By Judah Esses
When the pandemic hit and live sports were halted, much hope seemed lost for the online sports betting market. However, since the restart of sports, the recovery of stocks such as DraftKings and Penn National have been remarkable. Since hitting their lows of $10.04 and $3.25 in March, DraftKings has surged over 415%, while Penn National Gaming has grown close to 200%. This rise can be attributed mainly to the demand for sports betting, especially as all sports returned simultaneously. Because of the influx of sports throughout the summer, States saw record numbers of bets being placed. Pennsylvania saw a record-high $365 million bets placed, and online wagering accounted for 88.1% of the $365 million. In August, New Jersey set a nationwide record of $668 million bets. Much of the optimism in the market can be attributed to legalized sports betting, which could potentially increase the online sports betting market by tens of billions of dollars. However, because of the growing fear of a second wave of the coronavirus, which could shut down sports again, the market has seen a steep decline over the past month. Nonetheless, the long-term future for the online sports betting market seems bright.
In January, Penn National acquired a 50% stake in media giant Barstool Sports founded by the internet sensation CEO Dave Portnoy. Barstool Sports has the following of millions of teens and college students, appealing to a new wave of sports bettors. The favorability of sports betting among this age group has been a driving reason for the confidence surrounding the legalization of sports betting around the country. Just last month, they released the Barstool Sportsbook, which was highly advertised to the millions of followers on the Barstool Sports media pages. On the first weekend being live, the app was downloaded 66,000 times, breaking the download records of any other sportsbook app. This was especially impressive given the fact that it was only released in the state of Pennsylvania. Jay Snowden, CEO of Penn National, plans to release its app in every state where sports betting is legal by 2021. With the strong following of millions and an outspoken Dave Portnoy backing it up, Penn Gaming has a chance to secure a considerable market share in the online sports betting market.
DraftKings has also been making major strides. In early September, DraftKings announced that Michael Jordan has signed on to be an investor and advisor. This has given a lot of confidence to investors who were skeptical of DraftKings stock and the online sports betting market. DraftKings holds a 38% share of the online sports betting market, second to Fanduel, which holds a 43% market share. Securing such a significant market share has given DraftKings a gaining first movers advantage, which could be even more valuable with the start of legalized sportsbooks. One thing to notice, though, is DraftKings has exerted a lot of capital and has had multiple offerings in the past few months. However, DraftKings is a safe long-term bet as the market starts to grow.
The most significant growth factor for the sports betting market is national legalization. Since the repeal of the Professional and Amateur Sports Protection Act (PASPA), the failed federal ban on sports betting, 25 states have passed legislation to embrace sports betting. Of these 25 states, 11 have fully legalized online sports betting. As more and more states buy into the idea of legalized gambling, there is the potential of gaining millions of new users and bringing hundreds of millions of dollars of revenue for companies such as DraftKings and Penn National. Just this election day, Maryland, Louisiana and South Dakota voted to legalize sports betting. Now more than half the country has begun legalizing sports betting, and states such as New York, Michigan, and Texas might soon be next. Because of the coronavirus, states are looking to mitigate their losses, and sports betting has become an attractive option to do so. States that have legalized sports betting have seen large revenue increases from the holds and taxes placed on sportsbooks. This extra revenue has proved useful as the economic effects of COVID-19 still linger and states are in need of financial help. Having this extra revenue can likely speed up legislation and pave the way for many new states to legalize sportsbooks fully. The rise in the legalization of sports betting, specifically sportsbooks, will be huge for Penn National and DraftKings because not only will they see a massive increase in users, but they will also see a gain in confidence from investors, which is something they have previously been lacking.
Although the road to success for Penn National and DraftKings may look bumpy, there is a lot of room for growth looking forward. Coronavirus has made investors concerned, but has also helped propel the growth of the online sports betting market. With many people cooped up in their homes looking for excitement, sports betting has become an outlet for millions of people. With betting numbers setting records, the number of legislations and legalizations being passed rising, and both companies bringing on world-renown talents such as Dave Portnoy and Michael Jordan, there is a bright future ahead for the online sports betting market.