Wynn Resorts, the parent company of WynnBET, announced on Friday that it will close its online sports betting and iGaming platform in eight U.S. states, citing the lack of clear rules and high customer acquisition costs in the industry.
WynnBET to focus on states with physical presence
WynnBET, which is part of Wynn Resorts’ majority-owned subsidiary Wynn Interactive, will cease operations in Arizona, Colorado, Indiana, Louisiana, New Jersey, Tennessee, Virginia, and West Virginia as soon as possible. The company said it will work with its regulators and patrons to facilitate the closure.
The decision comes just a week after WynnBET launched a new legal sports betting app in six jurisdictions, with new technology and features to enhance the user experience. However, the company said it faced difficulties in competing with other online sports betting operators that have more established brands and customer bases.
Wynn Resorts Chief Financial Officer Julie Cameron-Doe said that the company believes there are higher and better uses of capital deployment for its shareholders than investing in online sports betting. She also said that the company believes in the long-term prospects of iGaming, but the dearth of iGaming legislation and the presence of numerous other investment opportunities around the globe have led to the decision to curtail its capital investment in WynnBET.
The company said it will focus primarily on those states where it maintains a physical presence, such as Nevada and Massachusetts, where it operates Wynn Las Vegas and Encore Boston Harbor respectively. The company said these operations will continue unaffected by the announcement. The company also said that its operations in New York and Michigan remain under review.
Wynn Resorts posts strong Q2 results despite online sports betting challenges
The announcement comes just two days after Wynn Resorts posted its second-quarter results, which beat Wall Street estimates. The company reported a revenue of $1.6 billion, up 76% year-over-year, driven by strong performance in its Las Vegas and Macau properties. The company also reported a net loss of $131.4 million, compared to a net loss of $637.6 million in the same period last year.
The company said that its online sports betting and iGaming segment generated $14 million in revenue in the second quarter, up from $6 million in the first quarter. However, the segment also incurred an operating loss of $55 million, up from $27 million in the first quarter.
The company said that it expects its online sports betting and iGaming segment to break even by 2025, assuming a 10% market share in the U.S. However, the company also acknowledged that the segment faces significant challenges and uncertainties due to regulatory changes, competitive pressures, and customer acquisition costs.
Wynn Resorts is not the first online sports betting operator to exit some U.S. markets due to the difficulties in the industry. In June 2021, BetMGM announced that it will stop offering its online casino product in West Virginia due to regulatory issues. In May 2021, Betfair announced that it will withdraw from New Jersey’s online casino market due to low profitability.
Online sports betting industry continues to grow despite challenges
Despite the challenges faced by some operators, the online sports betting industry in the U.S. continues to grow rapidly, fueled by the legalization of sports betting in more states and the increasing demand from consumers. According to a report by Eilers & Krejcik Gaming, a research firm that tracks the industry, online sports betting revenue in the U.S. reached $1.5 billion in 2020, up from $920 million in 2019. The report also projected that online sports betting revenue will grow to $5.8 billion by 2023.
Some of the leading online sports betting operators in the U.S. include DraftKings (NASDAQ: DKNG), FanDuel (owned by Flutter Entertainment (LON: FLTR)), BetMGM (a joint venture between MGM Resorts (NYSE: MGM) and Entain (LON: ENT)), Caesars Entertainment (NASDAQ: CZR), and Penn National Gaming (NASDAQ: PENN).
These operators have been expanding their presence and offerings in various states through partnerships with sports leagues, teams, media companies, casinos, and other entities. They have also been investing heavily in marketing campaigns, promotions, and customer loyalty programs to attract and retain customers.
However, these operators also face significant competition from each other and from new entrants in the market. They also have to deal with varying and evolving regulations across different states, as well as potential legal challenges from anti-gambling groups or other stakeholders.