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UK wagering companies bet on US after sports betting wager judgment

5 June 2018

By Natalie Sherman

Business press reporter, New York

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

From Tuesday, brand-new rules on wagering entered into effect in Delaware, a small east coast state about 2 hours from Washington.

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

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

The industry sees a “once in a generation” chance to establish a new market in sports betting-mad America, said Dublin-based monetary analyst David Jennings, who heads leisure research study at Davy.

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

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But the market states relying on the US stays a dangerous bet, as UK business deal with complex state-by-state guideline and competition from established local 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 purchased the US dream sports betting website FanDuel.

‘Take some time’
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The US accounted for about 23% of the world’s $244bn (₤ 182bn) in gaming income in 2015, according to a report by Technavio, external released in January.

Firms are wishing to take advantage of more of that activity after last month’s decision, which overruled a 1992 federal law that disallowed states beyond Nevada and a few others from authorising sports betting.

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

That is expected to lead to significant variation in how companies get accredited, where sports betting can take place, and which occasions are open to speculation - with big ramifications for the size of the marketplace.

Potential profits ranges from $4.2 bn to practically $20bn yearly depending on aspects like the number of states relocate 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’”, stated Will Hawkley, London-based head of leisure for experts KPMG.

Now, he said: “I believe a lot of individuals … 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, predicts that 32 states will legalise sports betting in some type by 2023, developing a market with about $6bn in annual earnings.

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

US laws limited sports betting mostly to Native American lands and Nevada’s Las Vegas strip up until fairly recently.

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

States have also been slow to legalise numerous types of online sports betting, in spite of a 2011 Justice Department opinion that appeared to remove challenges.

While sports betting is usually seen in its own category, “it plainly stays to be seen whether it gets the type of momentum people believe it will,” stated Keith Miller, law teacher at Drake University and co-author of a book about sports betting policy.

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

Now a consultant, he states UK firms should approach the marketplace carefully, selecting partners with care and avoiding mistakes that could lead to regulator backlash.

“This is a chance for the American sports betting wagerer … I’m not exactly sure whether it is a chance for business,” he says. “It actually is dependent on the result of [state] legislation and how business operators pursue the chance.”

‘It will be partnerships’

As legalisation starts, sports betting wagering companies are lobbying to ward off high tax rates, in addition to demands by US sports betting leagues, which wish to collect a percentage of income as an “stability cost”.

International business face the added challenge of a powerful existing video gaming industry, with gambling establishment operators, state-run lotteries and Native American people that are looking for to safeguard their grass.

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

They point to SBTech’s current statement that it is providing innovation for Kentucky Derby operator Churchill Downs as an example of the kind of deals most likely to materialise.

“It will be a win-win for everyone, however it will be partnerships and it will be driven by innovation,” Mr Hawkley said.

‘It will just depend’

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

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

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

It works as risk supervisor for the Delaware Lottery and has invested millions along with a local designer in a New Jersey horse racing track.

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

“We certainly mean to have a very considerable brand existence in New Jersey,” he stated. “In other states, it will just depend upon policy and possibly who our regional partner is.”

“The US is going to be the most significant sports betting market worldwide,” he included. “Obviously that’s not going to take place on the first day.”

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