Eilers & Krejcik Gaming: The bottom line

We most recently published our first report into the growing lottery courier sector in the US. Here are five key takeaways:

More M&A is likely: DraftKings helped bring the sector into the spotlight with its $750m deal for courier market leader Jackpocket. DraftKings aims to cross-sell cheaply acquired courier players to higher value online gambling products like online casino — something which will appeal to a subset of the US online gambling industry and potentially spur further M&A. Couriers like Lotto.com and Jackpot.com could feasibly be take-out targets.

Size of the prize? We estimate US lottery courier revenue was $120m in 2023 and will rise to $778m in 2028, implying a five-year compound annual growth rate (CAGR) of 45%. We regard our estimates as conservative and believe wider distribution of courier scratch-off ticket services — along with significantly improved courier scratch-off product — could lead to a $1bn to $2bn revenue total addressable market (TAM). 

Products are ripe for disruption. We traveled to Texas to test courier apps. Our main finding: Jackpocket is a cut above the rest, offering the top-performing scratch-off ticket product and novel features, including sweepstakes contests. That said, it was clear to us that the courier product landscape is still taking shape, and that ample room exists for improvement, innovation, and even disruption.

The regulatory risk? Lottery couriers operate largely in the absence of specific statutes and regulations. The unsettled policy landscape creates opportunities (e.g. minimal or no licensing and product tax costs) but also threats (e.g. the potential for rapid TAM contraction). Thus far, states have shown little sign of shifting away from the status quo.

The bottom line: the lottery courier sector is a fast growing, lightly regulated part of US online gambling that likely holds some appeal for real-money online gambling operators looking to reach new customers with lower acquisition costs.

Sweepstakes are becoming too big to ignore

Between 2019 and 2023 in the US, real-money online casino (+88% CAGR) grew faster than either sweepstakes or social casino, per our estimates, thanks to the legalization of online casino gaming in Pennsylvania, West Virginia, Michigan, and Connecticut.

That said, sweepstakes grew at a similarly fast pace between 2019 and 2021 (+85% CAGR), while social casino has been a relative laggard (+7% CAGR) due to a variety of operational headwinds and the market being much closer to saturation.

In our Q1 2024 Sweepstakes Gaming Monitor report, we argue that with 2024 expected net revenue of ~$3bn, the US sweepstakes gaming market is becoming too big to ignore — both for companies in adjacent sectors like real-money online gambling, as well as regulators. 

Indeed, last year, the Michigan Gaming Control Board sent cease-and-desist letters to at least Sweepstakes Limited (Stake.us) and VGW Luckyland, which resulted in most sweepstakes operators withdrawing from the state. 

We view states with regulated online casino interests as somewhat more likely to take similar steps, posing some regulatory risk.

However, we could also see sweepstake operators as potential M&A targets for online gambling companies, which are increasingly expanding into non-core verticals like lottery courier, skill games, and horseracing. 

The bottom line: the sweepstakes gaming industry is booming but that success might be a double-edged sword, with increased potential for lucrative exits but also potential for more regulatory scrutiny.

Who has the best US online sports betting app?

The results are in from our H1 2024 sportsbook product testing, and it’s a familiar one-two, with FanDuel and DraftKings atop the standings, in that order. 

FanDuel was exceptional across the board, topping the ranks for the fifth straight time, while DraftKings also improved its score from H2 2023, becoming faster and easier to navigate.

There’s a new face on the podium, with bet365 taking over third place from PointsBet, which slipped to fourth. Bet365 earned praise for its in-app speeds, vast array of betting markets, easily editable betslip, and being able to reuse previous wagers with a quick one-tap feature.

Hard Rock Digital also made waves, finishing in the top five for the first time. Hard Rock was ranked 26th in the H1 2022 edition of the report but has tracked upwards ever since. Testers specifically praised the app’s live betting, loading times, and high uptime cash-out. 

The spotlight has been on ESPN Bet and Fanatics, as the newest big players to enter the market. Do the apps show promise? Indeed, they do, though more so for Fanatics (finishing sixth overall) than ESPN Bet (11th). 

Fanatics had snappy initial opening times, a quick login process (with automatic biometric prompts), a strong SGP and a highly regarded search option. One of their more divisive elements is the home page, which combines elements of news, live content, markets, promoted bets, and city skyline imagery—creating a unique but unintuitive navigational situation.

Meanwhile, testers liked ESPN Bet’s UX and minty aesthetic, but felt the app lacked depth (particularly more extensive features).

For every riser, there’s a faller. BetRivers and BetMGM have slid down the rankings in recent reports to eighth and ninth respectively. Testers suggested these apps felt “frozen in time” somewhat and (at least outwardly) lacking major updates that would excite players.

Eilers & Krejcik Gaming LLC is an independent research and consulting firm with branches in Orange County, California and Las Vegas, Nevada. The firm’s focus is on product, market, and policy analysis related to the global regulated gambling market.

Clients include operators, suppliers, private equity and venture capital firms, institutional investors, and state governments. To learn more about the firm, visit www.ekgamingllc.com.