Dollar, dollar bill y’all.
With many apologies for stepping on Wyclef Jean’s “Sweetest Girl,” that lyric can best sum up sports betting in the United States for September and October. This is also where I passive-aggressively note that I’m doubling up this edition because the Arizona Department of Gaming did not release its first two monthly reports — September’s being more than four weeks later than the state’s self-announced timeline — until an unannounced news dump on New Year’s Eve.
Now on to the show.
To properly frame September and October (and, eventually, November and December), one has to go back to April 15 to see the ignition spark of how sports betting has fully taken off in the United States. That was when the NFL made FanDuel, DraftKings, and Caesars its official sports betting partners. The league added FOX Bet, BetMGM, PointsBet, and WynnBET as “Approved Sportsbook Operators” in late August, but the April deal is where things took hold.
With the deal’s announcement, the NFL officially completed its glacial 180-degree turn to embrace sports betting in the U.S. Recall former NFL commissioner Paul Tagliabue and current commish Roger Goodell both offering testimony against legalized betting on pro football as far back as 1991, with Goodell’s most recent statements against it coming via deposition in 2012.
But as the country moved forward following the worst of the pandemic in the summer of 2020, it also became clear to the league that momentum for state-by-state expansion was unstoppable. At the start of the 2020 NFL season, 18 states were accepting wagers. At the dawn of 2022, those totals are now 26 for commercial wagering and 33 when including tribal gaming.
Of particular importance to the NFL is which states were among those moving forward. Of the eight to launch in that span, five — Tennessee, Arizona, Maryland, Louisiana, and Virginia — are home to NFL games on any given Sunday. And that does not include New York‘s imminent expansion into mobile wagering, at which point Goodell will have a front-row view from his Park Avenue office in Manhattan watching the Empire State and New Jersey slug it out for the sports betting handle belt.
It was a foregone conclusion that NFL wagering would lift the sports betting industry, but the $99,000 question was how much. The league helped create an answer worth close to $6.9 billion in handle and more than $450 million in gross operator revenue in that two-month snapshot. It also rendered the run of six consecutive monthly handle records from August 2020 to January 2021 quaint in the sense that October’s now-record $7.55 billion handle exceeded the combined September and October 2020 handles by more than $1 billion.
|Month||Number of States Accepting Wagers||National Handle||Gross Operator Revenue||Gross Operator Win Rate|
|Percentage increase year over year||111.58%||103.08%|
The billon-dollar bonanza
New Jersey set the bar to close 2020 when it reported $996.3 million handle for December, raising expectations that it would be the first to clear $1 billion in a month in March during the NCAA basketball tournament. When March Madness came and went with an actual dip in handle to $859.6 million, many pointed to September as the next realistic chance the historical event could take place.
And sure enough:
It's official! New Jersey became the first state to handle $1 billion in wagers in a single month. @BergenBrennan on the September stats and what led up to the huge milestone: https://t.co/M5iVhxYJHU pic.twitter.com/CJNoisybT1
— NJ Online Gambling (@NJ_Gambling) October 18, 2021
The Garden State has since extended its billion-dollar handle streak to three months, with October’s $1.3 billion wagered now the single highest all-time monthly handle recorded in the United States. But Nevada also entered the 10-digit club in October with $1.1 billion, showing it still has some fight after ceding the post-PASPA handle crown to New Jersey earlier in 2021.
Large bumps from the two foundational pillars of sports betting were expected, as the September handle of $5.48 billion left the previous record of $4.63 billion far behind. But a host of second-tier states also flexed their muscles in helping national monthly handle clear $5 billion for the first time, as eight reported handle increases of $10 million or more.
|State||March 2021 Handle||September 2021 Handle||Percentage Increase||Dollar Increase|
Among the eight states, it is difficult to specifically quantify the NFL’s impact on the surge in handle, except in Colorado. The Centennial State is the only one that provides NFL-specific breakout for handle, and it went from $38.6 million wagered in September 2020 to $125.7 million in the same month in 2021. Three other states — New Jersey, Nevada, and Indiana — have football-specific breakouts, and while New Jersey and Nevada saw their respective handles more than double year-over-year to a combined $878.5 million, Indiana’s more than tripled to $148.6 million.
Illinois was one of the few states to show a decline in overall handle in September versus March, but its year-over-year football handle was consistent with other states, more than doubling to $227.3 million in 2021 compared to $88.8 million the year before.
Of course, all this talk about football-specific handle ignores the other elephant in the room: the continuing escalation of general parlay wagering by the betting public and the rampant popularity of single-game parlay betting. Operators quickly realized single-game parlays could result in potential huge revenue windfalls, given the appeal of combining mainstream wagering on NFL games with the popularity of picks rooted in fantasy football’s obsession with player yardage and touchdowns.
And we’re on to October
National October #SportsBetting numbers (complete):
GGR Win Rate: 5.9452%
AGR Win Rate: 4.4289%
— Chris Altruda (@AlTruda73) January 1, 2022
There are many ways to break down a historic month in which the October handle was 37.8% higher than September’s short-lived record. For example, if you want to be exasperatingly technical, September’s handle was a known record as it surpassed $5 billion prior to Arizona’s initial reports, but the record technically lasted only the few minutes needed to compile the state’s September and October handle once they were released.
However, there are also some very simple contributing factors. First, there were five weekends in October versus four weekends in September. Twenty-five percent more of anything is usually a good thing, and weekend days that mean a bonus Saturday of wagering on college football and a bonus Sunday of betting on NFL games was indeed a very good thing for operators.
And then, once more, there was the NFL’s public embrace of legal wagering. Turning back to Colorado, the extra NFL Sunday contributed to handle climbing from $125.7 million to $172.1 million. And that was with the Denver Broncos going 1-4 and their lone win coming on Halloween. Nevada’s football handle ($729.3 million) alone would have ranked fourth overall nationally, behind New Jersey, Illinois, and Pennsylvania.
The same held true for parlay handle. The eight states that provide handle figures for such wagers reported a combined $394.5 million in August. That number climbed to $432.3 million in September with Wyoming entering the fold. The Cowboy State has yet to publish category-specific numbers for October, but New Jersey and Illinois alone combined for $507.7 million in such wagers.
The last factor is a smooth convergence of September having Major League Baseball, the NFL, and college football to October having the MLB playoffs along with football and the start of the NBA and NHL seasons. There is no lack of inventory for betting options in the final four months of the year, which includes college basketball entering the picture in November.
Bundle all these factors together, and it is no surprise that 21 of 23 states set all-time monthly handle records, in addition to Connecticut coming on board. The size of the market had little relevance. Small-market Rhode Island jumped from $41.2 million in September to $60.3 million in October, New Hampshire from $68.1 million to $98.2 million, Iowa from $210.4 million to $280.9 million, Michigan from $386.8 million to $497.6 million, and Illinois from $596.5 million to $840.4 million.
As opposed to September, in which eight states had an increase in handle of at least $10 million compared to March, nine states had an increase of $100 million or more from September to October and another three reported increases of $50 million or more.
|State||September 2021 Handle||October 2021 Handle||Increase in Percentage||Increase in Dollars|
And in an interesting development for November, the handle has already cleared $6 billion and could very well make October’s record another short-lived one, as Arizona and Illinois are two of the three remaining states yet to publish. November, though, will be more dedicated to the absolute beating the house has administered on the public, as post-PASPA era revenue records are being established in nearly every legal jurisdiction.
And (finally) introducing … Arizona
GGR heavily inflated by free bets but still a v. impressive debut month of mobile #sportsbetting in Arizona in Oct., per new figures from @AzGaming. 7th largest US market by total handle and 4th by online revenue https://t.co/h5tEcZF8OZ pic.twitter.com/v6JCmYdjjK
— James Kilsby (@JKilsbyDC) January 3, 2022
The good news is the two reports provided by the Arizona Department of Gaming confirmed that the hype was worth the wait. The state essentially went to ludicrous speed from legalization to launch to be ready for the NFL season, and there were few regulatory hiccups in the run-up. Arizona will be the fastest state to $1 billion in handle in the post-PASPA era at three months when November’s figures are published, giving New York something to shoot for upon its launch.
The launch also showed just how willing operators are to flood the market with promotional play in their bids to acquire customers. All $31.2 million of online operator revenue in September was promotional revenue, leaving the state with less than $32,000 in tax receipts coming on the near $400,000 in retail revenue generated by FanDuel and Caesars. October was slightly better, as the state collected more than $1 million in tax revenue, but only 14.5% of the $66.9 million in online revenue was eligible to be taxed through the first two months.
This, of course, is nothing new, as nearly very state that introduces sports wagering — specifically mobile sports betting — will allow tax deductions for promotional revenue. It is the dance state government and operators perform to grease the entry point for a higher tax rate on iGaming, something that has been done to outstanding effect in Michigan, Pennsylvania, and New Jersey.
Arizona is not the only state where a significant amount of revenue is earmarked as promotional play, but it is very noticeable when the $57.1 million for the first two months accounts for nearly 25% of the $241.9 million nationwide that operators did not pay any state taxes on.