Would Tribal-Owned Online Sportsbooks Be Viable in California?

In states that have legalized online sports betting, local casinos will launch their own online sportsbooks. However, these homegrown sportsbooks are often overlooked in their markets. Big brands like DraftKings and FanDuel capture the most market share in the states where they’re legal. 

The Sports Betting Business Journal reports that 97% of sports betting handle in the eight states that break handle down by sportsbook comes from these seven brands:

• FanDuel
• DraftKings 
• BetMGM
• Caesars Sportsbook 
• BetRivers
• Barstool Sportsbook 
• PointsBet

That leaves 3% of the market for other national sportsbook brands, like Unibet, or homegrown sportsbooks. This is not necessarily a reason for homegrown sportsbooks not to launch. A casino sportsbook can be a popular feature for its casino patrons. But they have little hope of competing with national brands for the broader betting market.   

This has important implications for California sportsbooks. If Prop 27 passes, licensed tribal casinos could launch their own online sportsbooks. And, no matter what happens in the November election, the ultimate future of California sports betting is online. Homegrown, tribal-branded sportsbooks would capture a sliver of the market share compared to the national brands.

At the same time, homegrown sportsbooks could be new ways to expand a casino’s footprint across the state, attracting new customers and loyalty rewards members.

“As the (online sports betting) market expands, this is no longer about reaching and serving the core betting audience of experienced sports gamblers,” said Adriana Waterston, the chief revenue officer and insights and strategy lead at Horowitz Research, a consumer insights and market research agency. “It’s about wooing new bettors into the space.”  

There’s no better way to woo customers than with lucrative California sports betting welcome offers — which national brands afford more easily than local brands.

Why Customers Are Drawn to National Sportsbook Brands   

National sportsbook brands can dominate homegrown sportsbooks because they not only have the resources to build great apps and make sports betting easy for new users. The big brands can also invest in expensive customer acquisition methods. 

“Generally, online sportsbooks … rely heavily on promotional tactics such as risk-free bets to entice these new users,” Waterston said. “Moreover, spending on advertising and sponsorships is essential to stay top-of-mind among sports fans, which also represents a major investment.”  

Each customer that sportsbooks attract costs a lot of money. Large national brands can afford the bonus, advertising, and sponsorship costs to get in front of new bettors. 

Several tribes who own California Indian casinos, including the San Manuel Band of Mission Indians, Pechanga Band of Mission Indians, and Federated Indians of the Graton Rancheria, certainly aren’t strapped for cash. The San Manuel Band, for instance, has donated more than $100 million to the No on 27 campaign.

Still, these tribes’ bankrolls pale in comparison to the DraftKings and FanDuels of the world.

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How Could Tribal Online Sportsbooks Compete?

Even after getting those customers, sportsbooks have to keep them. However, training bettors’ eyes on competitive odds isn’t necessarily the best strategy for sportsbooks. 

“Better odds and a lower vig are important differentiators and are enticing to customers,” Waterston said. “But this can dramatically cut into the sportsbook’s profits and, from a consumer perspective, will likely just lead to higher churn and lower loyalty.”

If customers are trained to seek the best price on any wager, they won’t be loyal to any one sportsbook. That will decrease customers’ lifetime values at sportsbooks, posing an expensive challenge for the industry. 

Sportsbooks still have to offer competitive prices, but odds can’t be the only way that smaller sportsbooks set themselves apart. Instead, sportsbooks have to find ways to add value beyond competitive pricing. 

“The added value could come in the form of things like odds boosts and other enticements,” Waterston said. “Personalized notifications, social features or — and this is where boutique/homegrown sportsbooks could differentiate — it could come in the form of loyalty rewards.”     

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Some homegrown sportsbooks embrace this strategy. On Colorado’s Bet Monarch, bettors earn tier points and comps as they play. Before it launched in Michigan, the FireKeepers iCasino and Sportsbook app granted new users credit based on their existing rewards points. There are many ways to integrate a casino’s rewards program with an online sportsbook. 

However, large casino brands can do this, too. WynnBET, Caesars Sportsbook, and BetRivers are tied to each of their casinos’ rewards programs. These three brands are also large enough to also invest in sponsorships and expensive advertising. It raises the question of what homegrown casinos have to gain by launching their own sportsbook apps.     

Why Homegrown Sportsbooks Launch at All 

Homegrown sportsbooks can still play important roles in a company’s larger business model. Land-based casinos have long customer lists that can be reached with a mobile sportsbook. Like any other business, the more loyal customers are to their favorite brands, the better that sportsbook can perform with its customers.

“Yes, homegrown sportsbooks affiliated with casinos or sports teams are going to appeal to the loyalists to those brands and might help encourage a new user to try it out,” Waterston said. “But those kinds of affiliations alone will not make or break a sportsbook’s success. They will still need to deliver the best user experience in order to drive satisfaction and repeat usage.”  

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As more casual bettors enter the sports betting market, new segments will emerge with specialized needs. There’s already a market for sportsbooks marketed toward Spanish-speaking bettors, metaverse users, and other subsets of the sports betting market. 

Homegrown sportsbooks may not be able to compete on a national level with brands like DraftKings or FanDuel. But there are still plenty of ways for them to carve small corners of the market out for themselves.