UK wagering companies gamble on US after sports betting wager ruling

5 June 2018
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By Natalie Sherman

Business press reporter, New york city

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

From Tuesday, brand-new rules on wagering came into impact in Delaware, a small 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 very first in what could become 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" opportunity to develop a new market in sports betting-mad America, said Dublin-based financial analyst David Jennings, who heads leisure research study at Davy.

For UK companies, which are facing combination, increased online and tougher guidelines from UK regulators, the timing is especially suitable.

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But the market states counting 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 focusing on, but equally we don't wish to overhype it," said James Midmer, spokesman at Paddy Power Betfair, which just recently acquired the US fantasy sports betting site FanDuel.

'Require time'

The US accounted for about 23% of the world's $244bn (₤ 182bn) in video gaming income last year, 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 overruled a 1992 federal law that barred 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 question to regional lawmakers.

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

Potential income ranges from $4.2 bn to almost $20bn every year depending on factors like the number of states relocate to legalise, Oxford Economics estimated in a 2017 study for the American Gaming Association.

"There was a lot of 'this is going to be big'", stated Will Hawkley, London-based head of leisure for experts KPMG.

Now, he said: "I believe the majority of people ... are looking at this as, 'it's an opportunity 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, managing director at Eilers & Krejcik Gaming, forecasts that 32 states will legalise sports betting in some form by 2023, creating a market with about $6bn in annual income.

But bookmakers deal with a far different landscape in America than they carry out in the UK, where sports betting shops are a regular sight.
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US laws restricted sports betting mostly to Native American lands and Nevada's Las Vegas strip till fairly just recently.

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

States have also been slow to legalise many types of online sports betting, regardless of a 2011 Justice Department viewpoint that appeared to get rid of obstacles.

While sports betting wagering is typically seen in its own category, "it clearly remains to be seen whether it gets the type of momentum people think it will," said Keith Miller, law teacher at Drake University and co-author of a book about sports betting wagering policy.

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

Now a consultant, he says UK companies must approach the market carefully, picking partners with caution and avoiding bad moves that could lead to regulator backlash.

"This is a chance for the American sports betting gambler ... I'm not exactly sure whether it is a chance for company," he says. "It truly is dependent on the result of [state] legislation and how business operators pursue the opportunity."
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'It will be partnerships'

As legalisation begins, sports betting firms are lobbying to fend off high tax rates, as well as requests by US sports betting leagues, which desire to collect a portion of earnings as an "stability fee".

International companies deal with the included challenge of an effective existing gaming industry, with casino operators, state-run lottos and Native American tribes that are looking for to safeguard their turf.

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

They point to SBTech's recent 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 everybody, but it will be partnerships and it will be driven by technology," Mr Hawkley said.

'It will just depend'

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

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

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

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

Mr Asher said William Hill has ended up being a family name in Nevada but that's not necessarily 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 on guideline and potentially who our local partner is."

"The US is going to be the most significant sports betting market in the world," he included. "Obviously that's not going to occur on day one."

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