MaximBet has ceased operations, becoming the latest U.S. sportsbook to shutter its business in the face of mounting costs.
The gaming operator, owned by Carousel Group in partnership with Maxim magazine, said in a statement that it made the decision due to “macro economic conditions.” The company had delays in its new tech stack, which it announced in January but didn’t debut until September, and struggled to differentiate itself in a market increasingly dominated by operators with deeper pockets and more tolerance for losses.
“Our ability as an early-stage company to compete in a market where operating costs far exceed revenue, even among the top operators, is not sustainable,” the company said. “Our priority now, in consultation with state regulators, is to wind down operations and help active customers in Colorado and Indiana withdraw their funds and close their accounts.”
MaximBet was looking to raise money earlier this year, according to multiple people familiar with the company’s plans, though it’s unclear if the group was successful. An investor deck that was viewed by Sportico detailed the company’s first six months in operation, all in Colorado. In total, the deck says MaximBet had $18.7 million in real money handle (total handle minus free bets and bonuses), with marketing spend ($3.7 million) more than double gross gaming revenue ($1.8 million). A representative for Carousel Group said the company was always looking for capital, and that economic conditions made that “challenging.”
MaximBet, which tried to position itself at the nexus of sports and entertainment, is just the latest sportsbook to exit the U.S. market shortly after launching. Last month FuboTV (NYSE: FUBO) announced it was shuttering its Fubo Gaming division after less than 12 months. Fubo Gaming had a number of major sports sponsorships, and last week the New York Jets took the company to court over money it says it is still owed.
There will likely be more closing shop in the coming months, as the cost to acquire customers remains high and profitability elusive. Sports betting is generally a low-margin business, and the state-by-state nature of the U.S. market, coupled with money often owed to casinos, leagues and data operators, has created difficult conditions for operators large and small. DraftKings (Nasdaq: DKNG) stock fell more than 20% earlier this month after the company announced 2023 guidance that included adjusted EBITDA losses of $475-$575 million.
“The high regulatory cost to entry (including $10M or $25M license fees plus royalty or market access fees to casinos in certain states) make building a scaled sports betting business operating in most legal states difficult and expensive,” Dave VanEgmond, managing partner at gamming VC firm Bettor Capital said in an email. “You need hundreds of millions, if not a billion dollars, to aggressively compete to be a major player with more than a few percent of market share in sports betting. With the capital markets tightening, smaller companies and startups aren’t able to raise the necessary capital to compete, and I’d expect to see more exits or sales amongst smaller operators who don’t have access to capital to keep investing in the U.S. market opportunity."
MaximBet launched in 2021 with a much smaller sports sponsorship portfolio than Fubo. Pop star Nicki Minaj was an investor and spokeswoman; MLB All-Star outfielder Charlie Blackmon was an endorser. A representative for Carousel didn’t respond to a question about how Wednesday’s news affects those investors.
In a separate note to users, MaximBet said customers can withdraw fund through Dec. 15. Open bets will be settled until that date, at which point they will be cashed at “fair market pricing.”
(This story has been corrected in the penultimate paragraph to show that Charlie Blackmon was an endorser of MaximBet, though not an investor.)