Every sports bet is a gamble, even 'risk-free' ones
As I report in The Washington Post, sportsbook operators are enticing customers with increasingly complex promotions. Some call these offers predatory.
MINUTES after wrapping up my latest story with my Washington Post editor, Dan Steinberg, I heard that FanDuel’s “Santa” would be bringing Americans more than $20 million in “gifts” this holiday season.
The offer from the largest U.S. sportsbook operator epitomizes an increasingly popular type of promotion that critics say is misleading, predatory, and can incentivize reckless betting. Count among those critics the regulatory commission in Ohio, where mobile sports betting goes live on New Year’s Day.
As I report in the Post today, a “free bet” isn’t really free and a “risk-free bet” can be risky, despite what inexperienced bettors might assume. You could add to that list the fact that FanDuel’s “gifts” come with serious strings attached.
What did Santa Charles Barkley bring for new customers? A “no-sweat first bet” of up to $2,500. This souped-up version of FanDuel’s typical sign-up deal might sound like a refund of up to $2,500 if a person’s first bet loses. Not quite. Instead, a losing bet returns up to $2,500 in non-withdrawable “free bets.” Lose the “free bets” and walk away empty handed. In other words, there’s still plenty of opportunity to sweat.
FanDuel didn’t comment. This past summer, CEO Amy Howe told The Wall Street Journal that the betting industry needs to “grow up” — implying that being straighter with promotions was part of that.
FROM 2018 TO 2020, sportsbooks courted new customers with eye-popping deposit bonuses that in some cases basically were free money. Because the average recreational customer bets about twice as much through their first sportsbook as they do anywhere else, and because the average bettor only opens about two to four accounts, operators believed $1,000-plus was a defensible customer acquisition cost. Promotions essentially became a way of bidding for new users.
I lived in Brooklyn when mobile sports betting became legal there. Caesars offered New Yorkers a $3,000 deposit match, and other operators paid up to $100 to each referred customer and their referrer. But friends of mine who have zero interest in betting mostly declined to exploit these deals. Frustrating as it was to see people leave money on the table, I understood their skepticism. It probably sounded too good to be true … like a scam. I’m sure their doubts grew upon learning that opening an account requires giving SSN digits and other sensitive information.
But New York is filled with financially savvy people who lapped up these deals, and despite gaining an impressive early share of a lucrative new market, Caesars quickly reigned in its promo. (However, Caesars CEO Tom Reeg later said that the average customer only deposited $450, despite a deposit match up to $3,000 — underscoring the fact that most people fail to fully leverage even the most basic deal.)
As sportsbooks face growing pressure to turn a profit, can’t-miss promotions are disappearing. Competition for new customers is still fierce, of course, but the latest offers sound quite generous while being much more advantageous for the operator than prior promos. Most “free bets” do indeed improve the bettors’ chances; the question is whether they swing the odds enough to actually make a bet worth betting, and whether novices understand the risk involved. Like so much of gambling, it seems a small group of shrewd, disciplined bettors profit off of promos, while most people are baited down a path toward losses.
As always, I appreciate the generosity of everyone who spoke with me, including those I wasn’t able to quote. Especially grateful to regulatory officials in Colorado, Connecticut, Maryland, New Jersey, Ohio, and Pennsylvania for answering questions.
THIS IS MY FIRST Substack post, and since I know we all have crowded inboxes, I’ll try to keep my emails limited to when I have new pieces to share. In time, I might offer the option of more frequent emails specifically about the sports betting business.
If you’d like to talk about anything you think merits coverage, please write me at dannyfunt1 [at] gmail.com.
Thanks for reading! Wynnie wishes you a happy new year.