North American igaming beating OSB, analyst says
iGaming-centric operators like Rush Street Interactive posted strong first-quarter results, while online sports betting platforms like DraftKings and Flutter Entertainment beat projections but had to curb long-term revenue guidance.
Those were among the findings of Macquarie Equity Research analyst Chad Beynon, in a May 18 investor note.
Generally speaking, online operators reported 9% improvements in the first quarter, as well as 1% upgrades of guidance, Beynon found. These, he wrote, reflected “disciplined reinvestment and operating leverage rather than top-line outperformance.”
Except for Sportradar, all companies in Beynon’s coverage universe beat their first-quarter revenue guidance. For instance, Flutter predicted US$611 million but delivered US$631 million, while DraftKings came in at US$168 million after projecting US$153 million.
Rush Street expected US$48 million but finished the first quarter with US$60 million, the biggest outperformance in the group. It was also one of the few companies to outdo projections of cash flow, beating estimates by 9%.
Beynon reported “that online stock moves are increasingly being driven by positioning, sentiment, and macro/narrative factors rather than changes in earnings expectations.” He added that management commentary “remained broadly constructive, pointing to stable engagement, improving customer efficiency, and continued igaming momentum, while sports book results remained more volatile due to hold normalization and targeted reinvestment.”
Despite the ubiquity of prediction markets as a discussion topic, Beynon found their threat “limited given product constraints.” The forays by DraftKings and Flutter subsidiary FanDuel into event contracts were seen as incremental participation, not a disruption of the larger business.
Beynon saw an obvious split in the online segment, “with igaming-driven models continuing to deliver positive estimate momentum and higher-quality growth, while sports book-heavy operators face greater volatility.” To explain this, Beynon said, equity performance was insufficient “with both upside and downside overshoots evident across the group.”
Macquarie’s charts cosseted some bad news for legacy OSB operators, however. Sports betting app downloads for Kalshi had rocketed 1,824% from the first quarter of 2025, while those for Polymarket shot up 884%.
By comparison, increases for legacy operators were modest. BallyBet was up 25%, Fanatics Sportsbook 19% and Rush Street’s BetRivers was up 5%. DraftKings, FanDuel, BetMGM and theScore Bet all experienced year-over-year declines, 63% in the case of theScore and minus 37% for FanDuel. BetMGM was down 23% and DraftKings 16%.
Over the same 2025/2026 timeframe, igaming downloads were only up dramatically for DraftKings, which saw a 51% boost. BetRivers was up by 5% and Caesars Palace Online 7%.
Declines were manifested by BetMGM, down 26%, and FanDuel, off by 20%. Hollywood Casino fell 14% while Golden Nugget online dipped 2%.
Looking ahead through 2027, Beynon forecast 8.1% growth for OSB in the US but a 30.5% leap in Canada. US igaming was foreseen to grow 17% while Canadian online casinos would be up 33%.
David McKee is an award-winning journalist who has three decades of experience covering the gaming industry.
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The Backstory
Why igaming keeps pulling ahead
North American online casinos are widening their lead over online sportsbooks as investors reward steadier growth, fatter margins and fewer swings tied to game results. The pattern has been building across earnings seasons and analyst notes this year. Macquarie’s Chad Beynon highlighted the trend in late June, saying online casino momentum plus elevated sports hold would lift most operators in the second quarter. He projected online gross gaming revenue up 25% in 2025, with higher structural hold and faster shifts to in-play wagering pushing estimates higher over time. His broader read on the setup is here: igaming will outperform this year, Macquarie analyst says.
The investment case hinges on mix and math. Casino revenue compounds through stable daily play, while sportsbook results swing with outcomes, promotions and seasonality. Operators with a heavier igaming tilt have delivered cleaner estimate beats and confidence on cash flow. Those more reliant on sports must navigate choppier quarters and rising taxes that pressure promotion budgets. The split has sharpened as markets mature, creating clearer winners by product focus.
Hold, parlays and the new revenue math
Sportsbooks have leaned into mix to smooth volatility. Parlay products and in-play markets raise effective hold and cut variance, which helps close the margin gap with casinos. Analysts have flagged sustained strength here. Jefferies’ David Katz on Sept. 9 cited broad adoption of proposition bets and single-game parlays, calling out DraftKings as a prime beneficiary of in-play after its SimpleBet acquisition and noting FanDuel’s advantage in parlays. Read his view: DraftKings boosted by in-play betting, analyst says.
That shift shows up in state data. New York’s May results told a familiar story: revenue grew faster than handle on elevated hold. FanDuel led on parlay-heavy margins. DraftKings trailed closely in market share but not in hold, with BetMGM and Caesars further back. The snapshot underscores how mix, not just scale, is driving outcomes. Details: New York State OSB revenue outpaces handle.
Macquarie, meanwhile, expected second-quarter industry hold near 11% after a strong June, reinforcing the thesis that improved product design can mitigate sports variance and narrow the gap with igaming. That backdrop helps explain why multi-vertical operators can post steadier guidance even when downloads or headline handle slow.
Tax pressure and the promotion calculus
The other force behind the divergence is rising state taxation that lands heaviest on sportsbooks. New Jersey’s compromise to lift online rates to about 19.75% is the latest drag on unit economics. Truist’s Barry Jonas said June 24 that the move is manageable but requires tighter promotional spend to offset much of the hit starting in 2026. He sized the annual gross impact at tens of millions for Flutter’s FanDuel and DraftKings, with lesser but meaningful effects on BetMGM, Caesars and Penn. His breakdown and mitigation math: Garden State tax increase can be managed, Truist analyst says.
Macquarie echoed that higher taxes in Illinois, Maryland and Louisiana are front of mind, though a stronger igaming growth curve and a healthy second quarter could cushion cash flows. In the near term, the toolkit remains pragmatic: pull back on promos, sharpen parlay and in-play offers, and push more engagement into higher-hold products. Over the longer run, further legalization of both sports and casino online is the cleaner release valve, but timing is uncertain and uneven state politics keep pressure on forecasting.
Prediction markets: data source, not a death knell
The rise of event contracts has injected new debate about wallet share, yet industry analysts see more complement than cannibalization so far. Macquarie in June labeled the threat limited given product constraints, with incremental participation by DraftKings and FanDuel rather than disruption. Separate consumer work by Truist on March 17 found prediction-market users skew younger, highly active and concentrated in states without legal sportsbooks. Many also bet with traditional operators. The survey suggests that event contracts can be a feeder for customer acquisition and data rather than a core profit engine today. See the profile: Few prediction market users are 50 or older, Truist analyst says.
Jefferies added in September that prediction markets have a capped economic ceiling versus full sportsbooks, given product breadth and betting limits. Operators have responded accordingly, treating event contracts as optional engagement rather than strategic pivots. The near-term monetization edge remains with regulated in-play and parlays, where scale, pricing and risk tools generate compounding advantages.
State scorecards show the mix in action
New York is the clearest live lab for sportsbook mix and market power. May’s numbers again showed FanDuel and DraftKings sharing most of the action while monetizing differently, with FanDuel’s parlay emphasis driving a wider revenue gap despite similar handle share. BetMGM and Caesars continue to jockey for the next slot, while ESPN Bet and Fanatics trade share with punchy promotions or product improvements. New market entries and rebrands deliver bursts of handle but must hold gains with product.
Across jurisdictions, the lesson is consistent: growth in handle alone no longer impresses investors if it does not translate into expanding hold, higher cross-sell into casino and controlled promotions. That ties back to why online casinos are favored. The revenue is steadier, marketing is more surgical and cross-vertical synergies deepen customer value without outsized promo leakage.
What to watch into 2026
Three variables will set the pace. First, hold sustainability: Can operators maintain double-digit hold without dulling user experience as regulators scrutinize parlay complexity and disclosure. Second, tax creep: More states may test higher rates, forcing permanent cuts to promotions and more emphasis on igaming, where margins can better absorb policy shocks. Third, product velocity: In-play modules, personalized pricing and casino content pipelines will separate platforms that compound engagement from those that chase handle.
Recent analyst reads are cautiously constructive. Macquarie expects second-quarter outperformance for most business-to-consumer segments and sees 2025 online revenue climbing even with tax headwinds, supported by stronger igaming and better sports mix. Jefferies points to in-play as a new leg of handle unrelated to new-state launches, with DraftKings and FanDuel best positioned. Truist frames New Jersey’s tax as manageable with promotions, a test case for how far operators can stretch efficiency before growth stalls. For operators that get the mix right, igaming still looks like the steadier flywheel, with smarter sports products narrowing the gap rather than closing it.
