Placing bets and breaking sweats for March Madness

Brett Holzhauer
Brett Holzhauer March 27, 2024

The consistent favorite headline of March Madness is how nearly impossible it is to pick a perfect bracket, yet millions of fans decide to fill one out to earn bragging rights with their friends. The odds are steep: 

  • 1 in 9,223,372,036,854,775,808 (if you’re randomly guessing on the outcome of each game) 
  • 1 in 120.2 billion (if you’re a fan and know a few things about who may advance) 

In fact, no one has ever picked a perfect bracket. The best run ever recorded was someone predicting the first 49 games. Ironically, there are even contests now to get every pick wrong. 

There’s a lot of money at stake. The American Gaming Association estimates that $2.72 billion will be put on the line during March Madness, making this the largest sports betting event of the year. This obviously doesn’t account for the innumerable bets between friends and coworkers. And yet, March Madness only accounts for about 2% of the $121 billion wagered in 2023 across all sports. 

While gamblers have an albeit miniscule chance of potentially hitting it big, the real winners are the online sports betting platforms of the world. DraftKings, which owns roughly one-third of the sports betting market in the U.S., said in its most recent earnings report that estimated year-over-year revenue growth from 2023 to 2024 will be between 27% to 34%. And the states are cashing in too, receiving over $4 billion in tax revenue since the 2018 Supreme Court decision to legalize sports gambling. 

Thirty-eight states and the District of Columbia have legalized online sports betting. The most recent one, North Carolina, opened the floodgates on March 11 – in perfect timing for the tournament. 

But as you may imagine, having 24/7 access to a live casino in your pocket may not be a healthy option for some. The number of calls to gambling hotlines have soared in several jurisdictions (OH, KY, CT to name a few), and lawmakers are now trying to bring in more consumer protections. 

Here are a few things to know about the explosive growth of sports gambling, and the publicly traded companies benefiting from legalized, on-demand sports betting. 

Rules of the game are being rewritten as we play 

In 1992, Congress passed the Professional and Amateur Sports Protection Act (PASPA), which “restrict[ed] all but a handful of states from legalizing sports gambling.” This created a Prohibition-esque environment filled with under-the-table bets between friends and coworkers, “bookies,” and trips to the few places it was legal to place wagers. At the time, the law was supported by professional sports leagues which wanted to steer as far away from gambling as possible, even where it was still legal. 

Then, when the Las Vegas Convention and Visitors Authority wanted to run a Super Bowl ad in 2003 to attract visitors, the NFL denied them—the league wanted to maintain its steel curtain against sports betting. Other leagues also fought vehemently against gambling as a laundry list of stories about players, referees and coaches caught betting on games threatened the sports industry’s image of integrity. And it continues today as baseball’s biggest star, Shohei Ohtani, is now in the middle of an alleged betting scandal. 

But in the intervening 15 years, the internet became mainstream, a global recession depleted the cash reserves of local communities, and offshore sports betting gained popularity. In 2008, internet gambling was already an estimated $20 billion industry. At this point, leagues and states began seeing the potential revenue and appeal of sports gambling, and it was only a matter of time before states began challenging the legality of PASPA. 

In May 2018, PASPA was repealed by the Supreme Court, leaving it to the states to decide how to handle sports gambling. But this new gold rush of online sports betting hasn’t fully translated to college sports: universities that have tried to spin up partnerships with gambling platforms have been issued technical fouls. 

The University of Colorado at Boulder signed a controversial partnership in 2020 with online sportsbook PointsBet. Michigan State University and Louisiana State University also entered their own respective partnerships. But these partnerships quickly ended after an investigation into the PointsBet deal, as well as pushback from state governments and regulators. 

In response, the American Gaming Association issued its “Responsible Marketing Code”, where it outlines its goal to avoid marketing to college-aged students on campus. While you may not see physical ads inside a college basketball stadium this March, it’s all but likely betting platforms will run marketing campaigns during March Madness. 

The players, penalties and future game plan 

Like most things in life, too much of anything can sometimes lead to problems. As online gambling platforms have grown in popularity, so has problem gambling. 

Roughly 2.5 million U.S. adults are estimated to have a severe gambling problem, with another five to eight million falls in the mild to moderate category, according to the National Council on Problem Gambling

In my home state of Florida, the problems are evident. After the launch of Hard Rock Bet, calls to Florida’s gambling addiction hotline jumped 130% in one month.  

Many who find themselves in an addiction cycle are falling into deep financial holes. In 2022, Americans lost $250 billion total from gambling-related activities with the median problem gambler losing $16,750, according to QuitGamble. There are heart-breaking stories of those gambling student loan money away as they chase the hope of one day hitting it big. But, for most, that day simply never arrives. 

So what’s being done to solve this newfound crisis? State legislators are beginning to propose legislation to help curb the issue. In New York and Louisiana, bills are being considered to limit or even ban consumer-directed advertising from sports betting platforms. Maryland lawmakers want to put “virtual fences” around college campuses to ban gambling ads. In Maine, betting platforms can only run television ads during sporting events programs. 

While states hash out their own regulatory framework and consumers keep betting, for major online sports betting companies like FanDuel and DraftKings, the outlook is more complex. 

Here’s how equities in the sports betting space are performing (as of March 26): 

  • DraftKings (DKNG):  
    • Went public in 2019, up 383% 
  • FanDuel (FLUT, FanDuel’s parent company):  
    • U.S. market debut was in January 2024, stock price remains volatile 
    • Up 176% over the last five years 
  • Penn National Gaming (PENN):
    • Down 31% in last five years 
  • Roundhill Sports Betting & iGaming ETF (BETZ):  
    • Debuted in June 2020, up 18% 

As more states are likely to legalize sports betting, these platforms’ userbases may grow in tandem. However, like any other potentially harmful product introduced to the marketplace, regulators will try to bring additional protections for consumers. 

Additionally, it was announced on Wednesday that the seven largest online sportsbooks (FanDuel, DraftKings, BetMGM, Penn Entertainment, Fanatics Betting & Gaming, Hard Rock Digital and bet365) are forming the Responsible Online Gaming Association (ROGA). The group’s mission is to promote responsible gaming and creating marketing guidelines that also meet regulatory requirements. 

In the short term, college basketball fans will be glued to their televisions as their brackets get decimated, and even potentially lose their parlay they swear will earn them an early retirement. 

If you’re experiencing gambling problems, please seek help by calling the National Problem Gambling Helpline at 1-800-522-4700.