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Volume 21 No. 23
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‘Now it’s real.’ So what now?

States, sports look to pounce on legal betting

Two days after a Supreme Court ruling cleared the way for sports betting in any state that wants it, the CEO of William Hill, the leading Nevada sportsbook, stood in a New York airport contemplating a dizzying turn of fate as he searched for a flight that would get him home to Las Vegas in time to use his NHL playoff tickets.

 

Joe Asher had already had a whirlwind week — and it was only Wednesday. After the high court issued its ruling, he and his staff celebrated at a Vegas club long into the night before he flew East Tuesday morning so that he could continue conversations with the executives of Monmouth Park in New Jersey, a racetrack in the state that was now at the forefront of America’s changing relationship with sports and gambling.

Monmouth wasn’t the only place that can’t wait to have a discussion with Asher. Once an outlier in a U.S. sports industry that cast gambling as anathema, London-based William Hill suddenly finds itself high on the call list of sports properties anticipating a gold rush.

“We’ve been getting bombarded — absolutely bombarded — with in-bounds from sports teams in the last 48 hours,” said Asher, whose company bet big on U.S. expansion when it moved into Nevada in 2012. “We can’t even keep up with them.” 

Hill’s newfound dilemma is just one of the outcomes of the Supreme Court’s landmark decision last week. The torrent of money soon to be unleashed for people throughout the sports industry is another, as is the fact that two factions long at odds over the issue of gambling in sports — the leagues and the gaming industry — now must find a way to work together for each other’s benefit. 

Among the matters that must be sorted out before the money can begin flowing are where bets can be placed, whether they can be done on mobile devices and the many issues attached to integrity.

New Jersey’s Monmouth Park could be accepting legal bets as soon as next month.
Photo: getty images

Those in sports see an upside primarily in two areas: The creation of a new sponsorship category in a sector hungry to create a customer base and an increase in engagement that could stem declines in viewership. Both of those will be affected by the ways in which states that legalize sports betting choose to regulate it.

“It’s all going to depend on what the law and regulation turn out to be,” Asher said. “Is it retail [with betting only at brick-and-mortar sportsbooks]? Is it retail plus mobile? How can you get a mobile account? Can you sign up remotely or is it like in Nevada where you have to go into a sportsbook to sign up? That would change your marketing strategy.”

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William Hill will be among the first, if not the first, companies to take a legal bet in New Jersey when wagering begins next month thanks to a play it executed last year when it renovated a sports bar at Monmouth Park horse track in the hope that it could eventually turn it into a full-service sportsbook.

More importantly, William Hill anticipates expansion as other states legalize sports gambling. Gaming research firm Eilers & Krejcik projected 14 states will legalize sports betting in the next two years, with the footprint growing to 32 states within five years.

William Hill can expect plenty of company, and competition, in many of those states. Churchill Downs Inc., which operates the largest online horse betting site in the nation, last week announced its plans to enter the sportsbook business through deals with white-label gaming platform provider SB Tech and Atlantic City hotel casino operator Golden Nugget. The latter deal will provide Churchill with a transferable online gaming license to operate in New Jersey. That could be a blueprint that other sportsbooks follow.

Also last week, Ireland-based sportsbook Paddy Power Betfair confirmed talks between its nascent U.S. operation and daily fantasy power FanDuel. While FanDuel’s valuable customer base is what the sportsbook would want most, the combined venture also likely would give it access to FanDuel’s New Jersey online license.

As all of that action percolates, consider this: When New Jersey cuts the ribbon on sports betting next month, it will open the spigot on a market projected to be worth $350 million to $500 million in annual gaming revenue, based on industry analysts’ estimates.

In order to place wagers, bettors will need to open sportsbook accounts and deposit funds. Thanks to its beachhead at the horse track, William Hill already has an inroad to the state’s horseplayers. Similarly, the casino operators know their regulars. But that leaves a vast swath of sports fans who don’t often gamble.

This will be about customer acquisition, with fans of the New Jersey teams atop the prospect list.

Expect a similar dynamic to play out state by state. This is not to say that all states will look like New Jersey. Another early adopter, Mississippi, has approved sports betting only within the walls of its casinos. Pennsylvania cleared the way for broad adoption of sports betting as part of a larger casino package last year, but because it requires a $10 million up-front payment from bookmakers and includes a tax rate of about 35 percent, many in gaming question its viability. West Virginia expects to open this summer, with mobile betting available across the state, but there are no pro teams within its borders.

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Before returning to the U.S. as president of the San Jose Earthquakes last year, Tom Fox spent seven seasons in the English Premier League, first as chief commercial officer of Arsenal and then as CEO of Aston Villa. In recent months, he’s had a steady flow of calls from friends who run NFL and NBA teams, curious about the implications of expanded sports betting. Fox described a competitive landscape of bookmakers hungry to connect with each club’s fan base, using those contacts to drive traffic and build loyalty.

“Sportsbooks are by and large commodities that then have a brand associated with them,” said Chris Grove, managing director of sports and emerging verticals at Eilers & Krejcik Gaming. “What separates one sportsbook from another is not that visible to the consumer. It becomes a war of effective marketing.”

Fox agrees. “Now, it’s like Amazon,” he said. “They want to get you on their platform. Once all your transactions are happening there, if you like the offering and the odds they are giving you, you will stay. What they want from the sports teams is customer acquisition and data bases.”

That is instructive for those considering the link between varieties of state regulation and the way business will flow as a result. Those states that see sports betting solely as a way to drive people into casinos and horse tracks will set up similarly to the way the United Kingdom used to look, with a handful of brick-and-mortar brands advertising and activating sponsorship to drive foot traffic.

Those states that embrace a broader model with remote account sign-ups, wagering via mobile apps and enough licensed providers to stoke competition will yield a more robust sponsor market for sports properties.

While the sports leagues and gaming companies have been lobbying legislators on those issues in many states for the last few months, the Supreme Court verdict is likely to hasten decisions.

“For so many jurisdictions, the prospect of the court decision was a reason to tread slowly,” said Geoff Freeman, CEO of the American Gaming Association, the leading casino industry trade group. “The removal of PASPA is going to speed this thing up exponentially. I think we’re going to see an expansion for sports betting in a fashion more rapid than we’ve seen in any other type of gaming — whether that be online gaming, brick-and-mortar expansion or lottery expansion. This thing is going to take off quickly.”

While there is now discussion about intervention from Congress — the long-stated preference of all the leagues, which would prefer to work within the same confines in every state — most see that as unlikely.

“I agree with the leagues that consistency across state lines in terms of policy would be helpful,” Freeman said. “But I think there’s a much easier way to get there. And that’s for the leagues and the industry to get on the same page in terms of some of these critical issues. If [that happens] our ability to adopt smart policy is exponentially greater. If we’re not arguing with one another, if we’re not putting state legislators in a position of having to choose one over another, if we can simply come together and lay out what we believe to be a good framework — we will win in terms of good policy nine times out of 10. That is a much faster, much more sensible approach toward getting the consistency we’re all looking for.”

While the leagues and gaming interests have sparred on several issues, both now indicate an increasing willingness to work together.

“For sports betting to succeed for bookmakers in a way that also protects the integrity of the sports leagues, there needs to be cooperation between the leagues, the states and the bookmakers,” said Bryan Seeley, senior vice president of investigations and deputy general counsel at MLB, who has lobbied state legislators on the matter for the league. “We have a number of disagreements about what laws should look like. But ultimately none of us wants the integrity of sports to suffer. Everybody wants fan engagement to increase. And it would be a lot easier for us to all be on the same page when we’re lobbying in states.”

While it is clear that the royalty that the leagues have suggested easily could come as part of a commercial arrangement, Seeley said he isn’t sure that other wish-list items, such as access to anonymous, account-level betting data and full cooperation on investigations into suspicious betting, could be handled effectively without state mandates.

“If those requirements came out of some sort of private agreement rather than state law or state regulation, they’re still requirements and that’s fine,” Seeley said. “But the point is that there need to be requirements here. And those are most likely obtained in state law or state regulation.”

Last week’s ruling likely will expedite those legislative decisions, and the deals that will flow as a result. Asher said that acquaintances from across the U.S. sports business have called him in recent months to get a better feel for how bookmaking companies market their services.

Earlier this month, the CEO of a “prominent” U.S. sports franchise came to his office to discuss the potential to do business as William Hill expands its footprint.

 “People have been reaching out,” Asher said. “But now, you feel like you’re drinking from a water hose. Now it’s real.”