Sports betting has been heavily regulated in the US until 2018, when the Supreme Court struck down a 1992 federal law that prohibited gambling on sports in most states.
As of today, 12 US states have made sports betting legal, while another six have allowed some form of restricted online betting.
Other states are coming on board soon and all of a sudden, the US is fast becoming the holy grail for the sports betting industry.
A cohort of startups and platforms are rushing to apply for US licences, with capital raising and M&A activities well and truly in full gear.
A host of ASX-listed companies are also vying for a slice of the market, but against this competitive landscape, what would be the most realistic entry strategy?
Stockhead caught up with Bluebet (ASX:BBT) CEO Bill Richmond, to find out how his company plans to attack the US market.
Bluebet has named five priority US states for its initial entry: Virginia, Iowa, Colorado, Tennessee and Maryland.
The company has also just signed a partnership deal with BlueWater Resort & Casino to jointly pursue a sports betting licence in a sixth state, Arizona.
Richmond said the biggest challenge for new players going into the US market is the cost of customer acquisition.
“America is going to be a very competitive environment, and it will be very expensive for new players just to go in there without a database and without a brand,” Richmond told Stockhead.
“So we’re just going to five or six of these states on a B2C (business-to-customer) model as a proof of concept, to prove that we can do in the US what we’ve done in Australia.”
Richmond said that once that’s completed, Bluebet intends to retreat from the B2C business, and transition into the business-to-business (B2B) market – or what he calls the Sports Bookmaking as a Solution business model.
Green field opportunity
In this B2B model, Richmond says that Bluebet will be looking for partners with existing clients.
“The most obvious target for this is the casino groups,” Richmond said.
American casinos, according to Richmond, have no experience in sports bookmaking as it hasn’t been legal in the US in the past.
These partnerships could be done as joint ventures where casinos can leverage off Bluebet’s expertise and platform, while still being able to own and grow their own brands.
“This model has a great long term appeal for us because we’re really just leveraging off what we’ve done in the last 15 to 20 years.”
The B2B model also means that new entrants could avoid capital burn, as it will be the partners (in this case the casinos) who will be bringing in the clients.
“It’s not incumbent upon us to go and spend huge amounts of money on marketing to acquire customers long term,” said Richmond.
In a nutshell, the supplier of a B2B model like Bluebet would usually provide a full suite of odds and risk management services to regulated bookmakers.
There are several reasons why a bookmaker would want to outsource those to a third party.
For one, there could be a lack of knowledge and technological knowhow in sports betting in general, like in the example of the casino.
Second, there could be lack of knowledge of a particular sport. A UK bookmaker might be able to provide odds on European soccer matches, but would most likely want to outsource baseball matches to a US-based B2B provider.
Some bookmakers might even be able to provide pre-match odds, but could find live match odds too complicated.
“We’ve got a team that have a long history of running sports books on a 10 plus per cent margins, which is very strong in this industry,” Richmond said.
“So for Bluebet, this is a wonderful green field opportunity without having that long term capital risk.”