The rapid growth of the sports betting sector in the United States has been impressive, with 32 states legalizing some form of sports betting and 28 of them offering mobile or online access. However, according to Paul Girvan, early leaders in the sector are facing trouble on the horizon.

The market has been dominated by a hierarchy of operators that have gained access primarily through partnerships with land-based casino operators, both tribal and commercial. While eight states are considering passing legislation, there is a group of states that have been resistant to legalizing sports betting, including Minnesota, Oklahoma, and California.

The intense competition among operators has led to the massive growth in sports wagering but has also resulted in huge sign-up bonuses for new players, driving cost per acquisition (CPA) to astronomical levels often exceeding $1,000. As a result, major sports book operators like DraftKings, Caesars Interactive, and Flutter Entertainment’s US division have reported significant losses.

The companies justify these losses as part of a predesigned strategy to capture market share in the early years of market entry. However, the losses are not sustainable, and some operators have either pulled out of the market or curtailed their efforts. Observers have suggested that consolidation is inevitable.

The US sports betting market can be characterized into six tiers, each subject to differing influences. Tier one includes leaders like DraftKings and FanDuel, while tier two consists of PLC challengers like BetMGM and Barstool/Penn National Gaming. Tier three includes omnichannel converters such as Caesars and Golden Nugget, while tier four consists of newcomers like PointsBet and Kindred. Tier five includes land-based operators, while tier six is made up of the black market.

Four areas of turbulence can be predicted in the US sports betting market, including the unsustainable losses of major companies, opportunities for other competitors to make gains, a return to sustainable marketing practices, and an increased focus on ROI. Overall, there is trouble on the horizon for early leaders in the US sports betting sector.

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