US sports betting: Reaction and what happens next

The Supreme Court announced its long-awaited verdict on PASPA yesterday, delivering one of the biggest opportunities the online gaming industry has seen in years.

Below EGR examines the immediate impact, what the key stakeholders said, and what could happen next.

What now?

The onus falls on the individual states to pass sports betting. Six states have already done so (Delaware, New Jersey, Mississippi, Oregon, Pennsylvania, and West Virginia), and each will now be developing the regulatory framework needed to go live as soon as possible.

New Jersey has already said it aims to be offering sports betting within a couple of weeks, and Delaware and Missouri are expected to follow before the end of 2018. Several major states including California and Illinois could still pass sports betting legislation this year.

Some analysts project a market worth $1bn by the end of the year, while Eilers & Krejcik project a market worth $6bn by 2023, with 32 states having passed legislation.

Some stakeholders (notably the NFL and NBA) have called for federal legislation on sports betting, and US Senator Orrin Hatch announced yesterday he would indeed be lodging such a bill. Hatch said a state-based industry would create a “patchwork race to the regulatory bottom.”

Hatch didn’t announce any details, and it’s doubtful a federal solution would gather much momentum this year at least.

Will sports betting be online?

That depends on the state-by-state legislation. The pro leagues support it, but land-based stakeholders may oppose it. Eilers noted: “Online gambling has traditionally been a touchy subject for policy makers. The support of the leagues may make the difference on this one. But we could easily see a world where several states launch land-based sports betting only, at least initially.” The tax rates and other factors affecting profitability will all be decided at the state level.

Market impact

Approximately £1.5bn was added to the value of the three biggest listed UK firms, with Paddy Power Betfair up 12%, William Hill up 11% and GVC up 7.5%. 888 also gained around 15%.

Shore Capital noted the initial price reaction was “a little exuberant”, although Berenberg said it saw significant upside for William Hill and GVC.

Cenkos’ Simon French said the initial euphoria in the market dissipated somewhat after close, adding: “Not everyone can be a winner. We would expect those companies with existing relationships, proprietary technology and a willingness to enter as a junior partner will ultimately prove more successful. Of course the enticing alternative is that US bricks may look to add UK brains (and cashflows) to their operations. This is likely to be the most attractive outcome for most shareholders.”

Reaction

Itai Frieberger, CEO of 888: “888 has been keeping a very close eye on regulatory developments in the US and welcomes today’s announcement as an important step forward in the potential regulation of the US market. The potential for sports betting in the US is significant and, as the only operator in all three regulated US states, we believe 888 is uniquely positioned to exploit the potential growth opportunities in the US market that today’s ruling opens up.”

Paddy Power Betfair: “We welcome the Supreme Court’s decision which sets out a path towards an exciting regulated sports betting market in the US. Paddy Power Betfair is well-placed to take advantage of this opportunity through our existing US operations, and the Group’s wider resources and capabilities.”

William Hill CEO Philip Bowcock: “This is a landmark moment for sports betting and for William Hill. Now, all attention shifts to the states, where steps have already been taken to prepare for this day. Legalised sports betting means that consumers and sports leagues will have greater protection, states will benefit from the raising of taxes and there is the potential for over 100,000 jobs to be created. We welcome the ruling and expect to be operational in New Jersey as soon as responsibly possible. We are also actively working on opportunities in a number of other states and will update on these opportunities as appropriate.”

GVC: “The prospect of a regulated sports betting market in the US is clearly an exciting one. Given our existing licenced presence in states such as Nevada and New Jersey, together with our proprietary technology stack across all products and our experience of operating across many different geographic markets, we believe GVC is very well placed. However, it will undoubtedly be a competitive market from both a supplier and operator perspective and much will depend on what legislation individual states pursue. Therefore, the US is very much about the long-game and not short-term profitability.”

Kindred: “We welcome the US Supreme Court decision and are of course excited about these new markets hopefully opening up. We are following the developments in the US with great interest to see how the different states choose to regulate their respective online markets as this will determine the future success of gambling in each state. As it is the case in Europe, we will evaluate each market opening up and based on the regulation terms we will decide where we will focus our resources. At the moment, we are investigating if and how we can launch any of our brands in the US market.”

Barry Cottle, incoming CEO, Scientific Games: “This decision will potentially bring about the greatest wave of gaming expansion in the United States in the past 20 years. This is certainly an exciting development for our industry, our customers and our company. Scientific Games is uniquely equipped to help our customers capitalize on this new sports betting opportunity.”

Kristian Nylen, Kambi CEO: “Today’s Supreme Court judgment marks the beginning of an exciting new chapter for Kambi. We have been working towards this day since our inception, putting in place the foundations to ensure the business would be ready for a legal US sports betting market when it arrived.”

Richard Carter, CEO, SBTech: “The Supreme Court’s decision is a historic day for the industry and we look forward to working closely with all stakeholders and helping shape an open and responsible environment for sports betting to flourish in the US, which addresses the needs of consumers, law enforcement, regulators, sports integrity, operators and technology providers.”