Nevada Remains On The Outside Looking In
Written By Dominic Schatzan
At the beginning of the pandemic, there was justifiable fear that the sports betting market would take a big hit; all the major leagues suddenly shut down and most sportsbooks halted operation. Spurred by a sudden outbreak of COVID-19 cases on the Utah Jazz, the NBA shuttered its doors first, with the NHL, MLB, and the English Premier League following suit within days. Even smaller leagues like the resurgent XFL, felt compelled to shut down to combat the pandemic.
With no sports to be played and casinos considered non-essential businesses, sportsbooks were at risk of losing significant market stake. Early in the pandemic, online sportsbooks and their bettors were so desperate for competition to stake money on, that they turned to betting on foreign sports like Korean baseball and international cricket competitions when those sports returned to play in May.
Penn National Gaming (PENN), DraftKings (DKNG), and Flutter Entertainment (FLTR) are three of the largest purveyors of online sports betting; all three took huge hits immediately following the cancellation of sports. In March 2020, Penn’s market price decreased by more than 88 percent, DraftKings dropped by 35 percent, and Flutter dropped by 47 percent.
With no money coming in and all of sports questionable to return during the pandemic, investors soured on sports betting stocks quickly. Confidence sank to an all-time low in the future of the sports betting industry, but what happened next was a staggering comeback for these betting companies.
Sports slowly returned led by the Bundesliga, the English Premier League, and the MLB; the NHL and NBA sorted out their bubble locations and got their playoffs underway shortly thereafter. And then the biggest domino fell when the NFL began its regular season on time. With sports returning, investors felt confident in sports betting stocks once again. The recent legalization of sports betting in many parts of the US meant that the market was poised for growth. Sportsbooks started opening around the country and betting increased substantially. In turn, the stock prices of Penn, DraftKings, and Flutter soared.
As of November 2020, DraftKings and Flutter’s stock prices have tripled in value and Penn’s stock prices have more than quintupled in value from their lowest points in March 2020. With the market value more than doubling in value relative to pre-pandemic prices, there is no longer a question of whether these companies are going to succeed, only a question of how successful they will become. And what does the success of these online-based sportsbooks mean for Nevada’s sports betting industry? Will Nevada’s reluctance to transition to fully online sports betting pose future problems?
The Lessons Nevada Can Learn
Online sports betting is the current wave and while Nevada had long been at the forefront of the sports betting market, they are now lagging behind. Remote sports booking apps are available in Nevada, but only if you go to the physical sports book to deposit funds first. If you run out of money, most sports books require you to go in again to deposit more funds. This strategy is a boon for getting people into casinos and potentially onto slot machines or blackjack tables, but it is limiting the market for sports betting.
If an approach like Draft Kings’ free-for-all online sports betting was applied in Nevada, local sports betting would jump through the roof, but the likelihood of that happening is low; why is that? The simple answer is that Nevada casinos don’t want competition from the likes of Draft Kings, Flutter, and Penn. If Nevada sports books transition to fully available online services, there shouldn’t be any legal restriction to keep the online-based sports books from operating in Nevada. With archaic rules locked in place, Nevada casinos are effectively locking out all innovators in the sports betting market.
Despite the downsides of new competition, Nevada sports books owe their customers more and owe them better access. We lack the ability to fully bet online, the ability to play daily fantasy sports, and the ability to even play in free contests on Draft Kings and Fanduel. Simply put, Nevada used to lead the way in sports betting, but it is now more restrictive on sports betting than several other states. It’s time for Nevada sports books to look at the market value that online sports booking brings and get their foot in the door for Nevadans; otherwise, Nevada will permanently lose its status as the sports betting capital of the world.