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UK wagering firms gamble on US after sports betting wager ruling

5 June 2018

By Natalie Sherman

Business press reporter, New York

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

From Tuesday, new guidelines on wagering entered into effect in Delaware, a tiny east coast state about 2 hours from Washington.

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

The changes are the first in what could end up being a wave of legalisation after the Supreme Court last month cleared the method for states to allow sports betting.

The industry sees a "as soon as in a generation" chance to establish a new market in sports betting-mad America, said Dublin-based financial analyst David Jennings, who heads leisure research at Davy.

For UK companies, which are facing consolidation, increased online competitors and harder guidelines from UK regulators, the timing is particularly opportune.

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But the market states counting on the US remains a dangerous bet, as UK business face complicated state-by-state policy and competitors from entrenched local interests.

"It's something that we're really concentrating on, but similarly we do not wish to overhype it," said James Midmer, representative at Paddy Power Betfair, which just recently bought the US fantasy sports betting site FanDuel.

'Take time'

The US accounted for about 23% of the world's $244bn (₤ 182bn) in video gaming earnings last year, according to a report by Technavio, external released in January.

Firms are hoping to take advantage of more of that activity after last month's choice, which struck down a 1992 federal law that disallowed states outside of Nevada and a few others from authorising sports betting wagering.

The ruling discovered the law was an over-reach of federal power. But the court it did not really legalise sports betting, leaving that concern to local lawmakers.

That is anticipated to cause substantial variation in how companies get licensed, where sports betting wagering can occur, and which events are open to speculation - with huge ramifications for the size of the marketplace.

Potential revenue varieties from $4.2 bn to practically $20bn each year depending upon factors like how many states move to legalise, Oxford Economics approximated in a 2017 study for the American Gaming Association.

"There was a lot of 'this is going to be substantial'", said Will Hawkley, London-based head of leisure for specialists KPMG.

Now, he stated: "I think most people ... are taking a look 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 take time'."

'Remains to be seen"

Chris Grove, handling director at Eilers & Krejcik Gaming, predicts that 32 states will legalise sports betting in some form by 2023, developing a market with about $6bn in yearly income.

But bookmakers deal with a far various landscape in America than they carry out in the UK, where sports betting shops are a regular sight.

US laws minimal gaming mainly to Native American lands and Nevada's Las Vegas strip up until fairly recently.

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

States have likewise been slow to legalise lots of forms of online sports betting, regardless of a 2011 Justice Department opinion that appeared to eliminate obstacles.

While sports betting is normally seen in its own classification, "it clearly remains to be seen whether it gets the sort of momentum people believe it will," said Keith Miller, law teacher at Drake University and co-author of a book about sports betting regulation.

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

Now an expert, he states UK companies must approach the marketplace thoroughly, picking partners with care and preventing errors that might lead to regulator reaction.

"This is a chance for the American sports betting ... I'm unsure whether it is a chance for organization," he says. "It actually is reliant on the result of [state] legislation and how the business operators pursue the opportunity."

'It will be partnerships'

As legalisation starts, sports betting firms are lobbying to ward off high tax rates, along with demands by US sports betting leagues, which want to gather a percentage of income as an "stability fee".

International business deal with the added difficulty of an effective existing gaming market, with gambling establishment operators, state-run lottos and Native American tribes that are seeking to safeguard their grass.

Analysts state UK companies will need to strike collaborations, offering their knowledge and innovation in order to make inroads.

They indicate SBTech's current statement that it is offering technology for Kentucky Derby operator Churchill Downs as an example of the type of offers most likely to materialise.

"It will be a win-win for everybody, however it will be collaborations and it will be driven by innovation," Mr Hawkley said.

'It will simply depend'

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

The business has actually been buying the US market since 2011, when it purchased 3 US firms to develop a presence in Nevada.

William Hill now employs about 450 people 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 invested millions alongside a regional developer in a New Jersey horse racing track.

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

"We definitely mean to have a very significant brand name existence in New Jersey," he stated. "In other states, it will simply depend on regulation and possibly who our local partner is."

"The US is going to be the biggest sports betting wagering market worldwide," he included. "Obviously that's not going to happen on day one."

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