With contributions from David Pakman, Managing Partner & Head of Venture Investments

Gambling is one of the most exciting markets on the internet today. Not only is it ripe with innovation but the online gambling market is supposed to reach $278 billion by 2034 growing at a 9.6% CAGR. At CoinFund we take a broad view of the market and include iGaming (online casino and slots), poker, sports betting, prediction markets, and even new formats like loot boxes. It’s especially exciting for us as we believe blockchain rails and well designed tokenomics will be the differentiating factors for the leading gambling platforms of the future.

The summer is typically the slowest season for gambling activity. But in the past few months, several key headlines in the space have signaled a sharp uptick demand for online gambling platforms. Prediction markets are in the limelight, as mainstream platforms like Robinhood, FanDuel, and DraftKings launch their own, or partner with existing players. Last month, Polymarket received investment from 1789 Capital and added Donald Trump Jr. to its board. As more prominent players begin to embrace prediction markets, what will crypto adoption look like in the broader context of online gambling? 

CoinFund has been paying close attention to the gambling space for the past year, and we recently announced we led the seed round for real-money gaming platform ZOOT. To further uncover the crypto community’s gambling patterns, we issued a survey that amassed 70 respondents. Here are the results from our inaugural Gambling Adoption Survey. 

 

Demand for licensed vs. unlicensed platforms

Nearly 44% of respondents reported that they gamble online more than once a week. Digging into their user behavior, 52% of respondents said they spend their time playing casino games, while 34.8% will make bets on sports. Additionally, 19% of respondents use prediction markets. It will be exciting to monitor user adoption on Robinhood, FanDuel, and DraftKings as they make further inroads into the crypto space through prediction markets. 

Unfortunately, similar to other gambling verticals, there is not a clear stance on how prediction markets should be regulated. The Nevada Gaming Commission recently warned FanDuel and Robinhood against offering sports related prediction markets in their state. Robinhood is countersuing them as their offering through Kalshi is regulated by the CFTC. It’s difficult to understand why either CFTC regulated contracts or peer-to-peer betting would be banned, while users can still bet against the house. We hope regulators focus on transparency and fairness as poor regulation forces betting behavior into the black market. The American Gaming Association estimates over 20% of US online sports betting and more than 65% of iGaming (online casino and slots) occurs in the illegal market today. 41% of our survey respondents primarily use platforms that are unlicensed in the US. Additionally, many providers such as Stake.com operate in the US without proper licensing until they are served with cease and desist letters. Consumers may be unaware they are betting on unregulated sites – 1.4% of respondents claimed to be unaware of the regulatory standing of the platforms they use. These unlicensed sites also have an unfair advantage when it comes to customer acquisition as we presume they don’t pay taxes here in the US (the number #1 component of COGs for Draftkings and Flutter). In 2024 there was $22 billion of regulated online gross gaming revenue (GGR) in the US and $54 billion in illegal GGR according to the AGA. GGR is the revenue platforms generate before paying out bonuses and taxes. The AGA also estimates states lost out on $15B in tax revenue from gambling platforms last year. 

Customer acquisition and retention

97% of respondents have joined a betting platform specifically for a promotion. Free bet and  deposit campaigns are the status quo for customer acquisition and retention, with many offering $1000 or more in “free” bets. 42% of our respondents farm promotions monthly and 54% use between 2-4 platforms consistently, depending on the promotions being offered. A loyalty token akin to Binance’s BNB or OKX’s OKB that gives users on platform perks could increase retention. Shuffle (SHFL) and Rollbit (RLB) have some of these aspects but may have flooded the market too aggressively while they focused on customer acquisition. 

It’s particularly interesting to see financial apps add in more typical gambling options, and for gambling apps to add in stock market speculation like FanDuel is doing with CME. At CoinFund, we have been expecting convergence of these spaces, but the speed of adoption has notably increased the past few months. In our survey the #1 criteria for users in selecting a gambling platform is a wide selection of bets being offered. We expect this continues to be prominent and that users would enjoy having all of the speculative behaviours they want in the same place. The rapid rise of Fanatics as a wagering platform speaks a bit to this trend as they were very quickly able to capture $300 million in betting revenue, likely from their existing customers. Anecdotally, our respondents said they enjoy the cross segment value of their rewards like being able to use bet promotions towards buying collectibles. As the space matures, we believe winners will have multiple speculative activities and other synergistic products in the same platform to drive user retention.  

We see online gambling as one of the highest potential sectors across fintech, Web 2.0 and web3. In the TTM, over $25 billion was deposited onchain through stablecoins and tokens like ETH and SOL. The convergence of both is a theme we plan to continue betting on (pun intended). Our respondents highlight the market is ripe for continued disruption. If you have an innovative plan to use web3 elements as part of a gambling platform, specifically regarding your retention strategy, we’d love to hear from you. 

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