Since August, to say the sports betting business has been robust is an epic understatement. The novelty of seeing the national handle surpass $2 billion that month has given way to an upward spiral of money — wagered and won by the betting public and collected by operators when the public loses — that shows no signs of slowing down.
October marked the crossing of the $3 billion threshold for the first time, making November a litmus test of sorts to see whether that momentum could be sustained as the sports schedule took on a more normal feel versus the crush of games in August and September following the worst of the COVID-19 pandemic. Consider that test passed with flying colors, as operators created a fourth consecutive month of national record handle and third straight of revenue after the Illinois Gaming Board released its official numbers Monday.
The debut of Tennessee, with its $131.4 million in handle and $13.2 million in revenue in its first month of operation, was merely the proverbial cherry on top for the November numbers. Overall, bettors nationwide plunked down more than $3.46 billion worth of wagers, while operators came up clutch — to the chagrin of bettors — and recorded their highest win rate of the year to create a windfall of more than $302 million.
And since operator revenue and state taxes go hand in hand, that was also a monthly record as coffers around the nation rang with more than $50 million in receipts.
New Jersey: The $900 million gorilla in the room
Las Vegas is always going to be a “bucket list” destination for sports betting, especially for the NCAA men’s basketball tournament and other signature events, like Super Bowl LV on Sunday. But until COVID-19 is effectively sidelined and/or Nevada chooses to embrace remote registration for mobile wagering in Sin City, the reality is New Jersey now has the money cannon when it comes to handle.
|State||October 2020 Handle||November 2020 Handle||Difference Month Over Month||Percentage Change|
The industry has ooooohed and aaaaahed the Garden State over the fall and winter with regard to handle, and with good reason. Its monthly game of “Can you top this?” throughout this record surge has been something to behold — New Jersey’s handle spiked nearly 40% from August to November (almost 50% if you count December) and it currently occupies all of the top five monthly handle slots of the post-PASPA era that dates to May 2018.
The 16% increase from October to November’s then-record of $931.6 million was the largest of any state with legal sports betting, and the $128.5 million in difference also absorbed the notable monthly declines for Nevada and Pennsylvania — which respectively rank second and third in handle. They combined for $1.1 billion in November — $83.6 million less than October.
Behind the “Big 3,” Illinois, Indiana, and Colorado picked up the flag to extend the national streak with individual monthly highs across the board for handle amounts. While Illinois and Colorado are still in their impressive rookie seasons, Indiana has shown remarkable staying power, vying for a top-five spot in the sports betting handle rankings on a monthly basis, surpassing $200 million for four months in a row.
To use a college basketball analogy befitting the Hoosier State, Indiana is the Gonzaga of sports betting in the sense it has a mid-major population (6.73 million) while punching above its weight and operating at a high level. It provided nearly $20.5 million of the $55.7 million increase among the three states from October to November.
Among other states, Tennessee quickly established itself as a nine-figure player with its initial report, and Iowa has quietly mirrored the late 2020 surge — its record November handle of nearly $87.2 million was a 73.3% increase from August, and that occurred despite having an in-person registration requirement. Handle in Michigan dropped off dramatically, but that can largely be attributed to Detroit’s three retail sportsbooks being closed for the second half of the month due to the pandemic without any mobile betting available at the time.
November revenue: The house comes calling
When the September handle climbed by 30.6% from August, revenue rose by only 21.6%. When the October handle climbed 14.1% from the previous month, however, revenue nearly doubled from $142.7 million to $271.9 million, and taxes more than doubled, going from $19.5 million to $44.2 million. What was the variable? Win rate.
Also known as the “hold,” win rate is determined by the amount of revenue collected by sportsbook operators divided by the amount wagered. The win rate fluctuates from month to month, and the national average win rates for August and September were 5.35% and 4.94%, respectively. They ranked as the third- and second-worst months of the 11 in 2020 with full reporting.
Considering the national average win rate in the PASPA era is slightly below 7%, bettors were faring relatively well against operators when it came to their picks at the start of this surge. In the last two months, though, the house has dashed dreams and collected dollars at a record pace. The national average win rate in October was 8.24%, which was tops in 2020 until November checked in at 8.64%. Those also rank sixth and fourth, respectively, among the 31 national average monthly win rates in the post-PASPA era.
|State||October 2020 Revenue||October 2020 Win Rate||November 2020 Revenue||November 2020 Win Rate||Difference Month Over Month||Percentage Change|
Nowhere was that more apparent in November than Nevada, which offset its 7.5% drop in handle from October with a then-national record of $61,807,000 in revenue on the strength of a 10.14% win rate. It is the highest recorded win rate in the Silver State in the PASPA era and resulted in a 45.8% increase in revenue.
Conversely, New Jersey’s revenue dipped despite its record handle, tumbling 13.6% to nearly $50.6 million as its win rate was 5.43% — barely half of Nevada’s and nearly two full percentage points below its October. Indiana (10.08%), Pennsylvania (9.86%), Iowa (9.34%), and Illinois (9.10%), also bettered the national average win rate, while Tennessee entered the chat at 10.06%. Though Colorado was below the national average at 7.94%, its falloff in revenue month over month can be more attributed to non-taxable promotional play given it recorded a record handle in November.
A significant part of the high win rates is the ongoing love affair bettors have with parlays. In states where breakdowns are available by category and include parlays, that win rate for operators consistently outpaces the overall win rate. For November, Nevada paced the group at 35.7%, followed by Mississippi (30.88%), Oregon (29.42%), New Jersey (18.6%), Illinois (18.45%), and Colorado (17.42%).
It was not just the big-handle states where operators performed well. Delaware nearly doubled its revenue to just shy of $8.2 million on a staggering 41.84% win rate from $19.5 million wagered. Granted, Delaware normally has a high win rate because it offers parlay cards at retail locations, but to keep more than two dollars for every five wagered is akin to the Michael Jordan shrug in terms of hot streaks.
Mississippi, New Hampshire, Rhode Island, and Oregon all reported handles between $25 million and $54.4 million and posted double-digit win rates, with Rhode Island pacing the quartet at 17.9% to collect nearly $6.3 million. All told, eight of the 17 states with numbers available for comparison in October and November reported lower handles but higher revenues, while only three had month-over-month increases in both handle and revenue.
$4 billion handle a short-term eventuality
#SportsBetting National Notes:
With only #Illinois December report outstanding, the 2020 national handle is $20.95 billion, with sportsbook operators collecting $1.44 billion in revenue and generating $237.5 million in taxes.
— Chris Altruda (@AlTruda73) February 1, 2021
A fifth consecutive monthly record for handle is all but assured when Illinois releases its December numbers (note, the extended lag time in publishing is due to statutory rules) in the coming weeks. There already has been $3.28 billion counted among the 17 states that report handle (New York does not release handle figures), which is approximately $185 million shy of November’s standard.
A fourth straight month of record revenue, however, seems unlikely. For starters, the average national win rate without Illinois is 7.30%, which would rank fifth for 2020. With New Jersey, Nevada, and Pennsylvania already having reported, Illinois would need an unprecedented win rate on a record handle — think in the neighborhood of 13% on $500 million wagered — to fill the $63 million gap currently between December and November revenue numbers. Its current high-water revenue mark is $42.2 million.
As the reports begin to be prepared for January 2021, there is a slim chance at a $4 billion handle to start the year considering an estimate for December to be $3.75 billion. Michigan will report nine days of mobile sports wagering — with 10 operators launching simultaneously — in addition to its three commercial casinos in Detroit re-opened at reduced capacity.
Virginia also entered the sports betting fray in late January, though with fewer operators and staggered starts among them, and Tennessee looks poised to continue month-to-month growth as sports betting continues to move from novelty to entrenched in the Volunteer State. Iowa now has remote registration, though the Hawkeye State closed 2020 on a surprising note by clearing $100 million in handle for the first time in December.
If not January, a $4 billion handle will come soon enough. But the trend continues to be a positive one for sports betting waiting on the last revenue report of 2020 and the first ones of 2021.