Why you should be careful betting parlays

Let's take a brief look at the data from New Jersey this football season

The American Gaming Association reported on Tuesday that the legal U.S. sports betting market posted a record $10.92 billion in revenue for the year 2023 (with a few states left to report in Nov. and Dec.). A record of nearly $120 billion wagered on sports across 38 legal states (plus Washington D.C. and Puerto Rico) combined with an increased year-over-year win for sportsbooks (9.1%, up from 8.1% in 2022) helped to fuel the new revenue record.

With more and more states legalizing sports betting, it makes sense that the overall amount wagered — also known as “the handle” — would increase YOY. And because individual states vary in the detail of their sports betting revenue and handle reports each month, it can be difficult to get an apples-to-apples comparison among states.

Before New York legalized mobile betting in Jan. 2023, New Jersey was consistently the state with the most money wagered on sports betting every month. However, with mobile betting legal in New York and the massive population difference (plus NYC residents no longer having to pop into NJ to make their wagers), New York took over as the No. 1 sports market by handle in the U.S.

Over the course of 2023, New Jersey had $1.0 billion in sports betting revenue, second only to New York (which has an astronomical 51% tax rate). That revenue number was up 31.9% from 2022 and marked the first time the Garden State exceeded $1 billion in revenue.

So, why did New Jersey make so much more revenue in 2023?

There is one overarching reason: Sports bettors are betting more and more parlays … and losing on them.

For those unfamiliar, a parlay means that you string together two or more individual bets and both wagers must win for your bet to cash. In other words, you could’ve had a four-leg parlay in the Super Bowl with Patrick Mahomes OVER 1.5 TD passes, Mahomes OVER 25.5 rushing yards, Travis Kelce OVER 70.5 receiving yards and the San Francisco 49ers to win. You would’ve won three of the four legs, but your parlay would’ve lost.

I’ll try not to dive too deep into the numbers, but bear with me for a minute.