Sports Betting Consolidation: DraftKings and FanDuel Squeeze Out Rivals
Since the Supreme Court struck down the federal ban on sports betting in 2018, dozens of companies rushed to launch mobile gambling apps. Today, that crowded market looks entirely different. DraftKings and FanDuel have established a dominant duopoly. They are actively squeezing out smaller rivals who simply cannot afford the astronomical marketing budgets and strict regulatory costs required to survive.
The Reality of the Sports Betting Duopoly
If you watch any live sporting event on television, you will see ads for DraftKings and FanDuel. This relentless visibility translates directly into market dominance. Currently, DraftKings and FanDuel control roughly 70 to 75 percent of the legal online sports betting market in the United States.
FanDuel, which is owned by the global gaming giant Flutter Entertainment, typically holds the number one spot for market share. DraftKings sits comfortably in second place. Traditional casino brands like BetMGM and Caesars Sportsbook fight over the remaining scraps, battling for the third and fourth positions. For everyone else, the math is starting to look impossible.
The Crushing Cost of Customer Acquisition
The primary reason smaller sportsbooks are failing is the sheer cost of acquiring new users. In the business world, this is known as Customer Acquisition Cost (CAC). To get a new bettor to download an app and make a deposit, sportsbooks must offer aggressive promotions.
A few years ago, it was common to see “risk-free” bets up to $1,000 or massive deposit matches. These offers cost the companies hundreds of millions of dollars. DraftKings, for example, reported spending nearly $1.2 billion on sales and marketing in 2023 alone.
Smaller companies cannot burn cash at this rate. When an independent sportsbook tries to enter the market, they face several heavy expenses:
- Sign-up Bonuses: Giving away $200 in bonus bets to every new user immediately puts the company in the red.
- National Advertising: Buying airtime during NFL or NBA games requires massive upfront capital.
- Celebrity Endorsements: FanDuel pays high-profile figures like Rob Gronkowski, while DraftKings employs Kevin Hart to push their brands.
Unless a company has a war chest of billions of dollars, they cannot compete with this level of marketing spend.
Regulatory Nightmares and Heavy Taxes
Beyond advertising, the sports betting sector is highly regulated. Unlike a typical tech startup that can launch a website globally in one day, sportsbooks must launch state by state. Every state has its own gaming commission, its own set of rules, and its own licensing fees.
Taxes are the ultimate hurdle. In New York, the state taxes gross sports betting revenue at a staggering rate of 51 percent. Pennsylvania taxes it at 36 percent. When the government takes half of your revenue right off the top, you need incredible volume to turn a profit. DraftKings and FanDuel process millions of bets daily, allowing them to absorb these high tax rates. Smaller sportsbooks simply do not have the volume to survive a 51 percent tax hit.
The Casualties of Consolidation
Because of these extreme financial pressures, we are seeing a wave of closures and acquisitions. Companies that launched with high hopes in 2019 and 2020 are now throwing in the towel.
- PointsBet: Once seen as a rising star with unique betting features, PointsBet realized it could not sustain the marketing spend required to compete. In 2023, the company sold its United States operations to Fanatics for $225 million.
- WynnBET: Despite being backed by a luxury Las Vegas casino brand, WynnBET announced it would shut down its sports betting apps in several states, including Massachusetts and Colorado. The company cited the steep financial requirements of user acquisition.
- Fox Bet: Backed by the massive Fox media empire, this app failed to gain serious traction and completely shut down its operations in the summer of 2023.
- Barstool Sportsbook: Penn Entertainment bought Barstool Sports to launch a betting app, but eventually realized the brand was not converting enough bettors. Penn sold Barstool back to its founder for one dollar and signed a new $1.5 billion licensing deal to rebrand as ESPN Bet.
The Fanatics Wildcard
The only company currently attempting to disrupt the DraftKings and FanDuel duopoly is Fanatics. Fanatics took over the PointsBet infrastructure and is uniquely positioned to bypass standard marketing costs.
Instead of spending billions on television ads, Fanatics already has a massive database of sports fans who buy jerseys and hats from their e-commerce store. They are offering merchandise discounts (like $150 toward an NFL jersey) in exchange for signing up for their sportsbook. This creative approach to customer acquisition might be the only way a new competitor can survive in today’s market.
What This Means for Everyday Bettors
For the consumer, market consolidation is rarely a good thing. When DraftKings and FanDuel have fewer rivals, they do not need to fight as hard for your business.
Bettors are already seeing the effects of this duopoly. The wildly generous $1,000 sign-up bonuses are largely gone, replaced by smaller “Bet $5, Get $150” offers. Furthermore, without smaller sportsbooks competing on odds, the major apps have less incentive to offer the best possible prices on games. Instead, DraftKings and FanDuel are heavily pushing Same Game Parlays. These parlays offer huge potential payouts for the bettor but carry a much higher profit margin for the sportsbook.
Frequently Asked Questions
Why are smaller sports betting apps shutting down? Smaller apps cannot afford the massive marketing budgets required to acquire new customers. They also struggle to remain profitable under the heavy tax rates imposed by states like New York and Pennsylvania.
Who currently dominates the US sports betting market? FanDuel and DraftKings dominate the market. Together, they control roughly 70 to 75 percent of all legal sports betting in the United States. BetMGM and Caesars hold the third and fourth spots.
Will sports betting promotions go away completely? Promotions will not disappear entirely, but they are becoming less generous. Instead of massive risk-free bets, sportsbooks are now offering smaller, targeted bonuses to ensure they can achieve profitability rather than just gathering new users.
Is it safe to bet with smaller, lesser-known apps? If the app is legally licensed by your state’s gaming commission, your money is legally protected. However, if a smaller app decides to shut down, you will be given a specific window of time to withdraw your funds before the app closes permanently.