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Sports Gambling is Legal

What's next?

· Sports betting,Blockchain,startups,Sports,Gambling

So unless you're living under a rock, you heard the news today: the US Supreme Court ruled 7-2 in favor to legalize sports gambling on a state-by-state level. Obviously, there's a lot to unpack here, and I'm sure you'll see countless articles/editorials on this that are much more structured & in-depth, here's my hot take in 20 minutes or less of writing/research.

CLEAR WINNERS

  • New Jersey!! Though...since each state has the authority to legalize gambling, I think you'll see several more liberal states sprinting to catch up to New Jersey so they get to see revenues as well. Biggest question in my mind: Does this mean that anyone can gamble online as long as the website is incorporated (or qualified for business) within the state? Or do I need to physically be in New Jersey to place a bet within New Jersey? I'm sure there will be workarounds/hacks on this if true, or course...
  • DraftKings & FanDuel: these 2 companies have already built a "moat" (Elon Musk would hate that) around the Daily Fantasy Sports market.  Given their fan base (myself included), it's not exactly a stretch to say that most DFS players also might dabble in sports betting from time to time.  All they need to do is turn this on, and voila, revenues in the billions.  I wouldn't be surprised if they already have built out a platform (early-stage) to just flick the light switch on and start running to stay ahead of the pack
  • Paddy Power Betfair Not exactly a household name, right?  Well, these guys are a European sportsbook that entered into the US market via the acquisition of a little-known DFS website named "Draft" (to the tune of $48M, which is crazy given traction of the app) back in 2017.  They were just sitting, waiting patiently for this to happen.
  • Las Vegas, Horsetracks, and other traditional casinos, including Indigenous American tribes): Caesar's, MGM, Foxwoods, Mohegan Sun, Wynn, etc.: These guys know what they are doing, and odds are they were already prepared for this....the rich will get richer.
  • NBA, MLB, NFL, NHL: god knows these guys are gonna make sure they get a cut from all of this action. Didn't the NBA already align themselves with gambling?  Could you go to a Giants/Jets game and place your bets via in-stadium wifi??
  • E-Sports: as boring as gambling on e-sports sounds to an old man like me, it will surely happen, and be HUGE.  I can't even understand the notion of going on Twitch to watch someone else play Call of Duty, but it's happening.  Twitch didn't get acquired by Amazon for around $1B for nothin'.  Imagine a scenario where you could not only play Fortnite, but bet on yourself (and other people) to win??

CLEAR LOSERS

  • Old-school bookies.  Too much competition, and margins are slightly razor-thin already.  More on this later
  • Gambler's Anonymous.  That is, unless they have the ability to meet the new demand
  • Any professional sports league that holds firm in the belief that gambling is "bad" and unethical.  It's already happening behind your back to the tune of multiple billions of dollars. Stop leaving money on the table.

WAIT AND SEE....

Here is where things get really interesting....obviously, I this opens up tremendous opportunities for startups to move into the space. Here are some potential concepts/areas of interest:

  1. White-label solution for bookies to keep their business books?  Time for them to go digital. Somebody's gotta help them out before they lose their relevancy...
  2. Digital wallet that holds all your different bets, and lets you cash out/exchange money, etc.  Paypal/Venmo for gambling. CRYPTOCURRENCY??
  3. Platform (a UX layer) that sits on top of multiple gambling sites and allows you to place bets. Gambling-site agnostic.  Wonder if gamblers would use multiple sites though, or just stick to one?
  4. Data & Content!!  Recommendation platform based on machine learning/algorithms, etc.
  5. Blockchain-based gambling sites: secure transactions, lower processing fees by eliminating the middle man, etc.  Huge opportunity here, and the timing couldn't be any more perfect.

Another potential huge winner? BARSTOOL SPORTS. Barstool is already making solid revenues doing advertising for gambling websites - this will have a huge multiplier on it come soon. But if Portnoy, Chernin & co want to pull a Scrooge McDuck and swim through gold coins, I think they have 3 options:

HIGH FIXED COSTS: Buy a tech startup in the gambling space, just to get ahold of their tech/talent. Probably gonna overpay a bit right now, but better do it now, because waiting will just allow Comcast to back up the Brinks truck. I can't see them hiring the talent to build their own - seems out of their strategic priorities/skill set. They don't need to buy a site with an existing following - just the good, solid technology. Their existing customer base will allow them to explode. [other option: buy into a round of a gambling startup to seek a long-term exit]. They lose out on those endorsement/ad revenues for other sites, but that's pennies on the dollar considering the upside.

MEDIUM FIXED COSTS: License out someone else's technology for a fee, and let them develop a white label website that's just branded as "Barstool Sports Gambling." Let them handle the back end/software updates, and just control the demand gen & messaging.

LOW FIXED COSTS: Another licensing deal; just the opposite. Barstool licenses out their name to a gambling site for a fixed annual fee. Allows them to have a take, but have no downside. That said, it severely limits their upside as well; it's not like they can offer up their name to multiple sites, so they lose out on multiple revenue streams.

Love to hear others' thoughts on today's ruling. Who do you think were the winners, and losers? And what does the future look like??

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