UK sports betting companies 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 in America.

From Tuesday, new guidelines on sports betting came into impact in Delaware, a tiny 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 first in what could become a wave of legalisation after the Supreme Court last month cleared the way for states to permit sports betting.

The market sees a "once in a generation" chance to develop a brand-new market in sports betting-mad America, said Dublin-based financial expert David Jennings, who heads leisure research study at Davy.

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

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But the market states relying on the US remains a risky bet, as UK companies face complicated state-by-state regulation and competitors from established local interests.

"It's something that we're actually concentrating on, however equally we do not wish to overhype it," said James Midmer, spokesperson at Paddy Power Betfair, which just recently bought the US fantasy sports betting website FanDuel.

'Require time'

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

Firms are wanting to tap into more of that activity after last month's choice, which struck down a 1992 federal law that barred states beyond 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 in fact legalise sports betting wagering, leaving that concern to regional lawmakers.

That is expected to cause considerable variation in how companies get accredited, where sports betting wagering can occur, and which occasions are open to speculation - with huge ramifications for the size of the market.

Potential earnings ranges from $4.2 bn to nearly $20bn each year depending upon factors like the number of states move to legalise, Oxford Economics approximated in a 2017 study for the American Gaming Association.

"There was a great deal of 'this is going to be substantial'", stated Will Hawkley, of leisure for experts KPMG.

Now, he stated: "I believe the majority of people ... are taking a look 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 require time'."
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'Remains to be seen"

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

But bookies deal with a far different landscape in America than they perform in the UK, where sports betting stores are a regular sight.

US laws minimal gambling largely to Native American lands and Nevada's Las Vegas strip until reasonably recently.

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

States have also been slow to legalise lots of forms of online gaming, in spite of a 2011 Justice Department viewpoint that appeared to eliminate challenges.

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

David Carruthers is the former president of BetonSports, who was apprehended in the US in 2006 for running an offshore online sportsbook and served prison time.
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Now a specialist, he states UK firms must approach the market thoroughly, choosing partners with caution and preventing errors that could cause regulator backlash.

"This is a chance for the American sports betting wagerer ... I'm uncertain whether it is a chance for business," he states. "It actually depends on the result of [state] legislation and how the service operators pursue the opportunity."

'It will be partnerships'
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As legalisation starts, sports betting companies are lobbying to ward off high tax rates, along with requests by US sports betting leagues, which want to collect a percentage of revenue as an "stability fee".

International business face the added challenge of a powerful existing gaming industry, with gambling establishment operators, state-run lotteries and Native American people that are looking for to protect their grass.
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Analysts say UK companies will need to strike collaborations, providing their know-how and innovation in order to make inroads.

They indicate SBTech's recent announcement that it is supplying technology for Kentucky Derby operator Churchill Downs as an example of the type of deals likely to materialise.

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

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

The company has been purchasing the US market since 2011, when it purchased 3 US firms to develop an existence in Nevada.

William Hill now employs about 450 individuals in the US and has revealed partnerships with casinos in Iowa and New Jersey.

It works as risk manager for the Delaware Lottery and has invested millions together with a regional developer in a New Jersey horse racing track.
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Mr Asher said William Hill has ended up being a household name in Nevada but that's not necessarily the goal all over.

"We definitely mean to have a very significant brand name presence in New Jersey," he stated. "In other states, it will just depend upon regulation and potentially who our local partner is."

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

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