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How much sportsbooks actually make when you wager

New York enjoyed its biggest mobile sports betting month of the current fiscal year in October. It took in a handle of more than $1.5 billion, which translated to a $74 million windfall for state education. That same month, Caesars Sportsbook made a little more than $7 million in revenue. And Caesars is one of the biggest names in the American mobile sports betting industry. It’s not easy to look at the gross number and see how much sportsbooks actually make as profit.

For some smaller operators, the numbers were even lower. Rush Street Interactive’s BetRivers platform reported $894,138 in October revenue, according to the New York State Gaming Commission. At that time, WynnBET reported $257,711 and Resorts World $227,036 in revenue. And those numbers reflect revenue, not profit – which is what’s left over after a business removes all expenses, debts and operating costs.

It’s all evidence of the low margins at which U.S. mobile sportsbooks operate. And that is even during a blockbuster month in the country’s biggest mobile betting state. New York’s tax rate of 51% is the highest in the nation. The industry’s bigger names tend to pull in bigger revenue numbers. For example, FanDuel reported $37 million in October revenue in the Empire State. So the millions and billions in betting activity reported each month do not necessarily reflect the operators’ bottom lines.

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How Much Sportsbooks Actually Make: An Expensive Business To Run

“Sports betting is an expensive venture,” Steffi George and Tamara Savin Malvin of the Miami-based law firm Akerman LLP recently wrote in an opinion piece at Bloomberg Law. “Much of the handle is returned back to the customers. The hold, or revenue actually kept by the sportsbooks, is but a fraction of the handle generated.”

Again consider the case of New York. Its October mobile betting handle of $1.543 billion resulted in gross revenues of $145 million. But that total was to be divided between all operators and the state. It’s a similar story at the opposite end of the range in a state like Iowa. It has one of the nation’s lower sports betting tax rates at 6.75%. The Hawkeye State saw $212 million in mobile sports betting handle in October, $196 million of which was paid out. That left $16 million in revenue to be split among 19 operators and the state.

And out of that revenue, “high costs of operation must be paid,” George and Malvin wrote in Bloomberg Law. “Aside from typical operational costs, expenditures toward customer acquisition have curtailed profitability. To operate in this highly regulated industry comes at a significant regulatory price via licensure fees and taxes, as well as costs associated with compliance and responsible gambling requirements.”

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Revenue just 8% of handle

As more states launch legal sports betting, the total revenue continues to grow. The $4.29 billion in sports betting revenue in 2021 was a 177% percent increase over the number in 2020. That number is from the American Gaming Association. And it represents just 8% of the $57.2 billion in legal sports betting activity from that same year.

“It’s a low-margin business for sportsbook operators,” Bill Miller, chairman of the AGA, told Yahoo Finance. “There are some times when sportsbooks make money, and there are some times when sportsbooks lose money. And so the reality is, unlike with a slot hold or a table hold, the percentage of revenue, vis-a-vis the overall handle, is always going to be a small number.”

Gareth Core, senior director of product and operations at FanDuel, spoke at the SBC Summit in Spain in September. He said that the margins taken by sportsbooks have slowly increased from 3% to 6%. FanDuel has a target of 12%. And it will rely on a mobile sportsbook that’s among the most popular in the industry.

“We don’t see iGaming going much further than where it is today in 2023, or possibly even 2024,” Core told the conference. “We see sports betting continuing to be the buzzword in 2023, as it is today.”

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