Mobile sportsbooks off to a slow start in Arkansas

Arkansans wagered over $12.6 million on sports betting in June — a new monthly high, fueled by the rollout of mobile apps this spring by two of the state’s three casinos.

But that figure remains paltry compared to neighboring states. In June, operators in Louisiana reported a combined “handle” — the total wagers placed at a sportsbook over a given period — of $132.4 million. The monthly number in Tennessee was $215.8 million. Mississippi’s handle was $25.1 million, or twice as large as Arkansas’s, even though Mississippi limits sports betting to on-site play at the state’s casino’s, rather than online.

Arkansas’s July handle was a modest $9.3 million. But the state’s casino operators say bigger numbers are around the corner. Mobile sports betting is still new to Arkansas, and the summer months are short on marquee events. 

Carlton Saffa, chief market officer at Saracen Casino Resort in Pine Bluff, expects interest to surge as football season gets under way.

“I think this conversation a year from now will look very different,” Saffa said. “Once we’ve been through a full customer acquisition cycle, you’ll see handles that make sense.”

Arkansas casinos have been offering sports betting on site since 2019, but online betting only became legal on Feb. 22, after finalization of a rule change by the Arkansas Racing Commission. Southland Casino Racing in West Memphis unveiled the state’s first sports betting website in March. It launched a mobile app, Arkansas Betly, the next month.

Saracen launched its mobile app, BetSaracen, on May 12. It has yet to capitalize on a college football or basketball season, let alone a Super Bowl. While some Razorbacks fans were eager to bet on the SEC Baseball Tournament or College World Series this summer, Saffa said, college baseball is “just a freckle on the arm of sports betting” in terms of scale.

“In a nutshell: Add football to the mix, and then we’ll see what happens,” he said.

Most states that allow mobile sports betting have one thing Arkansas doesn’t: Big national operators. Casinos in many states have partnered with big national players such as DraftKings, FanDuel and Caesar’s Sportsbook, which already have apps built and ready to deploy. 

As more states have legalized the practice, such online bookmakers have grown into behemoths, churning through billions in wagers annually and becoming household names among fans.

But when Arkansas began drafting a rule to allow mobile sports betting, it included a requirement that at least 51% of the proceeds of any such partnership go to the casino.

Typically, casinos in other states take just 5% to 15%, according to public statements made last fall by a lawyer for an industry group that opposed the rule, the Bet on Arkansas coalition. The group, which included DraftKings, FanDuel and other national operators, said they likely couldn’t do business in Arkansas under such unfavorable terms.

The national operators argued that the rule limited consumer choice and possibly ran afoul of federal law by discriminating against out-of-state companies. No other state has a similar rule, they noted. Scott Hardin, a spokesperson for the state Department of Finance and Administration, said the rule attracted “almost a thousand comments for feedback, which was just unheard of.”

A spokesman for Bet on Arkansas, the group representing the national sportsbooks, did not respond to a request for comment for this article.

In the end, the casinos won. Legislators signed off on the rule on Feb. 22, with the 51% requirement intact. (As of Aug. 16, Hardin said, the state was not aware of any lawsuit filed challenging the rule.)

That left the Arkansas sportsbook market to Southland, Saracen and the state’s third casino, Oaklawn Racing Casino Resort in Hot Spring. Each has had to take on the task of building, maintaining and promoting its own mobile app. Oaklawn, which has no online sports betting option has said previously it expects to launch an app sometime this month.

Saffa said the technical challenges have been considerable. Any sports betting app must use geolocation and mapping services to determine if a user is in state. It needs to verify the identity of the individual, just as a casino must do for in-person transactions.  And it must integrate various payment methods — Venmo, PayPal, Apple Pay, Visa, MasterCard and more — and ensure security. 

“To build all of that into a well-performing app is tough, and that’s why most [casino] operators have chosen to partner with someone else,” he said. “They think, ‘We have to give away the farm in terms of revenue share, but something is better than nothing.’ ”

Saffa said the launch of the Saracen app was “a seven-figure investment” and maintenance and promotion required a “mid-seven figure spend” on an ongoing basis. But he expressed confidence that it would be worth the casino’s while. 

“We believe the product will begin to pay for itself in September, and carry on that path from here on out,” he said. “Full profitability should occur by year end.”

No profits yet

Sports-based wagers at both Southland and Saracen have increased since mobile betting went live. Southland’s handle in January was $3.7 million; in July, it was $4.2 million. Saracen’s handle climbed from $1.7 million to $4.5 million over the same period.

But neither casino has translated the increased wagers into big profits. Southland’s “net win” for mobile and on-site sports betting in June was only $172,455, its worst month of the year, despite seeing $6.7 million in wagers that month. (A casino’s net win refers to its take after paying out winnings to people who have placed bets; it does not account for expenses or overhead costs.)

A spokesman for Delaware North, Southland’s corporate owner, said the company is “very pleased” with the performance of its Arkansas sportsbook.

“With only a few months under our belt, we are seeing positive growth — growth that is sustainable and doesn’t inflate the market with loss-leading promotions and bonuses that oftentimes come with the out-of-state national brands,” Glen White, director of communications for the Buffalo, NY-based hospitality company, wrote in an emailed response to questions.

In other states, the national sportsbooks operators have offered wildly generous incentives to new customers, such as free promotional bets and deposit matches in the thousands of dollars. Some companies have racked up enormous quarterly losses as they compete for market share.

Saffa said the national operators have an unsustainable model.

“Their metrics are Silicon Valley metrics. They operate in terms of market penetration, not necessarily profitability,” he said. “We believe the Arkansas model will ultimately yield more revenue for the state.”

But Saracen also lost money on its sportsbook the first two months its mobile app was operational — largely the result of a $500 deposit match offer for new customers, which was designed to boost interest in the new BetSaracen app at the beginning of the slow summer season. In June, the casino paid out $271,579 more than was placed in wagers 

Saracen finally showed a positive net win of $363,743 in July. 

Oaklawn, the only Arkansas casino that has yet to debut a mobile app, collected a net win of  just $67,257 n July on a handle of just under $600,000. An Oaklawn spokesperson did not respond to a question about whether the casino was on track to roll out its app this month as planned.

During the first six months of the year, Arkansas collected just $605,389 in taxes on sports betting. 

All gambling revenue, whether from sports betting, slots or other games, is distributed in the same way. Just over half, 55%, goes to state general revenue. Another 27.5% goes to local authorities in the county (or county and city) where the casino is located. The final 17.5% goes to purses for live horse racing and greyhound racing, overseen by the state racing commission. (Southland, which is home to one of the country’s last remaining greyhound tracks, plans to end dog racing by Dec. 31.)

As of now, sports betting still comprises only a small fraction of the state’s gambling industry. The $12.6 million sports betting handle in June was dwarfed by the $572 million wagered on slot machines, video poker and other so-called “terminal” games at the three casinos.

But the experience of other states suggests that could change. After sports betting became legal in Tennessee in Nov. 2020, the state brought in $18.5 million in tax revenue over the first six months. New York, which legalized mobile sports betting earlier this year,generated a staggering $2.4 billion in wagers and $80 million in state tax revenue in the first five weeks of 2022 alone.

More and more states have legalized the practice since 2018, the year the U.S. Supreme Court struck down a federal law that had effectively prohibited sports betting in most parts of the country. But the rapid growth of the industry worries some advocates, who fear at-your-fingertips gambling may lead to a rise in addiction, especially among young people. State and national gambling helplines have reported large increases in call volume as sports betting has expanded in recent years.

In light of that, Saffa suggested, the relatively modest start to online sports betting in Arkansas may not be such a bad thing for the state. 

“As a casino operator, I would love more handle, more volume,” he said. “From a public policy perspective, I don’t know that that’s right.”