A new operator is now free to bid on a license for sports betting in Connecticut. This news comes as the result of an announcement from Rush Street Interactive that they will be dissolving their partnership with The Nutmeg State. On the surface, this may sound like just another Connecticut sports betting updated without much consequence. But the truth is, it's actually a pretty deal.
Rush Street Interactive (RSI), which operates the PlaySugarHouse sportsbook, initially agreed to a 10-year partnership with the state. They are pulling out of that agreement barely 20 percent of the way through it. Granted, RSI has not officially left Connecticut just yet. They will continue their sports betting operations until a new licensed partner is in place.
Who might that partner be? What type of impact will RSI leaving have on Connecticut's legal gambling market? And above all, why is RSI extricating themselves from a long-term deal with The Land of Steady Habits in the first place?
Let's begin the search for answers in what is, frankly, one of the most under-the-radar, yet-still-massive United States sports betting developments
Why Rush Street Interactive is Leaving the Connecticut Sports Betting Market
Legal sports betting licenses are generally hard to come by. The field of competition is fierce, and the rights to acquire one are expensive. Usually, though, sports betting licenses are worth all of the barriers for entry. After all, legal gambling is one of the most extravagant consumer activities in existence. American residents invest hundreds of billions of dollars in the legal United States sports betting market every single year. For any operator who can afford the initial cost of license, the overhead typically pays off in spades—even after accounting for the steep taxes online sportsbooks in the USA must pay.
However, RSI had a different experience upon entering the Connecticut sports betting market. PlaySugarHouse was—and is—something of a start-up sportsbook. And they pledged to deliver serious results almost immediately. The agreement they struck with Connecticut guaranteed the state $170 million over the course of 10 years. That amount was noticeably more than the $95 million required to bid on the license.
It turns out RSI over-promised on the success of PlaySugarHouse. Since launching in August 2021, they have generated under $15 million in total revenue (i.e. the amount of money they're left with after paying out winning wagers). That $15 million doesn't even cover what they effectively promised to give Connecticut every year. And after nearly 24 months of operation, it doesn't look like RSI is on the verge of turning things around. Connecticut only allows three sportsbooks to carry licenses at a time, but the other two active licenses in the state belong to corporate Goliaths. DraftKings and FanDuel.
This isn't just a matter of RSI struggling to keep pace with larger competitors, either. Sure, FanDuel and DraftKings are more established brand names. PlaySugarHouse was a fledgling experiment that needed to offer more aggressive bonuses to attract new clientele. That always put them at a disadvantage. But RSI's business model was complicated even further by FanDuel and DraftKings bagging a partnership apiece with two of the state's biggest casino resorts, Foxwoods and Mohegan Sun.
Without a longstanding reputation or a prominent casino partnership, the PlaySugarHouse brand name never took off inside the state. Polls conducted reflected poorly on brand recognition. Some have even suggested Connecticut gamblers were more likely to sign up with one of best reviewed online sportsbooks in the off-shore sector than join up with the state-licensed PlaySugarHouse.
Which Operators Might Apply for a Connecticut Sports Betting License
Given the manner in which RSI is bowing out of Connecticut, industry experts wonder whether other sportsbooks will be hesitant to take up their mantle. Competing with DraftKings and FanDuel takes deep pockets, and rock-solid brand awareness isn't a panacea. There's also a slight level of concern floating around Connecticut's legal gambling operations. They saw their sports betting revenue decline for the month of April by 20.8 percent.
Still, this hasn't stopped Connecticut from setting a high bar for applicants. According to Legal Sports Report, operators must be prepared to sign an eight-year deal with the possibility of a five-year extension. The Connecticut state lottery, which is in charge of sports betting, also wants their next operator to guarantee at least $10 million in annual revenue payouts.
It isn't yet clear who will be in the running to replace RSI—or how many sportsbooks are actually interested in doing so. We'll have a better idea after the applications are in review. The deadline to submit them is Friday, May 19. So, we should know more in the coming weeks.
With that said, four other sportsbooks initially applied for Connecticut sports betting licenses that ultimately went to RSI, FanDuel and DraftKings: MGM Resorts, Caesars, PointsBet and Penn National. Almost all of them could apply again. PointsBet is the only exception. They recently pulled out of the Massachusetts sports betting market and are winding down their operations in the United States.
For now, Caesars or MGM Resorts seems like the best option to replace RSI. They both have established, recognizable brands and deep pockets—two prerequisites for challenging FanDuel and DraftKings. But as Legal Sports Report noted, operators such as Betway, bet365, Fanatics and Tipico are currently trying to expand their footprints. They could enter the fold, as well. Regardless of who wins the sports betting license, though, Connecticut remains a state to monitor. Their market success will carry serious weight among other low-population states who have yet to legalize sports gambling.
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