Wagering on the US Sports Betting Market? Take the Over

Dennis Huang
Fourth Realm
Published in
4 min readNov 4, 2020


Fourth Realm is a venture capital firm that focuses on how humanity’s interaction with productivity, community, and commerce will evolve. Recently, we explored our relationship with sports and fandom through the lens of sports betting.

Photo by Dave Adamson on Unsplash

As Americans, we have always had a complicated relationship with sports gambling. On one hand, it can be unsavory — think of the Black Sox, Pete Rose or Tim Donaghy. Hell, even my alma mater Boston College was involved in a point shaving scandal in the 70’s (briefly mentioned in Goodfellas).

On the other hand, sports betting is deeply ingrained in our culture. We love it! We’re degenerates. The first horse racetracks in the US predate the founding of the nation. We hungrily pool our money together for March Madness every year, despite the NCAA “urging” us not to. Illicit gambling has become so popular that the American Gaming Association estimates the illegal sports betting market to be $150 billion.

In May 2018, the SCOTUS issued Murphy v. National Collegiate Athletic Association, a decision that held the Professional and Amateur Sports Protection Act (PASPA) to be unconstitutional. As a result, the decision opened the door for state-sponsored sports betting. This nascent market had less than two years to grow before COVID-19 struck. Would bettors still be there as sports have returned?

As you can probably guess, yes. They were. In fact, demand is higher than ever. For example, New Jersey just reported a record high $748M in sports bets in September. Indiana similarly also posted a record high $206.8M in sports bets, eclipsing their pre-COVID high of $186.0M.

Despite these record breaking numbers, here are three main reasons why this recent jump in numbers is just the beginning:

Sports betting is legal in only 18 states (plus Washington, D.C.)

This one is simple. With only less than half the country having legalized sports betting, and up to 13 more states considering legalization, it is inevitable that the number of US bettors will increase.

An important policy consideration about the US’ state-driven (as opposed to federally-led) approach to sports betting is that the country will have a patchwork of legislation that will no doubt frustrate operators and leave some states better suited for gambling than others.

Mobile betting

It may seem odd to be highlighting “mobile” as a growth vector in today’s world, but because PASPA severely held back the industry for so long, even seemingly obvious moves like this one represent significant expansion opportunities.

New Jersey is the shining example here: not only were 84% of the $4.6B wagered in its sportsbooks placed online in 2019, the online boom led it to outperform in tax revenue collection as well. States without mobile betting are not faring nearly as well, and it’s estimated that New York lost ~$6M in tax revenue as a result of residents going to New Jersey to place bets.

Despite the clear advantages mobile betting provides to states, on-site (i.e casino) gambling is still the norm. It’ll take some time for policymakers to come around to accept mobile betting. Until then, we’re left with odd rules like those in Mississippi, where mobile betting is allowed, but only on casino grounds.

Gambling-adjacent markets:

At the end of the day, not everyone can run a sportsbook, but there are plenty of opportunities in gambling-adjacent markets:

  1. Infrastructure: Backend plays aren’t the sexiest, but they can be lucrative (there’s a reason B2B SaaS companies are trading so highly!). As more sportsbooks go online, the infrastructure powering them can’t be ignored. DraftKings made infrastructure a core investment thesis via their acquisition of SBTech. Infrastructure can encompass everything from payment rails and anti-cheating software to oddsmaking and geo-fencing.
  2. Content: Not only have startups like Barstool and Action Network found success as a gambling-centric content destinations, they have been so successful that Penn Gaming acquired a 36% stake in Barstool earlier this year.
  3. Major sports publications like ESPN, The Athletic and Bleacher Report have all expanded their gambling coverage as well. And, in a perhaps gambling related move, ESPN has moved many of their major content creators and shows behind a paywall to their ESPN+ subscription service.
  4. Betting Data: With more and more sportsbooks, gamblers will want a way to find the best odds. Abe is an example of odds aggregation, and Action Network does something similar.
  5. As the scope of sports gambling expands to encompass other sports, like golf, tennis and e-sports, supplying more niche data will turn to a competitive edge as well.
  6. Customer Acquisition & Retention: As more casual gamblers enter the market, sportsbooks will want ways to identify, segment and retain those customers– expect this challenge to grow in complexity as more states come online. As an example, if New York okays mobile gambling, what can New Jersey sportsbooks do to keep their existing customers from across the river?
  7. Gambling Addiction: Unfortunately, gambling can be addictive and harmful. Casinos will need ways to detect and help problematic gamblers, and ideally there would be a national system that applies across all states.

America is finally embracing its love affair with sports gambling. There’s still a long, winding road ahead, but this market’s potential is undeniable. As much as I can’t wait for California to finally legalize sports betting (please), I’m equally as excited to see what innovations come out of this market in the coming years.

Are you a founder, an industry expert, or someone who’s passionate about sports gambling? Reach out to me at dennis.huang@fourthrealm.vc or partners@fourthrealm.vc — I’d love to chat with you!