During a keynote speech at the National Council of Legislators from Gaming States (NCLGS) summer meeting in Denver, Tipico US’s SVP of Business Development Stephen Krombolz spoke on behalf of the smaller US operators when it comes to market conditions.
While Krombolz did not explicitly mention the recent doubling of the sports betting tax rate in Ohio just six months after launch, his comments certainly suggested these changes adversely impact challenger brands and smaller operators more than the major sports betting brands.
“I signed a 10-year deal to have market access in the states based on certain economic assumptions,” he said. “From an operator perspective, we really are making long-term commitments to invest in your space that we choose to enter. So it’s helpful if the goalposts don’t move along the way, especially if you have operators that are operating with the letter of the law and following the rules and being good corporate citizens.”
Krombolz offered more insight to the crowd, which consisted largely of lawmakers and regulators, about what operators think about when it comes to entering new states and how much it has changed in the past three years.
“I think it’s important for you folks to understand what the marketplace looks like from an operator perspective when you look at market entry. Market entry is very different than it was in 2020. Market access, what we call secure rights to license, was extremely competitive,” Krombolz explained. “Prices were inflated and, in many states, most times you were making market deals where you don’t even know the regulatory environment, so you don’t know the tax rate. You don’t know licensing fees.”
Those days of everyone rushing into every market are long gone. Many operators skipped out on opportunities in Massachusetts while even the big two, DraftKings and FanDuel, have spoken to New York lawmakers about how the onerous tax structure makes running a profitable sportsbook untenable.
“The big operators [enter every state] because they’re going to be everywhere but, as a small operator, you really have to be strategic around the markets. A lot of that has settled to some degree, but it’s still really important to remember when you as regulators are considering what to do in your relative space that if you want to have really competitive market that is open to the large and small operators, and we’re very much a challenger brand in the US but come from a parent company with considerable resources, but every dollar counts. So when you talk tax rates that are really high, sure, the big operators are going to pay it because they need to be there, but for smaller operators, it’s going to be more difficult, so you’re going to really weed out competition,” he added.
Finally, Krombolz alluded to considering the possibility a state will legalize online casino sooner rather than later. Tipico US is currently live in New Jersey, Iowa, Colorado, and Ohio. The company also has market access in Minnesota and Indiana, a state many pegged to legalize online casinos this year.
“From an operator perspective, iGaming is a really important piece of the puzzle.”
