Morgan Stanley believes the outlook for the domestic sports wagering industry is crystallizing, prompting the investment bank to boost its revenue projection for the business to $7 billion by 2025. That’s well above the firm’s forecast of $5 billion issued in June 2018 and reiterated last December.
The Wall Street house acknowledges that the pace of legalization has been slower than it expected, as 13 states currently have operational sports betting with several others, such as Montana, New Hampshire and Washington, DC, inching closer.
Morgan Stanley also noted that its initial estimates overlooked a couple of important factors, namely the potential for bettors in Australia and the UK to “redistribute” wagers to American sports, and the ongoing boom in the online betting market. A research note obtained today by Casino.org features Morgan Stanley’s first data sets that separate online and mobile from brick-and-mortar sportsbook estimates.
We expect online sports betting revenue to reach $5B in 2025, and onground revenue to reach $1.5B,” said the bank. “For the first time, we are forecasting online vs. onground revenue separately.”
Based on the assumption that by 2025, 36 states will have approved sports wagering, the brokerage firm estimates that in that year, the average online or mobile sports betting spend will work out to be $52 a year per adult in those states. That compares with the current rate of $40 in New Jersey and $45 and $43 in Australia and the UK, respectively.
Ambitious Forecasts
The projection that 36 states will have signed off on sports betting by 2025 is aggressive. As mentioned above, 13 states currently have it up and running. Then there’s the group of Illinois, Montana, New Hampshire, North Carolina, Tennessee, and Washington, D.C. that are likely to enter the fray in the coming weeks or sometime next year.
Tomorrow, voters in Colorado will consider Proposition DD, a referendum aimed at permitting sports betting to raise money for the state’s water budget. But even if all the states just mentioned and Washington, D.C. come online, that only brings the total with sports betting to 20, leaving a big lift to get to 36 by 2025.
This year, eight states didn’t even consider sports betting legislation, a group including Florida, which ranks third by population. Another 18, including Texas, the second-largest state, have sports wagering bills that are considered “dead.”
In the research report, Morgan Stanley does not mention the fate of sports betting in the “Big Three” of California, Texas, and Florida. In the Golden State, there is momentum for putting the sports wagering question to voters on the 2020 ballot.
Even More Ambitious
Morgan Stanley said that if all 50 states sign off on sports betting between now and 2025, the US market could swell to $15 billion. Casino.org inquired about the odds of that happening, but a representative from the bank said analysts weren’t available to comment on those probabilities.
The bank added that its worst case scenario is a $2.5 billion domestic sports wagering market in 2025, one that assumes only 22 states will have legalized it.
Pointing to Delaware, Mississippi and West Virginia, Morgan Stanley notes “meaningful revenue has not materialized in a number of smaller states, disincentivizing other states to legalize.”
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