PointsBet’s North American branch of business is for sale, which could open the door for a new sports betting company to enter the New York market. Unfortunately for operators and bettors, the Empire State isn’t a desirable place for sportsbooks to operate.
Last week during a PointsBet conference call, CEO Sam Swanell announced the company would be selling and “are well advanced” in negotiations with potential buyers. Though Swanell kept it discrete, being sure not to name drop the companies or individuals he’s spoken with.
It’s important to note at the end of 2022, PointsBet released a similar statement saying its Australian business was also for sale. Though at the time of this writing, no group has come forward to purchase PointsBet Australia.
It’s unclear how long the sale of Pointsbet North America will take. Recently, reports have emerged that Fanatics, a group who initially submitted a bid to enter the Empire State’s sports betting landscape but was snubbed, is a likely buyer of Points Bet. If that is the case, or even if any other company swoops in to grab PointsBet, it could likely shake up the NY sports betting market for players and operators.
Why is PointsBet selling the North American business?
PointsBet is the seventh-largest sportsbook in the US, with gaming licenses in 14 states. Despite what sounds like success on paper, PointsBet has struggled staying profitable.
PointsBet executives also foresee sportsbook consolidation on the horizon. Rather than play catch-up, they’re looking to stay ahead of the curve.
“We believe further industry consolidation is inevitable, and we’ll position PointsBet to take advantage of movement in the sector,” a PointsBet spokesperson said in an interview with Australian Financial Review.
How will the sale of PointsBet impact the NY market?
The New York sports betting market is closed, meaning there are no open openings for fresh operators looking to join. But PointsBet Sportsbook NY already has a license in the state, meaning a buyer could gain the ability to operate in New York through the purchase of PointsBet.
Plus, getting the license by acquiring PointsBet would allow a new sportsbook to avoid New York’s $25 million application fee. This is the highest app fee of any regulated sports betting state in the US, edging out second place Pennsylvania’s $20 million price tag.
But New York also taxes 51% of sportsbook’s revenue, making it an undesirable market to operate in. Earlier this year, executives from DraftKings Sportsbook and FanDuel Sportsbook tried lobbying for policymakers to lower the costly tax rate. Sen. Joe Addabbo sponsored a bill that would’ve lowered it to 30.5%.
Despite those efforts, the sportsbook tax rate remains at 51% with no change expected any time soon. So it’s hard to imagine a new operator purchasing PointsBet for the purpose of getting a foot in the NY market — it’s simply too hard to be profitable.
Gap between NY’s major players, rest of the field widens
FanDuel and DraftKings are far and away the most popular sportsbooks for New Yorkers, and the NY sports betting revenue reports prove it.
Since sports betting launched in NY in January 2022, FanDuel’s total handle sits at $8.5 billion and DraftKings at $6.2 billion. The sportsbook with the third-most handle is Caesars Sportsbook at $3.4 billion.
As far as gross gaming revenue goes, FanDuel has surpassed $865 million, followed by DraftKings at nearly $480 million. Getting the bronze medal is Caesars at over $253 million.
If PointsBet North America does end up selling, it’s likely customers will flee to FanDuel or DraftKings before joining the remaining six NY sportsbooks. This would only increase the already massive gap between the top dogs and the rest of the field.
Fewer sportsbooks means fewer options for bettors to choose from. For sports betting companies, less competition diminishes the motivation to offer the best promotions and odds.
Read more: Fanatics Nearing Acquisition Of PointsBet, Paving Way For Potential NY Sports Betting Entry
Will Fanatics take in PointsBet and open up NY sports betting shop?
In November 2021, Fanatics – as part of a bid with Kambi and Barstool Sportsbook parent company Penn National – was among the groups left on the outside when the state selected the winning NY sports betting applicants.
Nearly a year later, speaking at the World Congress of Sports, Fanatics CEO Michael Rubin expressed a bit of joy to be excluded, emphasizing that “you can’t make money” in New York because of the high tax rate.
That said, any final applicant knew of the 51% tax rate. It stands to reason, then, that Fanatics – despite the steep levee – wanted New York entry.
Currently, Fanatics operates a retail sportsbook at FedEx Field in Maryland with short-term plans for online sportsbooks in Massachusetts, Ohio and Tennessee. Comparatively, PointsBet is live in 15 jursidictions. Acquiring PointsBet could allow Fanatics to expedite its plans for sports betting expansion.
No sports betting precedent exists in New York. But in other states, when this kind of situation played out, the third-party buyer assumed control of the sports betting brands in those states. In theory, the same would occur in New York. That is, if Fanatics is over the “won’t make money in New York” line of thinking.