Why Churchill Downs Is Ending TwinSpires Online Sports Betting

Churchill Downs is exiting the online sports betting scene after failing to keep apace with other sportsbooks determined to secure maximum market share in America’s latest lucrative sector.

Churchill Downs Inc. (CHDN) owns the racetrack in Louisville famous for the Kentucky Derby and also has a number of other businesses within its portfolio.

In 2018 it began investing in online sports betting, and eventually launched the BetAmerica brand, which then became part of the TwinSpires venture, to offer sports betting markets for players in multiple states.

TwinSpires has been active in Arizona, Colorado, Indiana, Tennessee, Michigan, New Jersey and Pennsylvania, pushing into new territories at a time where rival betting firms – such as MGM, FanDuel and Caesars – have also been investing in the industry.

And it appears as though the company haas’t been able to keep apace with the fervent spending of America’s giant gambling brands.

The twin spires at Churchill Downs are an iconic image in horse racing but the TwinSpires brand has struggled against fierce competition

TwinSpires in ‘highly competitive’ space

In a call last week, CEO Bill Carstanjen told investors its push into online sports betting and iGaming didn’t make economic sense.

“This isn’t the result we wanted when we started this business back in late 2018, but it is the prudent next step for our company,” Carstanjen said.

“We have profitable retail sportsbooks in four of our casinos, however, the online sports betting and online casino space is highly competitive with an ever-increasing number of participants that the states have licensed.

“Many are pursuing maximum market share in every state with limited concern for short-term or even long-term profitability. Because we do not see – for us – a path in which this business model delivers predictable and acceptable margins for at least several years – if ever – we have decided to exit the B2C online sports betting and iGaming space over the next six months.”

What will happen to player accounts currently in use and in credit at TwinSpires remains to be seen, but sports betting is expected to be off the table by the summer.

Churchill Downs’ decision highlights the ferocity of spending within America’s online gambling market right now. As each new state welcomes in legal online sports betting, firms are spending millions of dollars in marketing and licensing in order to attract a limited number of players.

New York’s approval of online sports betting just weeks before the Super Bowl triggered a flurry of investment in the state – and has resulted in Caesars swiftly curtailing their marketing budget.

Indeed, Caesars endured a $434m fourth-quarter loss in 2021 and splashed more cash in New York to acquire 500,000 new players. The company now has a 21% market share across America but that has come at a cost too big for Churchill Downs to compete.

Optimism for future

Churchill Downs reported $31.9m in sports betting losses during 2021 but does still control 50% of the horse wagering market. The company also plans to open additional casinos (such as Derby City Gaming) and racetracks – a sector of the sports betting industry it knows well – and maintain its prominence in historical horse racing.

“We remain excited about TwinSpires horse racing,” Carstanjen added. “Pre-COVID, we were about 40% of the horse racing market. That jumped to 60% in 2020 and then in 2021 saw a steady state of 50% market share, so this is a very successful business.”

“We remain absolutely committed and excited about TwinSpires horse racing.

“As its top line, bottom line, and margins continue to demonstrate that this is a special online business with a sustainable, scalable, and unique business model that delivers profitable growth today just as it has when we started this business well over a decade ago.”