US Sports Betting Revenue Falls 6.4% in February Amid Industry Slowdown

US sports betting revenue fell 6.4% in February, totalling $1.17 billion despite a nationwide handle of $12.66 billion. The revenue decline marks a trend for state-licensed operators navigating an increasingly competitive market. By the same token, commercial gaming revenues showed resilience, posting a 4.6% increase over the same month last year. The divergence between overall gaming growth and sports betting performance raises questions about the factors driving this slowdown. Lower hold percentages, sequential handle declines, and emerging competition from prediction markets have created headwinds for traditional sportsbooks.

US Sports Betting Revenue Drops 6.4% Despite Overall Gaming Growth

Commercial gaming revenues climbed 4.6% year over year in February, driven by strength across both retail and online casino operations. Traditional casino revenues rose 3.9%, aided by a solid 5% growth in table game revenues. The table game performance marked the first increase since October, signalling potential recovery for retail casinos following a lackluster 2025.

Meanwhile, iGaming revenues jumped 25%, with online casinos generating $976.30 million. This figure represents nearly 25% of the $4.00 billion produced by traditional casinos, demonstrating the accelerating shift toward digital gaming platforms. The combined strength of casino revenues proved sufficient to offset declining sports betting performance.

Sports betting revenues totalled $1.17 billion, representing a 6.4% decrease from February 2025. The hold percentage contributed to this decline, coming in at 9.24, down 73 basis points from the prior year. More concerning for operators, handle decreased for a fourth consecutive month, indicating reduced betting activity beyond just unfavorable outcomes. The sustained handle decline points to structural challenges facing state-licensed sportsbooks rather than temporary market fluctuations.

Why Are Sportsbooks Experiencing Revenue Decline?

Hold percentage fluctuations emerged as the primary driver behind sportsbook revenue struggles. The nation’s licensed operators combined for a 6% hold rate in March, down from 8% the previous year. This decline stemmed from unexpected outcomes during March Madness, where higher seeds won 82% of tournament games, the highest rate in history. When favourites win consistently, sportsbooks lose money as public betting patterns align with actual results.

DraftKings reported a Q1 hold of 9.5%, falling short of the 10.4% structural hold expected under typical conditions. In similar fashion, state-level data revealed dramatic swings. New Jersey sportsbooks posted a hold of only 5.2% in December, compared to 8.5% the prior year. New York experienced parallel challenges, with revenue dropping to a six-month low in February as hold percentages compressed.

Seasonal factors compounded the revenue pressure. February handle fell 25% from January as college and professional football seasons concluded. Missouri demonstrated how promotional spending artificially inflates early performance, with operators distributing $33.10 million in free bets during January, down from $125 million in December. Consequently, the state’s hold dropped from 13.9% to 11.3% as promotional activity normalized.

Market maturation signals suggest the days of exponential growth have ended.

How Prediction Markets Are Disrupting State-Licensed Sports Betting

Prediction markets emerged as an unexpected competitive threat to state-licensed sportsbooks, operating under federal Commodity Futures Trading Commission oversight rather than state gambling regulations. Platforms like Kalshi and Polymarket derive approximately 90% of their volume from sports-related contracts, directly competing with traditional operators without paying state taxes or adhering to local licensing requirements.

The Trump administration’s CFTC adopted a permissive stance toward prediction markets, allowing platforms to expand offerings in states where mobile sports betting remains illegal. This regulatory gap prompted Mississippi Senate Gaming Chairman David Blount to oppose mobile sports betting legalization, citing prediction markets’ erosion of potential state revenue. Traditional operators responded swiftly, with DraftKings launching its own prediction market product.

Legal challenges multiplied as states fought back. Eight jurisdictions, including Maryland, New Jersey, Massachusetts, Connecticut, Illinois, Ohio, Nevada, and Montana, issued cease-and-desist letters or opened investigations. Arizona escalated the conflict by filing criminal charges against Kalshi. At least 20 lawsuits argue prediction markets offer unregulated gambling through regulatory loopholes.

Bipartisan legislation from Republican Senator John Curtis and Democrat Adam Schiff seeks to ban sports-related prediction market contracts. Paradoxically, some lawmakers now view prediction markets as motivation to legalize traditional sports betting and capture tax revenue currently lost to federally regulated platforms.