The loss of several online sports betting operators in Virginia and other states may not be much of a gain for those still sticking it out.
Numbers presented Wednesday to the Virginia Lottery Board showed that FanDuel and DraftKings are the top operators in the commonwealth by a wide margin, commanding market shares of 39.9% and 27.4%, respectively, for the first half of 2024.
BetMGM was a distant third, notching a 10.7% market share from January to June, the presentation to the board indicated. No other operator had double-digit market share in the state, with the fourth-place bookmaker, Caesars, accounting for 5.8%, followed by bet365 at 5.2%.
Virginia is also losing several operators. But the figures presented to the lottery board on Wednesday suggest their departures won’t throw much business up for grabs, as all possessed relatively minuscule market shares.
Slide from today's meeting of the Virginia Lottery Board. FanDuel had nearly 40% market share in the state thru the first 6 months of 2024, followed by DraftKings with 27.44%. 888, Betway, and SuperBook, which are exiting the market, accounted for 0.43% share... combined. pic.twitter.com/eFEA2wlpov
— Geoff Zochodne (@GeoffZochodne) August 7, 2024
888 (SI Sportsbook), Betway, and SuperBook, have all announced intentions to shutter their online sportsbooks in the commonwealth (among other jurisdictions), and lottery staff are working with the operators on their exits, or plan to. Unibet, meanwhile, has already allowed its license to expire and closed its Virginia business in April.
888 had only 0.06% market share during the first half of 2024, the lottery board's presentation noted, while Betway managed 0.26% and SuperBook 0.11%. Unibet's market share for a little over three months of activity was 0.04%.
In other words, the four shuttered and shuttering sportsbooks had a combined market share of less than half a percent in Virginia. Even if one operator were to scoop up all of that business, it would have little effect on the current hierarchy in the state.
888 (now Evoke) recently sold its consumer-facing U.S. assets to Hard Rock Digital, while SI Sportsbook's Virginia site now nudges visitors toward Hard Rock Bet. Even so, the Virginia figures also suggest the departure of operators such as Betway, SI, and SuperBook from other states could have little impact on competition in those jurisdictions.
Exit strategies
A note from Citizens JMP Securities to clients last month said the top seven companies in the online gambling industry in the U.S. control approximately 98% of sports betting revenue and 90% of iGaming revenue. This, JMP analyst Jordan Bender wrote, leaves “the remaining 36 active operators competing for a small pool of players.”
Bender added that exits are outpacing new entrants, but that Fanatics has managed to claw out a market share of around 3% to 4% without a “first-mover advantage,” albeit with the help of its acquisition of PointsBet’s U.S. assets and promotional spending.
In Virginia, however, Fanatics only accounted for 1.65% of the market in the first half of this year, according to the lottery board presentation.
“We do not expect exits to materially slow in the coming years with elevated cost of capital, an increase in consumer protection/regulation, and market share consolidating amongst the larger players,” Bender wrote.
DraftKings' impact
A bigger shakeup to market share may not come from exits, but from the plan by one of the two largest operators to impose a surcharge on winning bettors in states with higher tax rates.
DraftKings announced last week its idea to implement a "gaming tax surcharge" on winning wagers starting next year, helping it to recover the higher cost of doing business in Illinois, New York, Pennsylvania, and Vermont.
While the Boston-based bookmaker is confident the quality of its product will keep customers around, the surcharge plan opens the door to other operators trying to woo DraftKings users by not following suit.
BetRivers-operator Rush Street Interactive Inc. announced on Monday that it doesn't plan to impose a customer surcharge of its own, "reaffirming its dedication to providing exceptional value to its players."
A note from Jefferies to clients on Tuesday found a 60/40 bearish-bullish split among investors on DraftKings' idea, with the negative camp concerned the company is ceding control to FanDuel.
Flutter Entertainment PLC, FanDuel's parent company, is scheduled to release and discuss its latest financial results next week.
“FanDuel could market against [DraftKings' surcharge] and gain more share from new customers irrespective of whether it leads to more EBITDA, which would be negative for DKNG shares,” Jefferies analyst David Katz wrote recently.
