On May 14, 2018, the Supreme Court of the United States issued a ruling in the case of Murphy v. NCAA overturning a 1992 federal law that prohibited states which had not legalized sports gambling from legalizing it in the future. The 1992 law allowed some states, most notably Nevada, to continue offering sports betting while it blocked others. The law’s overturning means that states that do not have legalized gambling can begin of passing their own laws to legalize the industry within their borders, thereby allowing people physically present to make wagers. This process will take a while, so legalized sports betting is likely a ways off in the future in most states.
Some states are further along than others, however. New Jersey, the defendant in Murphy v. NCAA had already passed a law to legalize sports gambling. That was the impetus for the Supreme Court case. The case having been ruled in its favor in May, New Jersey allowed sports betting starting in June. In the first month of operations, New Jersey casinos saw a total of $16.4 million wagered on sports betting collectively), in July “the handle” rose to $40.7 million, and most recently, in August, it was $95.6 million. Although these numbers are small compared to total payment volumes, the trend is clear and likely to continue as casino operators have more time to launch promotions and drive both awareness and interest.
General consumer awareness and interest will also be driven by the media’s willingness to cover what was once an untouchable topic. As discussed in a Washington Post article, Fox Sports 1 is launching a gambling show titled “Lock It In” and ESPN is launching a competing show called “I’ll Take That Bet.” Previous to the Court’s ruling, consumers had begun dipping their toes into quasi-legalized gambling with the rise of the daily fantasy sports sites DraftKings and FanDuel. DraftKings has already entered the sports gambling arena through a partnership with Resorts Atlantic City.
Sports gambling has been around for as long as sports have existed and has thrived despite the best efforts of regulators and various government agencies to stop it. With many of the barriers to entry for consumers rapidly falling away, sports gambling has a lot of opportunity in front of it.
Given that gambling typically involves large sums of money moving back and forth between the gamblers and the casinos, which make their money by capitalizing on a small advantage (profit on a bet, a.k.a. the “house edge”) over a high volume of transactions. This environment creates a great opportunity for payments companies. Depending on the circumstances, players or casinos may want payment options that are low cost, or provide instant clearing, or allow for payment with credit. The casinos and the payments companies that support them will want to make sure that they are offering the best possible services for their customers. Also, given the relatively high frequency of transactions, with betting on weekly football games and betting even more frequently on variety of other sports, this segment provides an opportunity for the payments providers to build brand loyalty with their consumer customers as well. As volumes continue to increase, it will be increasingly hard for payments companies to ignore this segment. As in any market, the first movers will have the biggest advantage.
One firm that sees the opportunity and has begun to capitalize on it is Worldpay. Worldpay, a payment processor with experience processing payments in Europe and around the world, recently merged with Vantiv, a U.S.-based payments processor. As covered in a recent PaymentsJournal article, the new Worldpay recently partnered with DraftKings to support DraftKings’ online gambling platform now active in New Jersey. Worldpay seeks to leverage its experience working with legal gambling operations in Europe to take the lead in the U.S. gambling market.