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US gambling shake-up stakes: the runners and riders

Proactive Investors Wednesday, 16 May 2018
The decision by the US Supreme Court to allow states to decide whether to allow betting on sporting events will change the gambling landscape stateside. A federal ban on sports betting that has been in place was lifted by the Supreme Court on Monday and a number of states are expected to pass legislation that will make it possible, for example, to have a punt on the punter in an NFL game. READ Webis and GAN soar after US Supreme Court opens door to the legalisation of sports betting in the US Not that it is currently impossible to bet on sporting events in the USA. The Professional and Amateur Sports Protection Act (PASPA) of 1992 meant that legalised sports betting was restricted largely to the state of Nevada, home to Las Vegas, and to a lesser extent Montana, Oregon and Delaware, all of which had legalised gambling markets in place before the act was passed. “The legalization of sports gambling requires an important policy choice, but the choice is not ours to make. Congress can regulate sports gambling directly, but if it elects not to do so, each state is free to act on its own,” the statement from the Supreme Court said. As the USA learnt in 1919 with the introduction of the National Prohibition Act, which tried to outlaw the production and consumption of booze, simply passing an act banning a pastime does not eliminate it, it just drives it underground and there is a thriving illegal gambling market in the USA. The American Gaming Association reckons that Americans illegally wager about US$150bn on sport each year. US broker Jefferies reckons the market for legal betting on sport could be more than US$57bn a year in the US. For those not prepared to break the law and have a crafty bet on a hockey match breaking out at a televised fight there has been the development of the fantasy sport scene, in which players draft or select players and score points according to how well those players perform over a given period. Two of the big names in US fantasy sport - FanDuel and DraftKings – have already announced plans to branch out into taking bets on sporting events. UK bookie Paddy Power announced on Wednesday it is in talks to acquire FanDuel. READ Power Betfair up as it confirms talks to buy US daily fantasy sports company FanDuel FanDuel was part of merger discussion last year with rival DraftKings but the plan was scrapped in July after a legal challenge by the US Federal Trade Commission. Almost exactly a year ago, Paddy Power Betfair acquired daily fantasy sports platform, Draft, in a deal worth around US$50mln. Meanwhile, DraftKings’ chief executive officer, Jason Robins, has already pledged to provide its customers with “innovative online sports betting products”. "States are now free to allow their residents to place mobile sports bets with licensed, trusted companies based in the US and that pay taxes here,” Robins said. That last bit about paying taxes is likely to be the clincher for many states when considering whether to take advantage of the Supreme Court’s landmark ruling. Today the Supreme Court ruled PASPA unconstitutional, opening the door for fully legalized sports betting from your home, business & especially sports venues. To the Supreme Court I say pic.twitter.com/gAzOld0FeF — Warren Sharp (@SharpFootball) May 14, 2018 Tax revenue a big incentive for states that are considering lifting the ban on betting on sporting events There is little doubt that New Jersey, home to Atlantic City, which has its fair share of casinos since legalising casino gambling in the resort in 1976, will be quick out of the traps to legalise sports wagering. It was the state that challenged the Professional and Amateur Sports Protection Act after trying to find ways around it for some time. A bill sponsored on Monday by New Jersey state Senate president Steve Sweeney and others envisages an 8% tax rate for bets made in person at casinos and racetracks and a 12.5% levy on online bets. Some sources have suggested that the state could be open for business by May 28; race-track Monmouth Park has been working behind the scenes with UK bookmaker William Hill plc (LON:WMH) on taking bets and reckons that Memorial Day (May 28) is a realistic target for the first bets to be placed. William Hill is set to get half the proceeds of sports betting at Monmouth Park and is contractually obliged to spend US$5mln to develop the sports betting infrastructure in the years to come. Monmouth Park expects to be able to take sports bets via kiosks, web sites and mobile apps. With the National Basketball Association finals set to begin on the last day of the month, May 28 is a deadline Monmouth Park and William Hill will not want to miss. Although the Supreme Court’s decision will bring about a massive change in the gambling market in the US, the expectation is that most states will adhere to the model operated by Nevada, which possibly provides a big advantage to those operators entrenched in Las Vegas. They don't call Las Vegas "Lost Wages" for no reason​ Casino operator Caesars Entertainment Corporation (NASDAQ:CZR) has already indicated it will open a sports-book. Stockbroker Jefferies reckons Caesars and Penn National Gaming Inc (NASDAQ:PENN) could be the big winners in the gambling free-for-all, while business-to-business operators such as Scientific Games Corp (NASDAQ:SGMS) and International Game Technology PLC (NYSE:IGT) could also make out like (one-armed) bandits. Las Vegas-based MGM Resorts International (NYSE:MGM) has welcomed the decision and said it is “extremely well positioned for a post-PASPA environment." "MGM Resorts International applauds the Court's decision to allow states the opportunity to protect consumers and benefit the public by regulating and taxing sports betting,” it said in a stock market statement on Monday. "We look forward to working with legislators and policy makers to achieve a regulatory outcome that benefits states and consumers alike while ensuring the integrity of sports,” it added. In general, most of the major sporting organisations in the USA have been wary of legalising betting on their sporting fixtures but then almost all of them take control freakery to a high level – especially when it comes to ensuring that their leagues take the lion’s share of any income related to their sport. Nevada, we have a problem​ Possibly of more concern are the fears expressed by the National Council on Problem Gambling. As the UK has found, most people are OK with having the right for “the occasional flutter” or even a weekly bet on the time of the first offside decision against Jamie Vardy, but there is a section of society – usually from within the ranks of those who can least afford a gambling habit – that has a gambling addiction. Marlene Warner of the National Council on Problem Gambling has called for any governmental body or sports league that receives money from betting on sport should be required to dedicate funds to prevent and treat gambling problems.  

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