Hello,

I am sure Nvidia and GME is clogging your inbox and social feeds this week 🙂.

Let me offer you a window into a completely different industry, one which is also experiencing rapid growth - Sports Betting (in US).

We haven’t covered this topic before, so today’s post is a little longer than usual.

Rapid Rise

European and UK residents are already familiar with Sports Betting but its a relatively new concept for Americans.

Since a 2018 US Supreme Court ruling - which allowed for States to legalize Sports Betting - the industry has grown rapidly.

In 2023, Americans wagered a staggering $121 Billion on sports events, and after subtracting player winnings, the industry revenue stood at ~$11 Billion. This has grown from a very minor $0.4 Billion in 2018 - so a total growth rate of 2650%

To put things in perspective, the annual revenue of NFL is estimated $20 Billion.

The rapid rise in Sports betting points to huge pent up consumer demand. People were eagerly waiting for legalization and Covid years acted as a perfect catalyst to the industry.

Growth Drivers

1. Maturity in existing states and expansion into new states: Sports betting is legal and operational in 38 states today, with 5 new ones joining only in 2023 only. As existing markets mature and some of the remaining states - esp. California and Texas join in future, the overall industry revenue will keep growing strongly.

2. Convenience of Online (Mobile) betting: Sports betting today is almost exclusively online (and mainly Mobile). A lot of other kinds of gambling still happens in physical casinos - you drive to a physical location to try your hand on the roulette wheel or play poker. Not Sports Betting. It was born in the Mobile era (in US), and took off in Covid years, when people were glued to the their screens. The convenience of betting on the game while watching it from your sofa, is unmatched and a huge drive of demand.

3. Everything is a bet: Sports betting is not just about betting on the outcome of a game but on various events that happen within a game also. Parlays - where players combine multiple wagers into a single bet - are hugely popular in US sports betting market. E.g. in FanDuel, 90% of active users place a parlay bet. Betting can grow further to off-field events too (e.g. will Taylor Swift leave at half time from her boyfriend’s game). So the possibilities really are endless and the Betting market can even become higher than underlying sports market. It really depends on the ingenuity of the Sports betting companies like DraftKings and FanDuel.

Wider Implications

People love sports. And gambling has been around forever. So its not surprising that sports betting took off in US. Its a big industry in other countries too, e.g. UK online sports betting is multiple billions of dollars annually

However, there could also be a more deeper consumer trend underlying this.

People are gambling more, a lot more, in various forms.

• Online gambling (outside of sports betting) has also exploded in popularity. Industry revenue was $6.2 Billion in 2023 and grew 23% YoY. This industry wasn’t really present pre-Covid.

• People bet their life savings on Meme Stocks & Crypto and share gain porn or loss porn online. r/wallstreetbets - the subreddit behind the GameStop stock episode has 16M subscribers and growing

• Options trading, especially short dated options which is nothing like investing and everything like gambling, has been rising amongst retail traders. 56% of retail options trading volume has expiration of 5 days or fewer

So what’s going on?

There is a name going around for this - Financial Nihilism - A theory attributed to Travis Kling, which states that many people, especially younger ones, feel that the cards of life are stacked against them. Climate is changing, they can’t buy a house, and a comfortable retirement seems increasingly out of reach. So what do you do? Go for all or nothing bets - what’s there to lose? This mindset seems to be driving a lot of online gambling we see today.

Conclusion

The underlying consumer trend, regulatory easing, mobile betting innovation are all strong positive drivers for the Sports Betting industry. Things may still get bumpy ahead, esp. on the regulation front, but I would wager that this industry will keep growing in the US.

That’s all for this week. Thanks for reading. Before you go, a word from this week’s sponsor.

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