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U.S.

Sports Betting:
Assessing Today's Market And
Tomorrow's Opportunities

Presented In Partnership With:


About The Authors About Eilers & Krejcik Gaming

Chris Grove is the Managing Director of Sports Betting and


Emerging Verticals for Eilers & Krejcik Gaming. Grove is a nationally-
recognized expert on the subjects of gambling policy analysis and
regulated sports betting market revenue sizing. His work on these Eilers & Krejcik Gaming LLC is an independent research and
topics is regularly relied upon by policymakers, media, analysts, consulting firm with branches in Orange County, California and Las
and publicly-traded companies. Grove has worked directly with Vegas, Nevada. The firm’s focus is on product, market, and policy
policymakers in several states, including Illinois, Massachusetts, and analysis related to the global regulated gambling market. Clients
Nevada, on questions related to regulated sports betting. include operators, suppliers, private equity and venture capital firms,
institutional investors, and state governments.

The firm’s work on the U.S. regulated sports betting issue includes
a series of 50-state projections that have become the widely
accepted basis for discussion of the U.S. market’s potential. Recent
state-governmental engagements have included West Virginia and
Chris Krafcik is the Managing Director of Political and Regulatory Indiana, for which Eilers & Krejcik Gaming provided comprehensive
Markets for Eilers & Krejcik Gaming and co-lead of the firm’s Sports market projections, economic impact projections, and fiscal analyses
Betting & Emerging Verticals practice. Krafcik, whose focus areas relating to sports betting and online gambling.
include sports betting and online gambling, has testified before
lawmakers in states including California on issues related to online
gambling and fantasy sports, worked directly with policymakers on
the sports betting question in Indiana, and was co-lead of revenue
forecasting for the firm’s 2019 West Virginia online gambling study.
Slide Title Here

SPORTS & EMERGING VERTICALS PRACTICE – THE LEADING INDUSTRY VOICE

Eilers & Krejcik Gaming’s Sports & Emerging Verticals practice is the leading voice for policy and market projection concerning the U.S.
regulated sports betting, online casino, and online poker markets. The firm’s insights and analysis are regularly cited by lawmakers,
financial analysts, publicly traded companies, and a wide variety of mainstream media outlets.

Eilers & Krejcik Gaming is the only research firm with a vertical dedicated to coverage of monthly financial and legislative developments in
U.S. regulated sports betting and online gambling markets. Subscribers to our Sports & Emerging Verticals research receive:

50+
KEY REPORT FEATURES

Delivery News Trend Proprietary Market Survey


Report
Schedule Analysis Spotting Data Forecasts Data
U.S. Sports Betting Market Monitor Monthly 3 3 3 3
The number of market
U.S. Sports Betting Policy Monitor Monthly 3 3 3 3
research reports we publish
U.S. Online Casino Tracker Monthly 3 3 3 3 annually. Our reports,
which are used by casinos,
Daily Fantasy Sports Tracker Quarterly 3 3 3 3 tribal governments, online
European Online Gambling Monitor Quarterly 3 3 3 3 gambling brands, and
technology suppliers, save
Esports & Gambling Monitor Biannual 3 3 3 3 3 clients valuable research
time, reduce internal research
Flash Notes Varies 3 3 3 3 cost, and support strategic
Special Topic Reports Varies 3 3 3 3 3 decision-making.

TO INQUIRE ABOUT A SUBSCRIPTION


To learn more about our sector-leading Sports
& Emerging Verticals research, please contact:

D.J. Leary
Director of Business Development
dleary@ekgamingllc.com
310-743-6239
Where Is The Market Today?

VI. Sports Betting Market Landscape: Map


• Single-Game Sports Betting Operational • Single-Game Sports Betting Authorized But Not Yet Operational Source: Eilers & Krejcik Gaming LLC / State Governments / State Gaming Regulators

Distribution Channel Snapshot

State Retail Online

NY* RI
AR l
CT**
PA NJ
CT
NV DE
WV DC l l
DC***

DE l l
NM AR****

HI MS MS l

AK
NV l l

NM l

* NY regulations initially approved in January 2019 would allow sports betting at the state’s resort casinos NJ l l
** CT passed a sports betting bill in 2017 but still requires enabling legislation
*** A DC bill that would allow a hybrid public-private model for sports betting was signed by the District’s mayor in January 2019 and is pending in Congress
**** An AR ballot measure approved in 2018, along with regulations adopted in 2019, authorizes the development of four casinos and the offering of sports betting at those facilities
NY l

37% 51% 8 13 2 PA l l

NJ’s share of total No. of retail No. of tribal


Tax rate that RI sportsbooks that are
RI l l
regulated U.S. No. of unique online governments
casinos will pay on currently operational
sports betting sports betting brands operating retail
their online sports in PA. Three of those
handle for the in NJ. sports betting in
betting revenue. are in Philadelphia. WV l l
month of February. NM.
How Big Is The Market Today?

Since the Supreme Court’s decision overturning PASPA in May 2018, first-wave markets have generated total handle of approximately
$2.51bn. In the chart below, we have set out handle by state. New Jersey has quickly established itself as the single largest market,
accounting for over three-quarters of total handle between June 2018 and February 2019. New Jersey enjoys a combination of
structural advantages–a large adult population, the presence of multiple professional sports teams, online distribution, a multiple-skin
model, and a favorable tax-and-fee regime–that its first-wave peers do not.

Sports Betting Handle In First-Wave States


$600,000,000

$500,000,000

$400,000,000

$300,000,000

$200,000,000

$100,000,000

$0
Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19
Delaware Mississippi New Jersey Pennsylvania Rhode Island West Virginia
How Productive Is The Market Today?

In the chart below, we have used handle-per-adult to measure the relative productivity of first-wave states. The New Jersey market,
buoyed by its uber competitive online sports betting vertical, is dramatically outperforming other newly regulating markets on a handle-
per-adult basis. We note that Delaware and Mississippi have not authorized online sports betting; that West Virginia went live with such
betting in late December (one brand recently halted operations due to a dispute with its supplier, but other brands are preparing to
enter the market); that Pennsylvania is set to go live with online sports betting in 2Q19; and that Rhode Island recently authorized, but
has yet to announce when it will go live with, online sports betting.

Handle Per Adult In First-Wave States


$60.00

$50.00

$40.00

$30.00

$20.00

$10.00

$0.00
Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19
Delaware Mississippi New Jersey Pennsylvania Rhode Island West Virginia
How Big Will The Market Be By 2023?

The chart below represents our baseline estimates for the total annual revenue that regulated sports betting would generate in the
U.S. through 2023. Our projection assumes 36 states and Washington, D.C. authorize sports betting by 2023, and that those states
vary on key policy terms such as tax rate, license fee, availability of licenses, and the ability to offer sports betting online.

U.S. Regulated Sports Betting Market Size


(in USD billions)
$5.70

$4.40

$3.70

$1.90

$0.81

2019 2020 2021 2022 2023


What Will The Market Look Like In 2023?

• Live In 2018 • Live In 2019-2020 • Live In 2021-2022 • Live In Or After 2023 • Unlikely To Authorize

WA VT
ME
MT ND
OR MN
NH
ID WI MA
SD NY RI
WY MI CT
IA PA NJ
NB
NV OH DE
IL IN
UT MD
CA CO WV VA
KS MO DC
KY
NC
TN
OK
AZ AR SC
NM
MS AL GA
HI LA
TX
AK

FL

Note: Current as of April 2019.


What Will The Market Look Like In 2023?

WAVE 1 WAVE 2 WAVE 3 WAVE 4 WAVE 5


(Live in 2018) (Live in 2019-2020) (Live in 2021-2022) (Live in / after 2023) (Unlikely to Pass)

• Delaware • Arkansas • Arizona • Alabama • Alaska


• Mississippi • Connecticut • Colorado • California • Hawaii
• Nevada • DC • Kentucky • Florida • Utah
• New Jersey • Illinois • Louisiana • Georgia • Wyoming
• New Mexico • Indiana • Missouri • Idaho
• Pennsylvania • Iowa • Montana • Maine
• Rhode Island • Kansas • North Carolina • Maryland
• West Virginia • Massachusetts • North Dakota • Minnesota
• Michigan • Ohio • Nebraska
• Missouri • South Dakota • Oklahoma
• New York • Tennessee • South Carolina
• Oregon • Texas
• Vermont
• Virginia
• Washington
• Wisconsin

EST PERCENTAGE OF THE U.S. ADULT POPULATION

10% 22% 17% 49% 2%

Note: Current as of April 2019.


What Are The Big Threats To Our Projections?

1
Online sports betting is not broadly implemented. Our projections assume that a critical
mass of states implement online sports betting by 2023, and that online sports betting
accounts for approximately three-quarters of total sports betting revenue in each of those
states.

Wire Act havoc. The new interpretation of the Federal Wire Act, if broadly enforced by the

2
U.S. Department of Justice, could bring online sports betting–and potentially any form of
regulated gambling that touches the internet–to an abrupt halt. In the absence of online
sports betting, we estimate that the regulated U.S. sports betting market would reach only a
fraction of its potential size.

3
Industry infighting. Disagreement among industry stakeholders about how best to
implement sports betting could slow or stall legislative progress in states across the country.
A slower-than-anticipated rollout of regulated sports betting could mean a market that, by
2023, is materially smaller than we’ve projected.
Who Wins From Regulated Sports Betting, And When?

In the chart below, relative share of the opportunity refers to how much of the total profit opportunity each stakeholder can realize,
1 being the least and 10 being the greatest. And opportunity velocity refers to how long it will take each stakeholder to realize their
maximum profit potential from regulated sports betting, with 1 being the longest and 10 being the shortest.

10
Media
9

8
Commercial
Lotteries casinos
Tracks
7
Opportunity Velocity

6 Fantasy Service
brands suppliers
5 Platform suppliers

4
Sports
3
leagues
Online Tribal
2 gambling casinos
Sports
1 teams

0
0 1 2 3 4 5 6 7 8 9 10
Relative Share Of The Opportunity
Who Wins From Regulated Sports Betting, And When?

The benefits of regulated sports betting will not be equally


distributed among stakeholders. Examples Of Relevant Stakeholders

Our general view is that, as a class, media companies have


the fastest and most lucrative path to profiting from legal sports
betting. Marketing is the single greatest cost center for sports-
books, and the intense competition in the early stage of each
market will likely drive inflated marketing spend.

Service suppliers, who have the benefit of moving easily


between markets, platforms, and operators, are also well-
positioned. Platform providers are more subject to pricing
pressure and fragmentation.

Both online gambling brands and fantasy sports brands have


upside, but are hampered by market access costs and
constraints.

While less nimble than their fantasy and online gambling brand
competitors, retail casinos, lotteries, and race tracks will all be
able to rely on the power of their incumbency to win an outsized
share of the market.

Sports leagues and teams will see meaningful benefits that will
be largely ancillary in nature (e.g., increased fan engagement)
and take time to manifest.
5 C O R P O R AT E PA R K | S U I T E 1 1 0 | I R V I N E C A | 9 2 6 0 6 | W W W. E KG A M I N G L LC . C O M

Disclosure: Eilers & Krejcik Gaming, LLC is an independent research firm and is neither a registered
broker dealer nor a registered investment advisor. No information contained in this report shall
constitute as a recommendation or solicitation to buy or sell a security. Individuals receiving this report
should consult with an investment advisor or registered representative before making an investment
decision related to any information contained in this report. In addition, Eilers & Krejcik Gaming, LLC
either does, or may seek to do business with any company mentioned in this report. This report was
prepared for and distributed to clients of Eilers & Krejcik Gaming, LLC. If you are not the intended
recipient and/or received this report in error, please delete this document and notify Eilers & Krejcik
Gaming, LLC at dleary@ekgamingllc.com, or call 310-743-6239. This report is also protected by federal
copyright law. Any unauthorized review, dissemination, or copying of this communication is strictly
prohibited. By accessing, reading, storing, distributing and archiving this research report, you hereby
agree, fully, and without dispute, to all terms and conditions outlined above.
SPORTS & EMERGING VERTICALS PRACTICE – THE LEADING INDUSTRY VOICE

Eilers & Krejcik Gaming’s Sports & Emerging Verticals practice is the leading voice for policy and market projection concerning the U.S.
regulated sports betting, online casino, and online poker markets. The firm’s insights and analysis are regularly cited by lawmakers,
financial analysts, publicly traded companies, and a wide variety of mainstream media outlets.

Eilers & Krejcik Gaming is the only research firm with a vertical dedicated to coverage of monthly financial and legislative developments in
U.S. regulated sports betting and online gambling markets. Subscribers to our Sports & Emerging Verticals research receive:

50+
KEY REPORT FEATURES

Delivery News Trend Proprietary Market Survey


Report
Schedule Analysis Spotting Data Forecasts Data
U.S. Sports Betting Market Monitor Monthly 3 3 3 3
The number of market
U.S. Sports Betting Policy Monitor Monthly 3 3 3 3
research reports we publish
U.S. Online Casino Tracker Monthly 3 3 3 3 annually. Our reports,
which are used by casinos,
Daily Fantasy Sports Tracker Quarterly 3 3 3 3 tribal governments, online
European Online Gambling Monitor Quarterly 3 3 3 3 gambling brands, and
technology suppliers, save
Esports & Gambling Monitor Biannual 3 3 3 3 3 clients valuable research
time, reduce internal research
Flash Notes Varies 3 3 3 3 cost, and support strategic
Special Topic Reports Varies 3 3 3 3 3 decision-making.

TO INQUIRE ABOUT A SUBSCRIPTION


To learn more about our sector-leading Sports
& Emerging Verticals research, please contact:

D.J. Leary
Director of Business Development
dleary@ekgamingllc.com
310-743-6239