Bet365 is slowly creeping into the American market, but North Carolina may not be an easy fit for the British sports-betting giant.
After a launch in Iowa, Bet365 is live in five US states, including New Jersey, Colorado, Virginia and Ohio.
Recent analysis from Earnings + More, a betting and gaming industry newsletter, indicates that with those five states, Bet365 in June has claimed 8% of the total US online sports betting market share. While just a single-digit share, Bet365 sits behind only FanDuel (29%), DraftKings (23%) and BetMGM (19%).
All five states where Bet365 operates have favorable laws for a sportsbook of its profile – money to spend and a lot of market share to consume. Bettors wondering whether they’ll see Bet365 North Carolina go live when sports betting launches in 2024 should know that the British giant may not find such favorable footing regarding the Tar Heel State.
Promo deductions are a big reason for Bet365’s growth
Four of the five states where Bet365 is live offer some form of tax relief for promotional spending. The fifth, Ohio, will phase in tax credits for promo spending, beginning in 2027.
Why is this important?
Promotional offers are ways sportsbooks attract new customers. Free money, bonus bets, deposit matches and the like give sports bettors interested in trying a new sports betting app a way to sample the product with little risk involved.
Bet365, one of the biggest online sportsbooks in the world, is just cracking the American market and trying to make up ground fast on industry leaders FanDuel, DraftKings and BetMGM. Spending on promo offers is a vital tool for it to make up that ground. And, boy, is it spending.
Data from Ohio, the only state where Bet365 is live that records revenue by operator, shows that for the year to date, Bet365 has grossed $193.1 million in total sports bets and given out $51.3 million in promo offers. That constitutes 26.6% of its total gross revenue.
By comparison, BetMGM, its closest competitor, grossed $250.1 million and gave out $42.8 million in promotions – 17% of its total gross.
FanDuel and DraftKings, both well-recognized brands in the American market, spent much less on promo offers.
A correlated data point noted by Eilers & Krejcik Gaming analysts has Bet365 “achieving the highest hold in Ohio at 18.5%.”
Hold, or the amount retained by a sportsbook after bets are paid out, may be so high for Bet365 because of the number of players using bonus bets and other promo options to try some of the higher-priced betting options that they’d otherwise shy away from with their own money.
Bet365 is likely hoping for this. In a US market five years post PASPA, sports bettors are seeing some of the novelty of betting apps wear off and are becoming more discerning with the quality of their apps. The more people get to know Bet365 and the betting products it offers, the more confident Bet365 is that its quality product will start converting users.
Zooming out from the Buckeye State
If this is the case in Ohio, where promo spending is currently taxed, it is almost assuredly the case in the other four states where some form of a tax break is given to online sportsbooks offering promos.
When looking ahead to the launch of online sports betting in North Carolina, Bet365 and other sportsbooks seeking to benefit from promotions would not receive any tax deductions for offering them under North Carolina’s sports betting law. Will this ultimately be a detractor for the international giant? Or will the lure of operating in the country’s ninth-most-populous state outweigh the higher tax rate?
While that trade-off is important, there is more to the picture for Bet365.
North Carolina would be one of the highest-taxed states for Bet365
North Carolina will tax sports betting operators at an 18% tax rate. That is not an exorbitantly high tax rate on a national level, but when looking at the states where Bet365 is trying to make a stand, it is. Of those five states, only Ohio will have a higher tax rate (20%) than North Carolina, and Ohio will eventually allow for promo deductions. The other states, all of which offer some form of promo deductions right now, levy the following taxes on online sports betting:
- Iowa: 6.75%
- Colorado: 10%
- New Jersey: 14.25%
- Virginia: 15%
Coupled with the promo deductions, the lower taxes provide a further cushion for a sportsbook needing to spend big to increase market share. This is a sweet spot for Bet365 – a sweet spot that North Carolina does not occupy but could have.
State Senate changed tack for NC sports betting bill
When House Bill 347, North Carolina’s online sports betting bill, first breezed through the House, Rep. Jason Saine, the bill’s principal sponsor, had included a 14% tax rate for online wagering and the inclusion of tax deductions for sportsbook promo spending.
However, when the North Carolina Senate got ahold of the bill, it made a number of key changes, including raising the tax rate to 18% and removing the provision that allowed for promotional deductions.
The Senate’s changes speak to the trade-off, one where a state either tries to be operator friendly by keeping the cost of doing business low or resident friendly by prioritizing tax revenue.
In the case of North Carolina, the Senate’s changes indicate an inclination towards the latter.
Biding its time could pay off for Bet365 in North Carolina
As Legal Sports Report noted in its 2022 assessment of Bet365’s place in the US market,
“Patience is one of the few edges Bet365 has in the US,” LSR’s Brad Allen said. “Competitors might have massive casino footprints or a DFS customer database, but they also have shareholders to appease.
“Bet365, on the other hand, is privately held by the UK-based Coates family and takes a long-term view.”
That long-term view has involved picking and choosing the states with low taxes and the opportunity to spend heavily on brand building through tax-deductible promo offers.
While North Carolina doesn’t fit that immediate profile, it is a populous state with a diverse sports fan base that ranges from the Cameron Crazies at Duke to the Storm Surge in Raleigh to any number of NSFW NASCAR fan-group nicknames. That combination led fiscal analysts to project that North Carolina sports betting could generate over $100 million in tax revenue by its fifth year.
A compelling market, but is it enough to tempt the British-based giant?
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