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  • April US Sports Betting Market Monitor: Will Kentucky prove a goldmine or fool’s gold?
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The upcoming launch of sports betting in Kentucky provides a series of possible advantages and drawbacks for operators, according to the latest Sports Betting Market Monitor published by Eilers & Krejcik Gaming (EKG).

Kentucky tries betting

After House Bill 551 was signed into law by Governor Andy Beshear on 31 March, legalising sports betting in Kentucky, the state is now expected to launch its regulated market by 28 December 2023.

EKG set out its own perspective on the market in this month’s report, providing a list of possible pros and cons for operators looking to make their mark in the Bluegrass State.

When considered alongside markets like New York with its 51% tax rate, Kentucky’s rate – set at 14.25% of GGR – looks positively modest in comparison.

Add to that the state’s relatively accessible $500,000 upfront licensing fee and its annual $50,000 renewal fee, and the market looks a very affordable one for many to enter.

The state also boasts a lower minimum gambling age than most, with sports betting set to become available to all over-18s (as opposed to over-21s only), and a passionate college sports fandom, with no significant restrictions expected for betting on student athletes.

On the other hand, Kentucky has a relatively small population of just 3.5 million, and personal disposable income levels well below the national average in the US.

The lower legal gambling age could prove to be a double-edged sword for operators, according to EKG, as the rule could invite negative press to the industry. 

Any overzealous attempts to protect young people from gambling harm in the state also has the potential to bring about unfavourable policy changes regarding college betting, which could prove disastrous, as the state is not home to any tier one professional sports teams.

EKG also points out that while in some states – New Jersey being the best example – neighbouring states without regulated sports betting can help to generate additional revenue from out-of-state visitors, no such advantage exists in Kentucky, whose seven neighbours (with the exception of Missouri) already offer legalised sports betting in one form or another.

Mature states promotional spend

Kentucky’s market launch later this year will offer yet another opportunity for us to analyse how operators approach their customer acquisitions strategies on a state-by-state basis.

One interesting metric in the latest report shows the ratio of promotional spend to GGR and NGR of the biggest operators in two more mature state markets, Pennsylvania and Michigan.

The above tables show that despite its market leading position, FanDuel has spent relatively modestly in those markets since launch, with promotional costs since totalling 30.8% of GGR and 44.4% of NGR.

Those figures have reduced as the markets mature, with promo costs equal to 27.9% of GGR in the trailing three month period. 

Overall, the numbers place FanDuel’s relative promotional spend below the average of all brands, which sits at 40.9% of GGR since the markets’ launches.

DraftKings’ customer acquisition strategy has seen it act more aggressively than its Flutter-owned rival, spending close to 100% of GGR from those markets in promotional costs since launch.

Caesars and PointsBet stand out as by far the most aggressive spenders when it comes to customer acquisition. 

Promotional offers in Pennsylvania and Michigan have cost Caesars 423.9% of GGR and upwards of 900% of NGR since launch, with PointsBet spending 281.5% of GGR and 1,078.3% of NGR.

Both operators have pledged to significantly pull back on promotional spend this year, however, and evidence of that is already clear in new state launches.

State by state GGR growth

The latest report also sets out GGR growth across 24 sports betting states, with comparisons showing sports betting revenue from the past 12 months compared to the previous 12 months.

In states where sports betting has been live for less than two years, year-on-year growth figures are provided on a like-for-like basis.

Standout performers in the chart include Oregon, with GGR growth of 88.1%, making it the fastest growing sports betting state included in the report.

Following up in second place was New Hampshire, with 81.2%, followed by Louisiana, Wyoming and Connecticut, which saw growth rates of 75.6%, 70.5% and 63.1%, respectively.

Growth was markedly slower in more mature markets, with New Jersey’s sports betting GGR increasing by a modest 5.4%. In Washington, DC and Nevada, meanwhile GGR grew by 10.6% and 15.2%, making them the second and third slowest growing jurisdictions in the US.

Other important figures from the chart include New York’s share of online sports betting GGR for the past 12 months, which sits at 18.52%, making it the biggest state by GGR share.

That was followed by Illinois and New Jersey, which accounted for 10.83% and 9.89% of GGR, respectively.

Parlay performance

One major driver of sports betting GGR in the US has been the increasing prevalence of parlay-style bets, which provide operators with significantly greater hold rates than traditional single market bets.

This chart shows the steady growth of parlay wagering across all operators since 2018, both as a proportion of handle and GGR.

Interestingly, despite accounting for a little over 20% of betting handle, parlays accounted for a whopping 54% of sports betting GGR over the past 12 months.

The figures have continued to rise steadily since same-game parlays became more widely available during the 2020 NFL season.

The hold rate on parlays has also grown since 2018, and has repeatedly risen above the 20% mark.

That sets parlays apart from their single market counterparts by a significant margin, according to other statistics recorded in the report.

According to EKG, average hold rates across all bet types were 8.67% over the past 12 months, with FanDuel achieving the best result of all major operators with a hold rate between 10% and 12%.

That puts the operator well ahead of its competitors, with DraftKings and BetMGM achieving hold closer to 7%, and Caesars’ hold rate sitting closer to 4%.

As previously reported by iGaming NEXT, FanDuel aims to take a margin of 12% across its sports betting operations.

EKG’s monthly report provides a digest of news and data points, including forecasts, for the emerging market for regulated sports betting in the United States. Please contact managing director Chris Krafcik for more information.  

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