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UK betting companies bet on US after sports betting wager ruling

5 June 2018
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By Natalie Sherman

Business press reporter, New York

It's high stakes for UK firms as starts to spread in America.

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

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

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

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

For UK firms, which are coming to grips with combination, increased online competitors and tougher rules from UK regulators, the timing is especially appropriate.

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But the market says counting on the US stays a dangerous bet, as UK business face complex state-by-state policy and competitors from established local interests.

"It's something that we're really focusing on, but similarly we do not desire to overhype it," stated James Midmer, spokesman at Paddy Power Betfair, which just recently purchased the US fantasy sports betting website FanDuel.

'Take time'

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

Firms are intending to use more of that activity after last month's decision, which struck down a 1992 federal law that disallowed states beyond Nevada and a few others from authorising sports betting.

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

That is anticipated to cause considerable variation in how firms get accredited, where sports betting wagering can happen, and which events are open to speculation - with huge ramifications for the size of the market.

Potential earnings ranges from $4.2 bn to almost $20bn each year depending upon elements like the number of states move to legalise, Oxford Economics estimated in a 2017 research 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 believe the majority of people ... are looking at this as, 'it's a chance but 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 profits.

But bookmakers face a far different landscape in America than they carry out in the UK, where wagering shops are a frequent sight.

US laws restricted betting mainly to Native American lands and Nevada's Las Vegas strip until reasonably 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 many types of online sports betting, despite a 2011 Justice Department viewpoint that appeared to eliminate obstacles.

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

David Carruthers is the previous chief executive of BetonSports, who was apprehended 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 thoroughly, choosing partners with caution and preventing missteps that might cause regulator reaction.

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

'It will be collaborations'

As legalisation begins, sports betting companies are lobbying to ward off high tax rates, as well as requests by US sports betting leagues, which want to collect a portion of revenue as an "stability charge".

International companies deal with the added obstacle of a powerful existing gaming market, with gambling establishment operators, state-run lotteries and Native American people that are seeking to protect their turf.

Analysts say UK firms will need to strike partnerships, providing their know-how and innovation in order to make inroads.

They point to SBTech's current statement that it is supplying technology for Kentucky Derby operator Churchill Downs as an example of the sort of deals most likely to materialise.

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

'It will simply depend'

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

The company has been investing in the US market given that 2011, when it acquired three US companies to establish a presence in Nevada.

William Hill now employs about 450 people in the US and has announced collaborations with gambling establishments in Iowa and New Jersey.

It works as danger manager for the Delaware Lottery and has invested millions alongside a regional developer in a New Jersey horse racing track.

Mr Asher said William Hill has ended up being a household name in Nevada however that's not always the objective all over.

"We certainly intend to have an extremely considerable brand name presence in New Jersey," he stated. "In other states, it will just depend upon policy and potentially who our regional partner is."

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

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