The Rise of Sports Gambling in the US

Market Drivers and Growth Trajectory

• Sports betting sentiment is positive, driven by the 2018 overturning of the Professional and Amateur Sports Protection Act (PASPA), which enabled state-by-state legalization.
• The industry is transitioning from a large existing offshore "gray market" to a regulated environment, leveraging increased consumer awareness and marketing for adoption.
• Goldman Sachs Research forecasts a $39 billion online sports betting market in the US by 2033 (at maturity).
  • This equates to a 40% compound annual growth rate (CAGR) over the next decade.
  • This growth trajectory outpaces the 18% CAGR e-commerce experienced over the prior decade, where no single category exceeded 22%.
• The $39 billion figure is derived via a state-by-state build modeling gross gaming revenue (GGR) as a percentage of personal consumption expenditure (share of wallet).
  • States are tiered based on existing legislation and infrastructure, with higher tiers indicating greater probability of legalization.
• Benchmarking against mature markets (UK, Australia) shows legalization typically takes about seven years to ramp from 10 basis points to 24 basis points of overall personal consumption expenditure.
• US adoption may exceed international benchmarks due to a broader variety of popular sports (e.g., football, baseball, basketball) compared to soccer-dominant markets.
  • Early tracking in New Jersey suggests the US market potential could exceed current S-curve benchmarks.

Strategic Shifts: Convergence of Media and Gambling

• The user demographic for digital sports betting skews under 40, contrasting with the traditional brick-and-mortar casino demographic which is predominantly over 50.
• Media companies and sports leagues are exploring direct-to-consumer (DTC) models to address cord-cutting and engage younger audiences.
• Sports betting apps aim to embed content directly, potentially bypassing traditional intermediaries.
  • At maturity, an estimated 50 million US consumers will bet on sports.
  • Top operators, holding 30-35% market share, could amass 15 million active users, a volume comparable to current NFL Sunday viewership.
• Operators are currently executing a "land grab" characterized by heavy promotions and significant investment in in-game betting technology.
• Strategic focus is shifting from pure advertising to developing proprietary content and deep partnerships with media companies to create new revenue streams combining betting and content monetization.

Regulatory Risks and New York Precedent

• New York has proposed a restrictive legislative framework requiring a lottery-type system with a cap on operators.
  • The model limits the market to two initial operators who then select up to two additional operators based on over 12 selection factors.
  • The tax rate is set at over 50%, accompanied by upfront licensing fees.
• Current average state tax rates range from under 10% to 25%, making New York's proposed structure significantly more stringent.
• Potential consequences of New York's model include reduced marketing budgets, compressed operator margins, and the risk of customers migrating back to offshore channels if promotions become insufficient.
• Other states are monitoring New York's implementation to determine whether they will adopt similar restrictive models or wait for clearer regulatory outcomes.

Impact on Market Sizing Outlook

• Including New York in the Total Addressable Market (TAM) at a standard 80% legalization probability maintains the $39 billion forecast, raising it marginally to $40 billion.
• Excluding New York due to potential market failure or lack of participation would reduce the $2033 forecast to $36 billion.
• Despite regulatory headwinds, the US sports betting market remains substantial regardless of New York's specific outcome.