Pointsbet is the latest brand to leave everywhere in North America

When U.S. states and the province of Ontario started accepting bids to apply for an online sports  betting license, one of the first companies to submit a bid was PointsBet. The Australian company founded by Sam Swanell, started operations in 2015, and within a few years had 5% of the Australian betting market netting almost AUD$200 million. With that success the owner figured that it could make a huge dent in the North American market, so when SCOTUS struck down PASPA in 2017, the company started making plans to enter the U.S. market. That occurred with a sports and casino betting license in 2019. They also made plans to go to Ontario after Canadian law struck down the rule that disallowed single game sports betting and received an online casino and sports betting license in April 2002, when the Ontario market went live. 

The company quickly learned, however, that North America isn’t Australia. Despite good revenue and growth, the cost of customer acquisition was much higher than expected, plus a few companies dominated the sports betting space making them almost irrelevant. The market share achieved by DraftKings, FanDuel, BetMGM and BetCaesars in all the markets PointsBet was located made it nearly impossible for the company to generate enough revenue to make it cash flow positive. As a result, the company realized it had no future and sold its U.S. operations to Fanatics in 2024 for $150 million. Unlike PointsBet, Fanatics believed it had the personnel, strategic plan and customer base (thanks to the Fanatics customer base) to be profitable in the United States. And with a license in 14 states, Fanatics realized it gave them immediate market access and saved them the hassle of going through the licensing processes that would have delayed their launch.

While PointsBet sold its U.S. licenses to Fanatics, it maintained its Canadian presence along with the Australian product. I asked Scott Vanderwel, the CEO of PointsBet’s Canadian license, why the company chose to sell its U.S. assets but not the Canadian product and his response was that it was twofold. First, the company saw a future in Canada that didn’t exist in the U.S. and no one offered a price they thought was worth divesting for. What Vanderwel didn’t say, but was implied in his answer, is that Fanatics wasn’t interested in the Canadian market (at least for now).

Despite optimism for success in Ontario and the success of the product in Australia, PointsBet Holdings sold 51.8% of its remaining non-U.S. operations to MIXI (a Japanese entertainment company. There was actually a bidding war for the company between MIXI and Betr, a fantasy sports company based in Florida, but the shareholders of PointsBet chose to take the all-cash offer from MIXI over the cash and shares offer from Betr.  From all accounts MIXI plans to continue operating PointsBet as is in both Ontario and Australia, while Betr had planned to sell the Canadian product to Hard Rock, which in turn hoped to use that as a way for the Seminole Tribe to get an immediate presence in Canada. There is no indication whether Hard Rock will still apply for an Ontario license.

Smaller Sportsbooks Concerned

What is most concerning about the sale of PointsBet’s operations to Fanatics and MIXI is that the company was growing - even if it wasn’t profitable. According to reports PointsBet had growth of over 14% from the last fiscal year and was en route to significant revenues. Yet this wasn’t enough to make it worthwhile to continue on with U.S. or Canadian operations. That has to raise red flags for companies like BetRivers and BallyBet that are operating in both the United States and Canada, which by all accounts are in the exact same position as PointsBet was. Even ESPNBet, that took over from Barstool Sports as PENN Gaming’s brand in the U.S. market, has been a major disappointment so far.

According to the latest figures the company had about $1.3 billion in revenue but losses of almost $134 million and less than 2% market share in the largest states. The company assumed the ESPN brand would be enough to get a lot of interest and signups, but by every measure its been a dud and PENN may be looking to exercise a clause with ESPN that allows them to end their partnership in 2026 and avoid paying $2 billion for the long term deal. In that case PENN will either leave the U.S., try and sell to another interested company as PointsBet did, or continue to run the company under their own or a different brand name.

But again, what does that mean to companies not named FanDuel, DraftKings, BetMGM or BetCaesars? Bet365 and Hard Rock have a slightly different focus as the big boys and are not trying to corner the market throughout the continent, so they likely have a good future  the U.S. Meanwhile, everyone else is almost certainly wondering what is the best option going forward?

Already Gone

Thus far nine companies that went in with high hopes have left the U.S.: BetFred, ClutchBet, WynnBet, BetSafe, Unibet, FoxBet, TwinSpires, MaximBet and SuperBet.

Four companies, Betway, TheScoreBet, PointsBet and 888 left the United States but are still operating in Ontario and the only companies that completely left the Canadian market are Unibet, CoolBet and Mansion casinos.

I asked Jack, a gambling analyst based in California if he believed PointsBet’s sale was an omen for smaller companies and he said that the ones that knew they had no future have already left and the rest are just grasping at straws. He also said that he highly doubts there are any major international companies not already in the U.S. that would be interested in acquiring the assets of a major player as Fanatics did with PointsBet.

"PointsBet was smart. They knew that even with growth there was no hope of making  enough money to keep shareholders happy, so when Fanatics indicated they were entering the market, PointsBet jumped up to the plate saying “look at us” and made Fanatics and Matt King an offer they couldn’t refuse. With a presence in 14 states the company could possibly have achieved profitability at some time in the future but they looked at the framework and decided that they could never generate what Fanatics was prepared to pay in this lifetime. The company certainly wasn’t prepared to wait 30 years in hopes that things would turn around."

Jack compared the situation with PointsBet to a condo developer that tries to convince homeowners and/or small businesses that it makes sense to sell to them because they would get far more from the sale now than they could ever get in the future.

BetRivers

I asked Jack specifically about BetRivers and he said that he knows the people at Rush Street well and they will not sell because they are content to sit in fifth or sixth place and rake in the small profits. The revenue for BetRivers grows every year but comes no where close to the top big boys - but they don’t care. He said the company has almost a quarter billion dollars of cash available to them and feel they have no reason to leave. Also, like MGM and Caesars, the BetRivers brand helps promote their land-based casinos. At the same time, he does acknowledge that if taxes go up for gambling across the United States, as expected, or if Fanatics and/or another large company starts causing their revenues to decrease dramatically they may have to look at a different strategy, including a possible partnership with a company like Bet365.

When asked about Ballys, Jack laughed and said they are dreamers who are relying on their slot machine brand name to save them, but they are too blinded to realize they are drowning with no life jacket in sight.

Canada

I spoke to a rep from iGaming Canada that I’ve met a few times now at the Canadian Gaming conferences and he said that Ontario is a different kettle of fish than the United States, so most smaller companies see a future despite the large number of entries in the province, even if they know they won’t compete with the likes of FanDuel, BetMGM or Bet365. He said each can easily afford the annual license fee, the 20% tax on gross profits and still be quite well off since they don’t have the same marketing necessities as in the U.S. I recall speaking to Paris Smith, former CEO of Pinnacle, at the Canadian Gaming Conference a couple of years back about how the company could compete with FanDuel or BetMGM. She said they weren’t trying to compete with the larger companies, but instead have a large, loyal customer base and are they only too happy to have 10,000 large players that wager large with them due to low vig and large limits, rather than trying to get millions of players as FanDuel or BetMGM do. Canada is also quite favorable to all gambling companies because they don’t have the same tax and payment hassles as the United States.  

There is no tax for recreational bettors in Canada so all money can be paid out to someone without having to worry about W2-Gs or other IRS forms and each company can easily transfer money back and forth with everything from PayPal to credit cards and bank transfers without having to jump through hoops. The most common method of payment by far is Interac (a bank-to-bank transfer system that charges no fees for either side and has a very low unlimited monthly merchant fees). So, bettors can deposit say $100, withdraw a win of $500 and then re-deposit $200 to the same company the next day with the same method and there is no issue with money laundering concerns or some other issues that typically befall gambling companies in the United States. And since the age to bet is 19 in Canada, they have a larger potential customer base. It’s also important to note that for many of these companies the vast majority of bets is in the casino that has no risk involved whatsoever and the sportsbook is just there in case somebody wants to bet on sports as well. For that reason, companies like Betway, 888, Bet99, TheScoreBet, NorthStar Bets etc. still value their Ontario license and have no visions of ever competing with a company like BetMGM.

It's uncertain what the revenue share for each operator is in Ontario since iGaming Ontario doesn’t release revenue by operator, but it is well understood that the largest company in Ontario is the government-based lottery operator, although their profits include all forms of wagering on the site (sports, casinos and lotteries). So, it isn’t a fair comparison. BetMGM recently stated it had 22% of the market and it is believed that FanDuel and Bet365 are just a little ahead of that. DraftKings has not made the same dent in Ontario as the U.S. since it made a late entry and when I asked someone from BetRivers about how they are doing in Ontario all he would say is “we are very pleased.”

So, PointsBet has now sold a majority stake in all its operations and will continue to operate under the same brand but run by a completely different owner. Regardless of what other smaller companies say publicly, this has to be concerning to them and wondering what their future in North America really is. PointsBet came out with guns blazing and had among the best sign-up bonuses in the business and advertised with impunity yet couldn’t make a real dent to allow them to compete with the likes of FanDuel or BetMGM.

Is there a real long-term future for the likes of BetRivers or Ballys in North America? Only time will tell. But certainly, if these smaller companies are made an offer they can’t refuse as Fanatics did, they would be hard pressed not to sell as the market continues to consolidate.

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