Top 10 North American gambling stories of 2023 - Part 1

Hartley Henderson lists his top 10 gambling stories of 2023 for North America. In the first of two parts, Hartley examines the stories that affected gambling in the United States, from the continued expansion of sportsbetting to yet another horse racing story that is not so good.

2023 Gambling Year in Review - Part 1

The year 2023 was an interesting year for gambling as sports betting continues to be adopted by more states and various issues related to compacts and cyber crime became major concerns. Moreover, some new sports betting sites started up, while others shut down. The following are the top 10 stories of the year in reverse order. 

10. Expansion in state sports betting handle and revenue, but continued losses

The year 2023 saw a large movement in sports betting. Ohio started offering both retail and online sports betting in January; Massachusetts started offering both online and retail sports betting in March; Maine began offering online sports betting in January and retail sports betting will follow soon; Kentucky started offering sports betting both at racetracks and online in September; and North Carolina passed a sports betting bill which was signed by the governor in June and some retail sports betting began, although a full rollout including online is set to take place in 2024. Moreover, Vermont passed a law to license and regulate sports betting, which was signed by their governor in June, and online sports betting is expected to start sometime in 2024. Also, Florida which legalized sports betting with the compact between the state and Seminoles, launched for one month on the Hard Rock app in 2021, but was shut down due to court proceedings. After the U.S. Supreme Court refused to intervene in a ruling by an appellate court earlier, the Hard Rock sports betting app was relaunched in November.

licensed regulated sports betting new states 2023So, in 2023 sports betting either started or laws were passed in six states bringing the total number of states with legal sports betting to 37, plus Washington D.C., Guam and Puerto Rico. California, Georgia, Minnesota, and Missouri have bills on the table which could see betting at some point in the near future, and Alabama, Alaska, North Dakota, Oklahoma, South Carolina, and Texas have had discussions on possibly looking at sports betting laws, but would require a change to most state constitutions. Hawaii, Idaho, and Utah will likely never legalize sports betting, unless the rapture comes.

Along with the growth in sports betting there has been a massive increase in sports revenue. New York leads the way in profits with expected revenues nearing $1.3 billion by the end of the year and New Jersey is second with an expected handle of more than $12 billion in 2023 and revenue of about $1 billion. Illinois, Pennsylvania and Michigan are not far behind. New Jersey and Pennsylvania actually have higher online revenues than New York, but they include online casino revenue as well, which is still not available in New York.

Despite the massive amounts being bet on sports in the United States, the product is still not profitable for sports betting companies. FanDuel is the number one sportsbook in the country and despite a 28% increase year-over-year, in fiscal 2023 the company still has not pulled its weight leading to Flutter Entertainment stock dropping. The company did not release results by country and product but it is believed that FanDuel’s losses were significant. Similarly, DraftKings which is the second largest sportsbook in the U.S. is expecting losses close to $100 million in 2023 and MGM and Caesars, which do not report earnings by product, are expecting significant losses on their internet products, although it is offset by revenues at land-based casinos.

Without doubt, New York is one of the biggest drags on company earnings. Despite being the top revenue generator for sports betting, 51% goes back to the state for taxes and there is no internet casino wagering to help stave off those significant payments to the state. Companies can easily give back a substantial portion of their earnings to the state and be profitable with iGaming which has been seen in New Hampshire and Pennsylvania. For that reason, at least two New York legislators have proposed allowing online casinos and poker to be added as options in the state with a 20% tax rate to help offset the massive tax implications of sports betting. They have also bandied about adding new sportsbooks to lower the tax rate, although the rate would still be 35%, if more than 12 operators are allowed. If New York does legalize online casino wagering, the state will likely face a challenge from the Seneca and Mohawk Tribes who would likely argue it will affect their revenues.

9. Horse deaths and shutdown at Churchill Downs

The horse racing industry was devastated in 2019 when 21 horses died at Santa Anita in the winter and spring necessitating the track to close its summer meet as it made major changes. The track issued new rules related to race day drugs, training, and made some changes to the track surface itself, although it remained a dirt track. Despite all of the changes, thirteen more horses died that year at Santa Anita.

From 2020 to 2022 there seemed to be a reprieve on horse deaths at U.S. tracks until 2023, when 12 horses died in the winter at Churchill Downs, including one on Kentucky Derby day. Churchill Downs Horse racing deaths drugs dirt Kentucky DerbyThe track decided to cancel races at Churchill Downs and moved the meet to Ellis Park, located in Henderson, Kentucky. Churchill Downs made some changes to the surface and race day drug rules and resumed racing in the fall at Churchill Downs, although like Santa Anita it stayed a dirt surface.

The horse deaths once again brought attention to the industry which seems to continuously put profits ahead of animal welfare. In one of the most glaring examples, Bob Baffert was allowed to race horses at the Breeders Cup in Keeneland in 2022 and Santa Anita in 2023, despite being suspended for giving horses illegal drugs, including Medina’s Spirit who died from a heart attack in 2022. Moreover, trainer Rick Dutrow, who received a 10-year suspension for excessively giving illegal drugs to horses, returned in 2023 and trained White Abarrio to a win in the $6 million Breeders Cup Classic. Animal welfare groups have said this lack of interest in horse safety will kill the industry in the future. They also said that an unwillingness to switch to synthetic tracks from dirt, as is done in Europe and Canada, will just prove that money is more important than animal and jockey safety.

As bad as the Churchill Downs deaths were, in August Maple Leaf Mel had a commanding lead in the Grade 1 Test Stakes at Saratoga, which was aired on national TV, but buckled, broke a leg, and had to be euthanized on track. Many equated the incident to the 1990 Breeders Cup Distaff when Go for Wand broke a leg battling Bayakoa for the win and the breakdown by Eight Belles, who broke down and had to be euthanized on track after losing to Big Brown. Those two incidents are believed to have lost many young, potential horse players who were upset and disgusted by the incidents.

Horse racing has always been known to be a dangerous and often unkind sport, but there was some comfort in believing that racetracks and the industry were doing everything possible to minimize the risks. But continuing to race even after an unusual number of horse deaths, allowing cheating trainers to return virtually unscathed, and unwillingness to adopt safer tracks gives the impression that animal safety is an afterthought in the industry. And the Churchill Downs deaths combined with basically a shrug by the industry doesn’t help to change that belief.

8. Wynn and smaller sportsbooks calling it quits as they find it difficult to compete

The year 2023 started off with a sportsbook and two casino companies shutting down in Ontario, Canada. Coolbet, an Estonian gambling company and one of the first in operation in the province, announced it was leaving Ontario when its license expired in April because it could not compete in the crowded space. Mansion, a UK company which ran two casinos in the province, also announced it would not renew its license since it was too hard to compete with the number of other companies in the space. Sadly, and owned by Mansion did very well with Canadian clients prior to applying for an iGaming Ontario license but when it came time to pay the licensing fee and taxes to the government, they realized they were a small fish in a big pond and could not justify the expense.

In the same month, PointsBet, a large Australian company that had gambling licenses in fourteen states decided to leave the U.S. market despite a 28% increase in revenue from 2021 to 2022, citing the company was constantly losing money. The company tried to sell to Betr in 2022 but couldn’t reach a deal. So in April 2023, PointsBet said it would search for a buyer and in October sold to BetFanatics for $225 million.

Then in August 2023, WynnBet announced it was leaving eight states, Arizona, Colorado, Indiana, Louisiana, New Jersey, Tennessee, Virginia and West Virginia because they said marketing and promotional costs were too high, and while they are still operating in Michigan and New York they are expected to leave those markets too or sell those licenses to other interested parties. Aside from the costs and the fact it’s nearly impossible to make money in the current environment, Wynn is faced with the company’s founder under scrutiny for sexual assault charges and previous statements where he backed Sheldon Adelson in the call to keep iGaming illegal. This is a major concern since the company realizes without internet casino betting, they have no path to profitability.

There is speculation that other small players in the U.S. including BallyBet, Unibet and Betway, among others, may follow the leads of PointsBet or Wynn and see if they can find buyers or simply leave. To date no sportsbook including the top 5, FanDuel, DraftKings, BetMGM, BetCaesars and BetRivers are actually making money on sports betting due to the amount of advertising and promotions needed to compete along with ridiculous tax requirements, and rules disallow the write off of promotional offers. Moreover, while sports betting is currently legal in 37 states and Washington DC, (albeit a couple of states have yet to begin operations), internet casino gambling is still only being offered in a handful of states and iCasinos are the big moneymaker as they have far less costs or risk that sports betting does. There is also realization that BetESPN and BetFanatics will move the smaller sportsbooks even further down the list and there is no viable path to profitability for most small companies.

So, more consolidation is inevitable, but that isn’t anything new to the industry. We've seen it over the last decade or so in the UK and even in the earlier days of internet gambling, so the North American sports betting industry should expect more of the same in 2024.

7. Ontario ban on advertising and promotions involving athletes and celebrities and its potential impact stateside

The Alcohol and Gaming Corporation of Ontario (AGCO) was receiving many complaints from mental health and anti-gambling groups that the province was not doing enough to prevent youth and problem gambling, so the AGCO announced that as of February 24, 2024 gambling companies would not be allowed to use athletes or celebrities to promote their sites. The ACGO argued in a statement that a ban on the use of athletes and celebrity endorsements would "help safeguard children and youth who can be particularly susceptible to such advertising content." They also said that the amount of advertising featuring players like Wayne Gretzky, Connor McDavid and Auston Matthews, as well as celebrities like Jamie Foxx, are so prevalent that it’s influencing youth and even children to gamble, since they look up to those players and want to emulate them. The new amendment prohibits athletes, celebrities, social-media influencers, other role models and cartoon characters in sports betting advertising.  

sports betting advertising in Canada celebrities athletesThe big question that the Canadian Gaming Association and the sportsbooks are asking is what constitutes an athlete or a role model? Would a player like Dan Marino who most kids wouldn’t know constitute an athlete that can influence kids? What about a coach like Bill Belichick? Moreover, who is a role model or celebrity is very subjective. So how is that defined? Naturally Taylor Swift would be a big no-no due to her fame and association with Travis Kelce not to mention she is the biggest celebrity in the world now, but what about someone like Ontario Premiere Doug Ford? The rules are confusing and the industry wants clarification.

The other question many analysts wonder is whether U.S. will follow suit. The UK already banned gambling advertising from athletes and celebrities, as well as jersey advertising, due to its influence on youth and compulsive gamblers, but the U.S. generally values the First Amendment rights to freedom of speech more than Canada or Europe whose free speech laws have significant limitations. Nevertheless, like Canada, the UK and even Australia, there are many state legislators and gambling groups in the U.S. who are outraged by the amount of advertising for sports betting and are also concerned that athlete and celebrity endorsements could be encouraging underage betting. Consequently, some industry analysts believe that sportsbooks may voluntarily stop using athletes and celebrities in ads as a preventative action, plus they are just too expensive and hurting revenues. Some independent research firms say that celebrities and athletes add little incentive to bet with a particular company and if they are not as well liked as believed, those endorsements could be a disincentive.

Some advertising companies say that a far more effective means to generate brand loyalty is to be creative with advertising and have super-bowl type ads that people will remember, but don’t feature particular people. They say that industries like tobacco were forced to be more creative with advertising in the 1970s until it was completely banned and not using any cartoon characters or spokespeople to promote smoking didn’t cause a decrease in the usage of tobacco. But they also point out that it wasn’t this type of advertising that led to kids and youth to take up smoking but rather parental influence and peer pressure. And many advertising executives and gambling analysts believe it’s the same here. They believe that if they want to quell underage and problem gambling the industry and government should spend money showing the dangers of compulsive gambling just as the tobacco industry did with cigarettes. So, it’s a conundrum. Is advertising free speech not to be fringed upon or is gambling so prevalent it must be stopped by any means? We will soon find out.

6. Damar Hamlin incident and the effect on betting

One of the most harrowing moments of 2023 occurred on January 2nd in a game between the Buffalo Bills and Cincinnati Bengals. After what appeared a routine tackle, Bills safety Damar Hamlin collapsed on the field and went into cardiac arrest. It took almost 9 minutes for team doctors to revive Hamlin who was later diagnosed by doctors to have suffered commotio cordis, an exceedingly rare incident where a blow to the chest during a normal cardiac cycle causes the heart to stop beating. The game, which was watched by millions on Monday Night Football, was postponed as players from both teams felt they were unable to continue due to the trauma from the incident, and later the NFL just cancelled the game outright and called it no contest.

Bills Damar Hamlin injuryThe whole sports world was strictly focused on the incident itself and prayed for Hamlin, but after Hamlin was shown to have recovered and it was clear he would survive without any serious repercussions, focus turned to the betting aspect of the incident. Because neither team completed a full 17-game schedule, the Bills officially finished the year with a 13-3 record and the Bengals a 12-4 record. This caused a lot of confusion regarding how to pay out total wins for the year. Different sportsbooks handled the situation differently, although most books cancelled all wagers on the number of wins because they said the full 17 games were not played. Naturally, those who bet the Bills to have less than 13 wins and had the bets voided were thrilled, but those who bet over thirteen wins were furious. And one bettor who bet on the Bills to win exactly thirteen games was so angry he sued the sportsbook. This also applied to anyone who bet the Bengals to win exactly twelve games or over 11 wins.

To add to the confusion, anyone who had bet on the Buffalo Bills to win the AFC automatically lost since the Kansas City Chiefs who had a 14-3 record were declared the AFC champions due to one more win than the Bills, although the Bills would have won a tiebreaker having beaten Kansas City earlier. The league went through a ton of scenarios where there could have been a neutral site game between the Bills and Chiefs depending on the outcomes of the games between Buffalo and Cincinnati as well as Kansas City vs Jacksonville but in the end there was no additional game to decide the AFC bye because Buffalo lost to Cincinnati in their playoff game.

As a result of the inconsistency of how sportsbooks graded these wagers, including voiding bets, there was one lawsuit issued in Ontario against sportsbooks who the bettor believed took advantage of an unusual situation to grade the bet in the sportsbook’s advantage. And there were also reportedly suits planned by bettors across the United States, but it appears none proceeded. Some books offered goodwill bonuses to those affected, but that was not the norm. A situation where bets were either voided or declared a loss due to a no-contest or withdrawal is not unusual, it happened when John Rahm was forced to withdraw from the Memorial Tournament with a 6 shot lead for having come into contact with someone who had covid, and it happened several years back when Hunter Mahan withdrew from the Canadian Open with a 4 shot lead because his wife went into labor, but because this was the NFL it got much more attention than the golf tournaments.

The one good thing that did come out of the Hamlin incident, aside from the fact that he recovered and played for the Bills in the 2023-2024 season, is that most leagues have now put in special rules for training, defibrillators and action plans should any incidents take place on the field so that the response could be even more immediate and effective going forward. But it also shows that with the impact of sports betting, including the money made by teams for promoting betting on their sport, any sports decisions made by the leagues must take into consideration the implications on sports betting.

Continue reading for the Top 5 gambling stories in North America for 2023 from Hartley Henderson! 

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