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UK wagering firms gamble on US after sports betting wager ruling
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5 June 2018

By Natalie Sherman

Business press reporter, New York

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

From Tuesday, new guidelines on wagering entered effect 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 first in what might become a wave of legalisation after the Supreme Court last month cleared the method for states to permit sports betting wagering.

The industry sees a "when in a generation" chance to establish 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 grappling with debt consolidation, increased online competition and harder rules from UK regulators, the timing is particularly opportune.

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But the industry says relying on the US remains a risky bet, as UK business face complicated state-by-state guideline and competitors from established regional interests.

"It's something that we're really concentrating on, but equally we do not wish to overhype it," said James Midmer, representative at Paddy Power Betfair, which just recently acquired the US fantasy sports betting site FanDuel.

'Take time'

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

Firms are wishing to take advantage of more of that activity after last month's choice, which overruled a 1992 federal law that barred states outside of Nevada and a few others from authorising sports betting wagering.

The judgment discovered the law was an over-reach of federal power. But the court it did not in fact sports betting, leaving that concern to local legislators.

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

Potential profits ranges from $4.2 bn to almost $20bn annually depending upon factors like how lots of states relocate to legalise, Oxford Economics estimated in a 2017 research study for the American Gaming Association.

"There was a lot of 'this is going to be substantial'", said Will Hawkley, London-based head of leisure for specialists KPMG.

Now, he said: "I believe a lot 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 take some time'."

'Remains to be seen"

Chris Grove, managing director at Eilers & Krejcik Gaming, anticipates that 32 states will legalise sports betting wagering in some form by 2023, developing a market with about $6bn in yearly earnings.

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

US laws minimal gambling mainly to Native American lands and Nevada's Las Vegas strip till relatively recently.

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

States have likewise been sluggish to legalise lots of forms of online gaming, in spite of a 2011 Justice Department viewpoint that appeared to get rid of barriers.

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

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

Now a specialist, he states UK companies should approach the market carefully, choosing partners with caution and preventing bad moves that could lead to regulator reaction.

"This is a chance for the American sports betting wagerer ... I'm not exactly sure whether it is an opportunity for organization," he states. "It really depends on the result of [state] legislation and how the organization operators pursue the opportunity."

'It will be collaborations'

As legalisation begins, sports betting wagering firms are lobbying to ward off high tax rates, as well as requests by US sports betting leagues, which desire to gather a percentage of revenue as an "stability fee".

International companies face the added challenge of an effective existing video gaming market, with gambling establishment operators, state-run lottos and Native American tribes that are seeking to defend their grass.

Analysts state UK firms will need to strike collaborations, offering their knowledge and technology in order to make inroads.

They point to SBTech's recent statement that it is offering innovation for Kentucky Derby operator Churchill Downs as an example of the type 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 innovation," Mr Hawkley stated.

'It will simply depend'

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

The business has actually been purchasing the US market given that 2011, when it purchased 3 US companies to develop a presence in Nevada.

William Hill now uses about 450 individuals in the US and has actually announced 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 developer in a New Jersey horse racing track.

Mr Asher said William Hill has actually become a home name in Nevada however that's not necessarily the goal everywhere.

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

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

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