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UK sports betting firms bet on US after sports betting wager judgment

5 June 2018

By Natalie Sherman

Business reporter, New York

It's high stakes for UK companies as sports betting wagering starts to spread out in America.

From Tuesday, new rules on sports betting came into impact in Delaware, a tiny east coast state about 2 hours from Washington.

Neighbouring New Jersey could start accepting sports betting bets as early as Friday.

The changes are the very first in what could become a wave of legalisation after the Supreme Court last month cleared the way for states to enable sports betting wagering.

The industry sees a "when in a generation" opportunity to develop a new market in sports betting-mad America, stated Dublin-based financial analyst David Jennings, who heads leisure research at Davy.

For UK companies, which are facing debt consolidation, increased online competition and tougher rules from UK regulators, the timing is especially opportune.

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But the market states depending on the US stays a dangerous bet, as UK business face complicated state-by-state guideline and competitors from established regional interests.

"It's something that we're truly concentrating on, but equally we don't wish to overhype it," stated James Midmer, representative at Paddy Power Betfair, which recently acquired the US fantasy sports betting site FanDuel.

'Take some time'

The US represented about 23% of the world's $244bn (₤ 182bn) in video gaming income in 2015, according to a report by Technavio, external released in January.

Firms are wishing to use more of that activity after last month's decision, which overruled a 1992 federal law that barred states outside of Nevada and a few others from authorising sports betting wagering.

The judgment discovered the law was an over-reach of federal power. But the court it did not actually legalise sports betting wagering, leaving that concern to regional lawmakers.

That is expected to result in considerable variation in how firms get certified, where sports betting can happen, and which events are open to speculation - with huge implications for the size of the marketplace.

Potential earnings ranges from $4.2 bn to practically $20bn yearly depending upon aspects like the number of states transfer to legalise, Oxford Economics estimated in a 2017 study for the American Gaming Association.

"There was a great deal of 'this is going to be big'", stated Will Hawkley, London-based head of leisure for specialists KPMG.

Now, he stated: "I think many people ... are looking at this as, 'it's an opportunity however it's not going to be $20bn and it's going to be state by state and it's going to require time'."

'Remains to be seen"

Chris Grove, managing director at Eilers & Krejcik Gaming, anticipates that 32 states will legalise sports betting wagering in some kind by 2023, creating a market with about $6bn in annual earnings.

But bookmakers face a far various landscape in America than they carry out in the UK, where sports betting stores are a frequent sight.

US laws restricted gaming largely to Native American lands and Nevada's Las Vegas strip until relatively recently.

In the popular imagination, sports betting wagering has long been linked to a 1919 baseball World Series match-fixing scandal.

States have actually also been slow to legalise numerous forms of online sports betting, despite a 2011 Justice Department viewpoint that appeared to eliminate barriers.

While sports betting wagering is usually viewed in its own classification, "it plainly stays to be seen whether it gets the type of momentum people think it will," said Keith Miller, law professor at Drake University and co-author of a book about sports betting wagering guideline.

David Carruthers is the previous chief executive of BetonSports, who was apprehended in the US in 2006 for running an offshore online sportsbook and served prison time.

Now a consultant, he says UK firms need to approach the market carefully, picking partners with caution and avoiding mistakes that might cause regulator reaction.

"This is an opportunity for the American sports betting gambler ... I'm not exactly sure whether it is a chance for organization," he states. "It actually depends on the outcome of [state] legislation and how business operators pursue the chance."

'It will be partnerships'

As legalisation begins, sports betting companies are lobbying to ward off high tax rates, in addition to requests by US sports betting leagues, which wish to gather a percentage of earnings as an "stability fee".

International business face the included challenge of a powerful existing video gaming market, with casino operators, state-run lottery games and Native American people that are seeking to defend their grass.

Analysts state UK companies will require to strike collaborations, offering their expertise and technology in order to make inroads.

They indicate SBTech's current announcement that it is offering innovation for Kentucky Derby operator Churchill Downs as an example of the sort of deals likely to materialise.

"It will be a win-win for everyone, but it will be partnerships and it will be driven by technology," Mr Hawkley said.

'It will simply depend'

Joe Asher, president at William Hill US, is clear-eyed about the realities.

The business has actually been buying the US market since 2011, when it bought 3 US companies to establish a presence in Nevada.

William Hill now uses about 450 individuals in the US and has revealed collaborations with gambling establishments in Iowa and New Jersey.

It works as threat supervisor for the Delaware Lottery and has actually invested millions along with a regional developer in a New Jersey horse racing track.

Mr Asher stated William Hill has ended up being a family name in Nevada but that's not always the goal everywhere.

"We definitely plan to have a really significant brand name existence in New Jersey," he said. "In other states, it will simply depend upon regulation and potentially who our local partner is."

"The US is going to be the most significant sports betting wagering market in the world," he added. "Obviously that's not going to take place on the first day."

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