Morgan Stanley Ups Its US Sports Betting Estimates By 40%

One of the big headlines this week was the revised estimates for the US sports betting market by Morgan Stanley. The numbers were eye-catching and led to a lot of mentions in the mainstream press.

In this column, I’ll dive into Morgan Stanley’s new numbers for the US sports betting market and see how they line up with other estimates.

According to Morgan Stanley, the US sports betting market could conceivably generate $7 billion annually by 2025. That’s a 40% increase over its previous $5 billion estimate from 2017.

Of course, that is entirely dependent on how many states legalize sports betting and what, if any, restrictions they place on the industry. Because of the legislative and regulatory uncertainty, Morgan Stanley couched its estimate with a bear estimate of about $2 billion.

Morgan Stanley also estimated a mythical 50-state US sports betting market would generate $15 billion annually. That number provides a window into its $7 billion estimate, which appears to be based on roughly half the country having access to legal sports betting by 2025.

Comparing Morgan Stanley’s Numbers with Previous Estimates

Morgan Stanley isn’t the only firm that been analyzing the US sports betting market.

Eilers & Krejcik

A slightly more conservative estimate was put forth by Eilers & Krejcik Gaming in 2017.

In its report, Regulated Sports Betting: Defining The U.S. Opportunity, the firm estimated a 50-state market “would be worth anywhere from $7.1 to $15.8 billion in revenue.” E&K defines the best-case scenario of $15.8 billion as “allowing unfettered access” to online and retail sports betting. But as noted above, 50-state scenarios are little more than fun exercises.

In the same report, E&K offered a 5 Year estimate, projecting 32 states with legal sports betting by 2023 (more than Morgan Stanley), with revenues of just over $6 billion (less than Morgan Stanley).

H2 Gambling Capital

In its November 2018 report, US Sports Betting: The Road to 2030, H2 Gambling Capital offered two market size predictions:

  1. By 2023 the legal US market will reach $5.3 billion
  2. By 2030, the US will have legal sports betting in 30 states with a revenue eclipsing $8 billion

H2 had the most conservative estimates, but at the same time, its best-case scenario was far more bullish than the others. According to H2, the US market has the potential to reach $25 billion.

The H2 report explained why that is unlikely to come to pass, and listed four factors that will tamp down that number:

  1. The number of states that legalize
  2. Taxation over a nominal rate
  3. A lack of online betting
  4. Supply limitations (betting restricted to certain facilities or by product)

H2 believes these factors will result in a market that reaches 33% of its potential.

Bottom Line

Even though there are some differences, the three firms are in the same ballpark.

If the US maintains its current course, about half the country will have access to legal sports betting within five years.

The amount of revenue the market will generate will depend on the factors outlined above but should be in the $5 billion to $7 billion range.

I’d also point out that shorter-term estimates by E&K and H2 have proven quite accurate, so these long-term forecasts shouldn’t be dismissed out of hand.

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