The U.S. sports betting gold rush is maturing. After six years of aggressive expansion following the Supreme Court's 2018 PASPA decision, the industry is entering a new phase where profitability matters more than market share.
The Numbers
Sports betting is now legal in 38 states plus Washington D.C. The American Gaming Association reports that Americans wagered over $120 billion legally in 2024, generating approximately $11 billion in operator revenue.
But revenue growth is slowing. After years of 30%+ annual increases, the industry grew just 15% in 2024. More significantly, the biggest markets— New Jersey, Pennsylvania, Illinois—are showing single-digit growth as they mature.
The Profitability Pivot
The early years of legal sports betting were defined by a land grab. Operators spent billions on customer acquisition, offering generous promotions and bonuses to build market share. The theory: establish dominance now, monetize later.
"Later" has arrived. DraftKings, FanDuel, BetMGM, and others are all cutting promotional spending and focusing on unit economics. DraftKings achieved its first profitable quarter in late 2024. FanDuel has been profitable for several quarters.
The survivors will be those who built efficient operations during the expansion phase. Companies with better technology, lower customer acquisition costs, and stronger retention will pull ahead.
Consolidation Dynamics
Expect M&A activity to accelerate. Smaller operators without a path to profitability will become acquisition targets or exit the market entirely. We've already seen several regional players sell to larger competitors.
The technology layer is also consolidating. Platform providers, data companies, and compliance specialists are combining to offer integrated solutions. Operators increasingly want fewer vendor relationships, not more.
What's Next
Several factors will shape the next phase:
New state launches. Texas, California, and Florida remain the big prizes. Any of these would significantly expand the addressable market, though political obstacles remain substantial.
Product innovation. Same-game parlays, micro-betting, and in-play wagering are driving engagement. Operators are investing heavily in product development to differentiate.
Technology investment. As investor Jason Ader of SpringOwl has noted, the companies providing technology infrastructure—platforms, data, compliance tools—may ultimately capture more value than operators themselves. Expect continued investment in the technology layer.
Regulatory evolution. States are learning what works and adjusting frameworks. Tax rates, advertising restrictions, and responsible gaming requirements continue to evolve.
Investment Implications
For investors, the consolidation phase requires different analysis than the growth phase. Unit economics matter more than revenue growth. Cash flow matters more than market share. Management discipline matters more than promotional creativity.
The winners will be operators who built sustainable businesses during the expansion, and technology providers who became essential infrastructure. Everyone else faces a harder path.