Sports Betting & iGaming

# Executive Summary * The Sports Betting & iGaming industry faces a pivotal moment as intense regulatory scrutiny and rising taxes in key markets are directly pressuring profitability and forcing strategic re-evaluation, including market exits. * In response, competitive advantage is increasingly defined by proprietary technology and AI, which are being leveraged to enhance product offerings, manage risk, and improve operational efficiency. * The U.S. market continues to consolidate around a few scaled leaders, with intense competition for market share driving high customer acquisition costs and a focus on brand loyalty. * While the pace of new market legalization provides a significant runway for top-line growth, particularly in the U.S. and Latin America, the path to profitability in these markets is fraught with high initial costs and regulatory uncertainty. * Financial performance is bifurcating between high-growth, tech-centric companies and those facing headwinds from mature markets or unfavorable regulations, though many are now demonstrating a clear path to sustained EBITDA profitability. * Capital allocation is focused on a dual strategy: returning capital to shareholders via significant buybacks while simultaneously investing in strategic M&A to acquire technology and market access. ## Key Trends & Outlook The most significant headwind facing the Sports Betting & iGaming industry is escalating regulatory scrutiny and tax pressure in key jurisdictions. Recent tax hikes in states like Illinois and New York are directly compressing operator margins and impacting financial guidance. This pressure forces companies to either absorb costs, pass them on to consumers via surcharges as DraftKings plans to do, or exit markets entirely, as demonstrated by Super Group's decision to leave the U.S. iGaming space due to changing market dynamics, including recent tax increases in New Jersey. Furthermore, potential regulatory bans on popular products like proposition bets, as seen with Ohio's governor calling for a ban, pose a direct threat to revenue and user engagement. This ongoing regulatory risk is the primary determinant of market viability and near-term profitability. To counteract external pressures, leading firms are accelerating investment in proprietary technology and AI. This allows for superior product offerings like in-play betting and personalized promotions, which drive user engagement and higher margins. Companies like Sportradar are deploying AI-driven solutions such as Alpha Odds for real-time pricing, creating a distinct competitive advantage that is difficult for competitors relying on third-party data to replicate. The primary growth opportunity remains expansion into new jurisdictions, particularly the state-by-state legalization in the U.S. and the rapidly growing Latin American market. However, the most pressing risk is that the high cost of market entry, combined with the threat of sudden tax increases or regulatory changes, could render these growth markets structurally unprofitable for all but the largest, most efficient operators. ## Competitive Landscape The market is consolidating, especially in the U.S., where FanDuel (Flutter Entertainment) and DraftKings hold a commanding share, collectively accounting for approximately 75% of the market in key states like Illinois. One distinct competitive model involves competing through global scale and a diversified portfolio of brands. Companies employing this strategy, such as Flutter Entertainment, operate multiple leading brands across numerous international markets. They leverage a shared technology and operational backbone, known as the "Flutter Edge," to achieve economies of scale, share best practices, and mitigate risk from any single jurisdiction. This approach allows Flutter to drive margin expansion and navigate complex regulations in over 100 countries with brands like FanDuel, Paddy Power, and Sisal. Another strategy focuses on dominating a specific, high-growth market through brand strength and aggressive customer acquisition. DraftKings exemplifies this by intensely focusing on the U.S. market, building a dominant brand and rapidly acquiring market share through heavy marketing, promotional spending, and strategic M&A to broaden product offerings. This focused strategy has established DraftKings as a leading force in the U.S. digital sports entertainment and gaming market. A third model involves providing mission-critical B2B technology and data that powers the entire ecosystem. Sportradar acts as an indispensable infrastructure partner to operators and media companies by providing official sports data, betting odds, streaming services, and risk management tools, often secured through long-term, exclusive league partnerships. Sportradar provides mission-critical data services to over 900 sports betting operators, leveraging exclusive rights with leagues like the NBA and NHL and AI-powered technology to create differentiated products. Smaller operators like Rush Street Interactive survive by avoiding direct competition with the scale leaders, instead focusing on superior technology for a better user experience and targeting underserved markets like Latin America. ## Financial Performance Revenue growth in the Sports Betting & iGaming industry is strong but bifurcated, driven by the pace of digital market expansion. Growth varies widely, from high double-digits to flat or slightly negative. Genius Sports, for instance, exemplifies the tailwind from providing essential technology to a rapidly expanding industry, reporting a +38% year-over-year revenue growth in Q3 2025. In contrast, PlayAGS, a company with a more equipment-focused segment, experienced a -1.2% year-over-year revenue change in Q1 2025. {{chart_0}} A clear divergence in profitability is evident, with a growing cohort achieving positive Adjusted EBITDA and even net income, while others still post losses due to high growth investments or one-time charges. Adjusted EBITDA margins for profitable companies cluster in the 15-35% range. Sportradar, with its 29% Adjusted EBITDA margin in Q3 2025, showcases the high profitability of the B2B data model. Rush Street Interactive, with a positive net income of $15 million in Q3 2025 and a 54% year-over-year growth in Adjusted EBITDA, proves that a disciplined, tech-first operator model can also be highly profitable, partly due to its proprietary tech stack leading to 20-25% lower operating costs per user compared to competitors. {{chart_1}} The industry's capital allocation strategy has matured to balance shareholder returns with strategic investment. DraftKings exemplifies this dual strategy perfectly, with a massive $2.0 billion share repurchase program running concurrently with strategic acquisitions like Jackpocket and Simplebet to enhance its product and technology stack. The industry-wide balance sheet position is increasingly healthy, driven by strong cash generation. Several key players now operate with zero debt. Super Group, with $393 million in unrestricted cash and zero debt as of Q2 2025, is a clear example of the robust financial position that disciplined, profitable operators can achieve. {{chart_2}}