Turn on any financial show or business news and chances are you will hear about the growth and profitability of state regulated online casinos. Many Americans have been waiting for regulated online gaming for years, and they opened their wallets and checkbooks. But can all this success continue? Or did the very online casinos who have profited so much recently stall their own growth?
It is hard to attend any professional sporting event without seeing the logo of Draft Kings, BetMGM, FanDuel or other online casino operators. If a major sporting event is on TV, you not only see the logos prominently displayed at the venue, but every commercial break you see at least one commercial for gambling.
The competition among online gambling operators is wicked, and most spend huge sums of money on advertising. But has all this advertising backfired?
Victim of Own Success?
Generally, with success comes recognition, and with recognition there are always a group of people who align against your success. In this case, that group of people is Congress. A group of people you do not want against you.
Early on I made the statement that I was glad I do not have kids who watch sports because they would probably become gambling degenerates later in life. The commercials make gambling look fun and sexy (which in most cases it is not unless you are doing it strictly for fun) which young people gravitate towards and want to participate.
Commercials and advertising are not bad, but in an industry like gambling, where you will always have opposition, you must be smart about it. When I watch a sporting event on TV and even I know there is too much propaganda for gambling, the executives at the gambling companies really missed the boat and did not do themselves any favors.
Now What?
What does the future hold for these state regulated operators? In my opinion, the easy fun days are over. Some states are already cracking down with more oversight. For example, in Pennsylvania you can now only register 3 credit cards. If you delete a card, you must wait 72 hours before using the new card you added.
Small changes like these do not seem that impactful, but it will show on their bottom line. The more concerning factor for these online operators is more, and I have a feeling there will be quite a bit more oversight and regulation.
It is too late now to reel back the advertising efforts, as they have already been noticed. I remember a similar scenario a few years back.
Online poker was taking off and was the new craze. However, it was still illegal for US banks to knowingly process gambling transactions. Of course, you could still deposit and online poker grew exponentially.
Everything was looking good for online poker, then PokerStars gets the bright idea to host a show on TV. It lasted about 2 months, then all of the sudden PokerStars was no longer accepting USA players.
Looking Forward
It most likely too late for the state regulated brands like DraftKings, BetMGM, Fan Duel etc. to stop the scrutinization of their industry. ore regulations are bound to be passed, affecting the profitability. As casinos lose money, you can guess how they fill the revenue gap. Tighter games.
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