New Threat Emerges to US Legal Sport Betting Industry

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It seems like a lifetime ago that the US legal betting industry was in the midst of exponential growth and a feeling like it couldn't be touched. But then the unthinkable happened - sporting events around the globe were put on hold, casinos were shuttered and virtually the whole country went on lockdown with no clear idea of when things would return back to normal.

Sportsbooks were hit hard immediately with the lack of marketable, sellable live athletic events to promote and for bettors to wager on. But the hits just keep coming for an industry that has already lost somewhere between $350 million and $400 million. If it weren't bad enough that the sporting world is essentially shut down, but now comes word of a run of seasoned bettors either withdrawing their funds from betting accounts or closing them altogether.

Reality is setting in

The US has recently been through crisis but they had nominal effect on the betting industry as a whole. The September 11th attacks saw a brief pause in North American sports but the continuation of global sporting events. The 2008 financial crisis wasn't enough to bring the betting industry down and even the Route 91 Harvest Festival Shooting that killed 58 in Las Vegas in 2017 failed to derail sport betting in that town.

But COVID-19 offers up a totally new challenge. Firstly, there are almost no sports to still bet on. Secondly, unemployment is about to reach historic levels meaning that expendable income has become a thing of the past. And thirdly, nobody knows what the post-COVID world is going to look like.

Nothing in the last 50+ years has been able to shutter the Vegas Strip for 40+ days and maybe nothing ever will again.

The result

People are withdrawing their money from sportsbook accounts in droves. There is a common thought among industry insiders that: “run on withdrawals, in combination with account closures” is the biggest threat to the industry going forward. Without the NFL Draft taking place a couple of weeks ago, withdrawals from online casinos would have far outpaced deposits the last seven weeks.

It all started with a run on account withdrawals that corresponded with the panic and uncertainty that surrounded Black Thursday - the day that eight Major professional leagues announced a suspension of their seasons. Nobody can blame customers for emptying an account due to a lack of sports to bet on or using that money during tough times for some necessities.

An industry insider exec put it best when he said: “The worry about them [customers] taking money out and not putting it back because they were laid off, or they are not as flush as they were a few months ago, that’s across the board. That’s not only applicable for gaming, it’s also applicable for retail sports gambling, sporting events, movie theaters, shopping centers, and everyone else.”

One case study that has come forward is the small state of Rhode Island. It has seen sharp increases in the disparity between deposits and withdrawals. Obviously, there aren't a whole lot of depositors at this time of total sports shutdown! That said, the state reported $162,500 in withdrawals in the four days after Black Thursday and $286,000 since the middle of March which is a nearly 20% jump.

Optimism

The COVID-19 reality is starting to shift in the US toward a relaxation of the lockdown rules which is obviously good news for individuals and businesses alike. Hopes are that infection rates remain in decline so the relaxation measures can stay in place and even progress toward normalization.

Sports will quickly follow society's lead and hopefully make US bettors' reliance on Korean baseball, Ukrainian and Russian table tennis, Taiwanese basketball, Russian ice hockey, and English darts a thing of the past.

UFC 249 is planned for May 9 in Florida, German soccer is slated to come back in May, NASCAR has announced a couple of races and the PGA Tour will resume next month, albeit without fans. If the betting action on the NFL Draft taught us one thing - it's that people are sports-starved and eager to throw down a wager or two when permitted.

Conclusion

Despite the state of the sports betting world and the shape of our planet as a whole, there doesn't seem to be as much concern among gambling execs as one would think. Pent up demand for sports betting and a thirst for the games we didn't even know we loved this much will drive the gambling industry again according to those in charge.

Withdrawals from sportsbook accounts were bound to happen. The panic is understandable. But most gambling execs interviewed since the start of the coronavirus lockdown have preached patience and don't seem overly worried about their post-COVID reality. If they aren’t worried, we shouldn’t be either.

Sports will carry on… eventually and when it does there will be people to bet on them.

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