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US mobile betting’s biggest hurdle

Insight | Analysis

Mobile sports betting has taken off rapidly in the US since the repeal of PASPA, but still has some way to go to reach Europe’s level of prevalence. Corey Padveen explains the current prevalence of the vertical and the hurdles that are keeping it from becoming dominant.

Sports betting has long been a popular pastime, and while players have managed to find ways to bet in the American market during years of embargo, its popularity has skyrocketed as states have slowly opened their doors to this multi-billion dollar industry.

Take New Jersey, for example. Online and mobile sports wagering was legalized in June 2018, and in its first year, the market increased by 1600%, only continuing to grow since then. Now, as mobile betting continues to see an increase in demand, more states are opening their markets, but that does not come without challenges.

Undeniable Popularity

Since the overturn of PASPA in 2018, markets including New Jersey, Delaware, Mississippi, West Virginia, Pennsylvania, Rhode Island and more have allowed for mobile sports wagering, with many more still looking at the potential to open up.

Clearly, the demand was too high to ignore, and the opportunity cost of maintaining an embargo had hit an apex, even in some more surprising markets.

Projections currently suggest that in the next 36 months, sports betting will account for 40% of total gambling revenue across the world, growing by $144 billion globally. Among the regions where growth is expected, none is more significant than the United States.

The US sports betting market cap is estimated to be between $60-73 billion and is increasing at a rate of $10 billion annually. What’s more, over half of American citizens have admitted to placing at least one bet on a sporting event. We can expect to see this number rise dramatically as mobile wagering becomes more refined – and prevalent – and esports wagering is introduced in the US market.

Currently, roughly 45% of all sports bets are placed on mobile platforms. While mobile sports betting in America has the potential to be as popular for users as it is in Europe, there are some unique technical challenges in the American market that might lead to slightly slower adoption.

Not Without Its Hurdles

Despite the clear popularity and potential of the mobile sports betting market in America, there are two major hurdles standing in the way of sweeping adoption on a European scale.

The first, and perhaps the most obvious, has to do with the legal structure of sports wagering in America.

The second, perhaps less clear difficulty standing in the way of mass adoption on a national scale relates to the legal challenges but focuses more on the work behind the scenes on the technical development front. Let’s start by reviewing the legal challenges.

In 2018, I was in Miami at the  Global Interactive Gaming Summit and Expo (GiGse) preparing to speak on a panel about mobile casino engagement when news broke that PASPA, the 1992 law that prohibited sports wagering in states that were not already regulated, had been overturned. Naturally, this shifted the focus of not only my panel but every other discussion at the event.

It was a huge moment for sports wagering and it seemed like there was real momentum to building up the American market to new heights. Of course, the federal decision was instrumental in getting the ball rolling, but that did not mean that it would be an easy road. More and more states are introducing legislation that allows for sports betting, but every state is different.

One of the major challenges that operators face is navigating the complex and oftentimes burdensome legal landscape of operating. Acquiring licenses is done on a state-by-state basis, and operations need to adhere to state laws.

If I have one of the limited number of licenses in Pennsylvania, I can operate my mobile sportsbook anywhere in the state. If I’m an operator in Mississippi, however, I need a land-based partner and my mobile wagering option can only exist inside the casino.

Thus, operators need to make important choices about where they make their investment, and operations need to be (somewhat) confined or at least adjusted for each state where they operate. This leads to the issues around the mobile betting technology itself.

A whole new component

For nationally regulated markets, mobile sports betting seems like the simplest activity there is. Whether you’re in London or Montreal, you can log in to one of the available mobile sportsbooks, create your account, and start wagering. While the process might look as simple in legal markets in the United States, the backend technical aspects can make it much more complex.

Without getting too deep into the specifics, let’s look at the practice of geofencing. If you possess a license in three markets, you need to build everything you would need for a standard sports betting application, then factor in the geographical components and fence off any boundaries that extend outside of the state. You would then need to trigger access when crossing into a new state where play is legal.

Essentially, there is an entire component of the build – and therefore cost and technical considerations – to be added to the mix. And once those technical hurdles are jumped, you need to ensure that the bets being offered comply with state laws in each state where your app can be active.

There is a standalone set of additional work and structure that goes into the mobile sports betting market in America. Despite its massive popularity and the all but certainty that if adopted federally, it would explode in usage, we are going to continue to see a slow (but still impressive, all things considered) rate of adoption in America.

What To Expect

Hurdles might exist, but that shouldn’t stand in the way of continued adoption and expansion, even if at a slower than ideal pace nationally. There has been pent-up demand in the American market for years, and if the rate of legalization and user adoption in the last few years is any indication, the market is poised for significant growth.

And if trends in other markets are any indication, expect the majority of that growth to be driven hugely by mobile engagement.