we are the market leader. It has been a proud moment for all of us.”

William Hill US has emerged as a leading multistate operator and chief executive Joe Asher said: “It’s been a great first year, and I think the strong momentum is going to continue over the next 12 months. The business is still ramping up.” William Hill had an established presence in Nevada and that helped it seize the first-mover advantage in many more states, while Paddy Power did well to snap up a well-known brand like FanDuel to front its US operations. The likes of Bet365, 888 and Ladbrokes Coral owner GVC are now likely to devote more attention to the US market and it will be fascinating to see how it develops over the next 12 months.

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