SBJ Betting: October smashing U.S. handle record

With Illinois and Arizona still to report, it’s clear that October will be the busiest betting month ever in the U.S., with at least 16 states breaking monthly handle records.

Tops among them was New York, which took $2.3 billion in wagers, eclipsing the $2.1 billion in November 2023. Massachusetts, Virginia, Maryland and Indiana all topped $500 million on the way to state records. October handle in 31 states and D.C. stood at $12.97 billion, well within range of the $14.47 billion record set in November 2023. Illinois and Arizona handled a combined $2 billion in September.

Some of the October surge was driven by luck. Lest we forget, even the most tightly tuned predictive algorithms miss on occasion. They missed badly enough in October that DraftKings  toggled its 2024 revenue projection down from a peak of $5.25 billion to a range of $4.85 billion to $4.95 billion. FanDuel lowered its revenue guidance for the year by $50 million, to $6.15 billion.

Looking at it more broadly, hold rate -- the percentage of handle that the sportsbooks kept as gross revenue after paying winners -- fell to 7% in October, down from 11% in September. Last year, hold was a consistent 9% in both September and October.

The impact on handle? When bettors win more, they wager more, especially in the first couple of months of football season when most are thinking about building their accounts rather than withdrawing profits.

More than meets the eye

The record October almost certainly was driven, in part, by the low hold. But there is more than that going on here.

October is up 12% over last October. September was up 15% over the previous September. The three summer months were up 28%, 25% and 29%, respectively, compared to the 2023, completing a five month run of 20%+ year-over-year growth. All of those figures tease out states that were not open the previous year (North Carolina, Maine and Vermont).

Yes, each state that legalizes boosts the addressable market. But there also has been considerable growth in states that have been open for more than a year -- and in some cases four, five or six years.

In an investor day presentation in October, FanDuel execs pointed to data from the 350,000 customers who opened accounts in 2019, a cohort that has delivered an annual growth rate of 19% and has continued to tick up in 2024. DraftKings also has pointed to continued growth among its early cohorts.

To gauge how that has played out more broadly, I dug into handle data from each September since the first legal U.S. sportsbooks opened in 2018, grouping states into cohorts based on the year in which they launched. Those that opened in November or later were grouped with others that began the following year.

Each cohort’s path has differed slightly from the others, but there is this commonality to take away: With the exception of 2018 sole-proprietor New Jersey, a unicorn by virtue of its proximity to New York, each cohort -- and, in fact, each individual state -- continued to grow by double digits this September, compared to last.

That includes states in their sixth football season (up 15%), fifth, fourth and third seasons (up 18% each) and second season (up 26%). States in which sportsbooks have been taking bets for five years or less have seen double-digit year-over-year growth in 37 of 40 September entries.

The largest growth spurts have come as more states have legalized. There could be another spate of those in 2025, with Texas, Georgia and Minnesota all in play. But in the last 21 months, only one top 10 market has opened: North Carolina. And yet betting continues to increase at a double-digit annual rate, even in states that some may have thought of as “mature” at this point.

A cohort-by-cohort look

2018 (New Jersey): West Virginia and Delaware also took bets in 2018, but the former was a first mover that declined quickly when a neighboring state legalized and the latter remained retail-only until the end of 2023. So for our purposes, we’ll focus on New Jersey. The OG of online sports betting states has seen September handle increase fivefold since taking its first bets in 2018, rising 142% in Year 2, 68% in Year 3 and 35% in Year 4. Even with the competition from New York, New Jersey has managed to break $1 billion in September in two of the last three years, and was back to pre-New York levels this September.

2019 (Pennsylvania, Indiana, Iowa, Oregon, Rhode Island): The five states that opened in September or October of 2019 have seen handle increase nearly fourfold since then, with a 135% increase those months in Year 2 and 61% increase in Year 3. Importantly, all five grew by double-digits this year, in what was the start of their sixth football season. Indiana (+25%) benefited from a record October, but Pennsylvania and Iowa were up 12% and 10%, respectively, this September.

2020 (Illinois, Colorado, New Hampshire): We’re not going to include Class of 2020 member D.C., which opened with a convoluted regulatory framework that depressed handle and has gone gangbusters since opening online wagering to the leading commercial operators earlier this year. Without the nation's capital, the three states that opened that year have seen September handle increase 254% across five football seasons. They nearly doubled in Year 2, then rose 27%, 21% and 18% in the last three years. Illinois increased 40%, 29% and 23%, respectively, the last three Septembers.

2021 (Arizona, Virginia, Michigan, Tennessee, Wyoming): The year that brought legalization in four states that hover around the dozen busiest also yielded faster starts than in those that opened previously, as well as a slower annual growth rate. It has taken three years for the Class of ’21 to double the handle of their first September. That said, growth has been steady: A Year 2 September increase of 36%, followed by 21% last year and 18% this year.

2022: (New York, Louisiana, Kansas, Connecticut, Arkansas): Anchored by the No. 1 U.S. betting market, the 2022 cohort has progressed at a similar pace to the 2021 states, growing by 39% in September of Year 2 and 18% this year.

2023: (Ohio, Massachusetts, Maryland): Perhaps because they legalized after most of the surrounding states already were up and running, the three states that launched in 2023 grew at a more modest 26% from Year 1 to Year 2. Massachusetts had the biggest gain this September, rising 33%. Ohio grew 25%; Maryland 20%.

The days of a state doubling its handle in its second year likely are behind us, largely because they’re getting off to much faster starts. But the fact that Massachusetts opened its second football season with a record $678 million handle, and then backed that up with $748 million in October, that Illinois grew by 23% at the start of its fifth football season, and that 16 states, including Pennsylvania (Class of ’19) have seen double-digit year-on-year growth every September since opening are all indications that the growth curve of most states will extend well beyond the first few years.

The latest states reporting puts U.S. handle for October at $12.9 billion, with two states still to report -- Illinois, the No. 2 U.S. market, and Arizona, which typically ranks between fifth and seventh. 

• The Atlanta Journal-Constitution has an op-ed from Georgia state Sen. Brandon Beach written under the header, "The Georgia swing voters who helped elect Trump want sports betting."

• DraftKings has completed its acquisition of Simplebet, a B2B provider of automated, in-game wager pricing, reports SBJ's Chris Smith.

• Horizon Sports & Experiences released a new study, "The Women’s Sports Opportunity," and found a 40% year-over-year increase in betting volume in women’s sports, partially driven by a 500% increase in bets placed on the 2024 NCAA women’s basketball championship, notes SBJ's Mollie Cahillane.

• Sportradar will leverage generative AI to create personalized audio advertisements for sportsbook operators, adding to its multichannel marketing service, notes SBJ's Rob Schaefer.