Can the US Sports Betting Industry Survive A Recession?

The US sports betting industry is facing its most formidable economic challenge yet.

A US-initiated trade war has led to eye-popping tariffs enacted worldwide, threatening to send the country into a recession. While that is far from certain, a stubborn President and warnings from major financial firms make it seem more likely each day. 

With Americans looking to tighten up their finances, can the country’s thriving sports betting industry survive?

Industry Grew Despite COVID Fallout

The sports betting industry faced an early test when the COVID-19 pandemic hit. Although it massively damaged the US economy, it didn’t stop many Americans from wagering on sports. 

While that success is a promising sign, that test came as the industry was still in the early stages of expansion. Now, most states have some form of legal sports betting, meaning the initial excitement has worn off. With many American bettors now used to legally placing wagers, it may be easier for them to cut the hobby out as the economy continues to sink.

Retail Operators Taking Biggest Hit

The biggest threat from a recession would be to retail sportsbook operators. Many import equipment and other goods to support their operations, but those costs are about to skyrocket. We have seen MGM, Caesars, and Wynn suffer massive hits despite tariffs being in effect for less than a week.

This will likely lead many operators to focus on their online platforms. While the online industry will also feel the effects, it will have a smaller financial impact. We have seen that already with DraftKings and FanDuel, whose stocks dipped far less than the Nevada-based operator.

Will Online Sports Betting Remain the Same?

The online sports betting industry is currently dominated by FanDuel and DraftKings, making it hard for the rest of the sector to compete. Since the industry leaders started as online operators, they don’t have the same retail presence. That will protect them from rising tariffs, unlike most of the industry.

The result could be that the competitive balance is further trending in the wrong direction. With other rivals facing tough financial decisions, it could lead to them deciding to pull out of the US market altogether. 

While niche platforms will always have a place in the US market, the rest of the pack could be thinned out over the coming months.