It’s no secret that the newer generation of sports bettors loves parlays — or that sportsbook operators love that players love those parlays. Somehow, though, that love affair is getting even wilder, with bettors taking even bigger swings and operators enjoying richer margins.
The growing popularity of bigger and far-less-likely-to-win parlays was highlighted Friday in a report from investment banking firm Citizens JMP Securities.
Citing data from Juice Reel, a bet-tracking and analytics platform, the report said the average number of legs for a parlay at online sports betting sites in Jan. 2024 was five, up from 4.2 in Jan. 2022.
Furthermore, the data suggests bettors are willing to build even bigger, and therefore riskier, parlays, with 10% of all parlays this year comprised of 10 legs or more. That's up from 8% in 2022.
“We believe Americans with a background in long-shot lottery odds are opting for longer-legged parlays with a noticeable uptick in high-single-digit, or 10+ leg parlays in recent years,” JMP analyst Jordan Bender wrote.
A report this morning from investment banking firm Citizens JMP Securities, citing data from Juice Reel, says the average number of legs in a parlay at online sportsbooks rose to 5 in Jan. 2024 from 4.2 in Jan. 2022: pic.twitter.com/JNbGIDksPo
— Geoff Zochodne (@GeoffZochodne) April 12, 2024
It’s a profitable shift for sportsbook operators, who are striving for that profitability consistently, but not for bettors. While the average punter may be increasingly willing to swing for the fences, the numbers reported by operators and regulators suggest bettors are coming up short far more often than they would if they just stuck to single-game wagering.
“The steady increase in the number of legs supported gaming margin expansion… and has brought on a noticeable difference in consumer behavior,” Bender wrote. “Sports betting operators with solid risk management can bake in more ‘juice’ or margin to take better pricing on as the parlays become longer.”
JMP estimated that every additional parlay leg would boost gaming margins by 1.3% for FanDuel, 1.1% for DraftKings, and 1% for BetMGM and ESPN Bet. A bettor could expect to win $105 on average from a single-game wager of $110, the report suggested, but that drops to $87 with a five-leg parlay and then to $69 at 10 legs.
The firm also forecast that every 5% increase in parlays as a percentage of an operator's overall handle (and a decrease in single-game bets as a result) would translate into noticeable gains in their hold rate, such as an added 0.9% for FanDuel.
So why parlay at all?
That parlay boom is borne out in numbers revealed by states willing to delve into that detail.
In New Jersey, for instance, the Division of Gaming Enforcement reported parlays accounted for $764.9 million in sportsbook handle during the first two months of 2024, up from $460 million for January and February of 2022. Parlay-related revenue shot up as well, from $63.5 million through the first two months of 2022 to $147.5 million in 2024.
In Illinois, regulators said parlay handle and revenue were $146.4 million and $14.6 million, respectively, in Feb. 2022. Those numbers shot up to $294.9 million and $53.9 million in Feb. 2024.
The state revenue figures highlight how much more profitable parlays are for sportsbook operators compared to straight bets. While the gross margins in Illinois for parlays were 18.3% in February, the overall win rate for the state's sportsbooks was 7.8%.
That increased revenue is the product of more and more bettors losing parlays. So why are they so popular?
The simple answer is that the average sports bettor likes them, especially because they offer the chance to win a lottery-like jackpot they may already be familiar with.
“I think there’s an element of people want to risk a little to win a lot,” said Joe Asher, president of sports betting at technology provider IGT, at the 2023 Global Gaming Expo. “The jackpot mentality that’s been ingrained in the culture of this country for a long time … I think that sort of thing continues and will continue to be appealing to the player.”
There’s also some parlay innovation to consider. They are no longer just about picking a moneyline here and a point spread there; rather, the rise of same-game parlays and enhanced same-game parlays, which allow you to add legs from other games, is giving bettors more to choose from.
“The betting types within parlays are another factor to consider and watch in the gaming margin expansion story,” Bender wrote. “In recent conversations, DraftKings and FanDuel both noted multi-game parlays are losing mix share compared to their same-game offering, which is a structural tailwind for gaming margins with more juice (or margin) baked into bets given that SGPs are more player-prop-oriented with less certainty around player performance for the operators.”
