The acquisition of Yahoo! by Verizon (NYSE:VZ) hasn't paid off quite the way the telecom giant likely hoped it would, but it may yet fuel some of its biggest growth opportunities. 

In November, Verizon announced it was going to expand on the Yahoo Sports brand by making it a center for sports betting. When it debuted, only people using the app in New Jersey could place bets, but Verizon plans to expand it this year to five more states were wagering on athletic contests is legal. As more states start to allow people to bet legally on sports, Yahoo could realize a good portion of its potential.

People cheering over soccer game

Image source: Getty Images.

Giving it a sporting chance

To monetize the Yahoo Sports app, Verizon is partnering with Roar Digital, a joint venture between MGM Resorts (NYSE:MGM) and GVC Holdings, to funnel sports betting through the casino operator's gambling platform, BetMGM. The new venture is called Yahoo Sportsbook powered by BetMGM.

The telecom says it's an effort that builds on its "core strategy to connect content and discovery to transactions." It will also allow the online betting platform to integrate with Yahoo's fantasy sports operations and content. 

New Jersey was one of the first states to authorize sports wagers after the U.S. Supreme Court struck down as unconstitutional the Professional and Amateur Sports Protection Act of 1992, which barred states from authorizing sports gambling. The Garden State went on to become the biggest market for sports betting, quickly beating out Nevada, where that form of gambling has been legal for decades.

The place to bet on sports

Online gambling hit almost half a billion dollars in New Jersey in 2019, driven mostly by casinos as online poker remains weak. Its rise has been fueled by both FanDuel, which partnered with The Meadowlands Racetrack, and DraftKings, which has partnered with Resorts Atlantic City and just filed for an IPO. Together they control about 80% of the online market in the state, but FanDuel is the biggest sportsbook in the country, with about a 60% share. 

New Jersey generated almost $4.6 billion in sports betting handle last year and revenue of nearly $300 million. In the state's gambling parlance, handle is the amount that is wagered; revenue is the amount the casinos keep.

MGM is the third-largest online betting site in the state through its Borgata casino, which uses BetMGM and PartyPoker, but there are 17 sportsbook apps operating in New Jersey, and 10 retail books operating out of Atlantic City casinos and racetracks. PartyPoker is a property of Roar Digital.

Off to a roaring start

The Yahoo Sportsbook will essentially serve as an affiliate of BetMGM, steering its traffic to the platform, which will handle the betting transactions. The partners haven't said how much compensation Verizon will receive for funneling customers to the platform, but considering the telecom's desire to monetize its media outlets, and its willingness to expand the partnership to more states, the terms are likely favorable.

Earlier this month, Roar Digital gained approval from Nevada gambling regulators to operate online sports betting in the state. It will be rebranding its PlayMGM digital sportsbook to BetMGM, and it hopes to be operational by the time of the March Madness tournaments.

Verizon has been transforming its media division away from social media and user-generated content, and last August sold Tumblr as part of that realignment.  Making its properties money-generating enterprises is the new goal.

A nationwide opportunity

Currently, 14 states offer full-service sports betting, and another eight have legalized it but have yet to authorize its operation. For example, Michigan just legalized it in December and expects to have its system up and running in March, but Connecticut, which legalized it in 2017 ahead of the Supreme Court's ruling, has failed to enact enabling legislation. Another half dozen states or so are considering it.

MGM Resorts has been building up a sports betting empire with professional sports league partnerships, but with this latest deal with Verizon and Yahoo Sports could turn the telecom into the power behind the throne.