Fitch Ratings Service told investors the growing legal U.S. sports betting market could provide $3 billion to $5 billion annually to casinos, racetracks and sports book operators.
And, the analysts said, the effect on other gaming revenue drivers – slot machines, table games, and non-gaming attractions – could see a “knock-on” benefit from sports gamblers.
In a report titled, “What Investors Want to Know: U.S. Sports Betting,” Fitch gaming analyst Alex Bumazhny wrote that live poker rooms inside casinos are a good comparison. Alone, the game is not a money-maker for the properties, but the action draws casino traffic.
“The proliferation of legal sports betting in the U.S. is a net positive for gaming operators,” Bumazhny said. “It provides some incremental direct revenue and another attraction to draw customers into the casino as younger customers might be less interested in slots than their older counterparts.”
The U.S. sports betting market is new, evolving and fluid. Fitch noted that growth is “regulation dependent.”
The ratings service said several casino companies stand to benefit from sports betting.
Penn National Gaming, which currently operates more than 40 casinos and racetracks in 18 states, “has the broadest exposure” to legalized sports betting, Bumazhny said. The company is operating in three out of the five largest current sports gambling markets.
Reno-based Eldorado Resorts, which has expanded in the past 18 months to 28 casinos in 13 states, “is best positioned” due to an agreement with William Hill US, which will operate sportsbooks at the company’s properties.
Gaming equipment suppliers also benefit from sports betting expansion, Bumazhny said, from an ability to offer a one-stop shopping for all gaming-related offerings. Scientific Games and International Game Technology, for example, have acquired or developed sports betting platforms.
Since the Supreme Court ruling in May opened the rest of the U.S. to join Nevada in legalizing sports wagering, six states – Delaware, New Jersey, Mississippi, West Virginia, Pennsylvania and Rhode Island – passed regulations allowing sports books to open at casinos and race tracks. New Mexico allowed an Indian casino to open a sports book under its compact with the state while last week, the city council in Washington D.C. voted to allow the district’s lottery to operate sports betting.
Last week in the U.S. Senate, a bill was introduced in which federal government would regulate sports betting nationwide by having the U.S. Justice Department set minimum standards states must meet to offer the activity. It’s unclear if the bill will have a hearing.
Meanwhile, Bumazhny said anywhere from “10 to 19” states could legalize the activity starting in 2019. Several states have already pre-filed sports betting bills for early 2019, including Kentucky, Missouri, Ohio, Tennessee and Virginia.
He called New York the most “meaningful potential market,” predicting the state would almost double the current nationwide revenue projections.
New York sports betting would boost MGM Resorts International’s sports betting prospects because of the company’s planned acquisition of the Empire City casino and Yonkers Raceway, north of New York City. The casino giant also has a joint venture with UK-based GVC Holdings on a U.S. sports betting platform.
Of the states that legalized sports betting following the Supreme Court’s decision, New Jersey has seen the heaviest results since launching the activity in June. Through November, New Jersey casinos and racetracks have booked $928.1 million in total sports wagers and collected $73.2 million in gaming revenues, according to the New Jersey Division of Gaming Enforcement.
Bumazhny expressed caution, however, in reviewing the early New Jersey results. He said the state’s regulations “are friendly for bookmakers” because for the low tax rate on sports betting – 8.5 percent compared to 36 percent in Pennsylvania – a healthy mobile wagering business, and multiple online betting sites per gaming license.
“We warn against extrapolating that state for the U.S. as a whole,” Bumazhny said. “New Jersey benefits from higher than average socioeconomic indicators.”
The budding U.S. expansion hasn’t hurt Nevada. Sports betting revenue for first 10 months of 2018 is up 12.2 percent to $229.4 million. Gamblers have wagered $3.86 billion with Nevada sports books, an increase of less than 1 percent.
Bumazhny said early results in Mississippi suggest the activity has helped other areas of the casino.
While Fitch expects further expansion in the sports betting landscape, the pace of passage is hard to predict. Oftentimes, states with multiple interests – Indian casinos, commercial casinos, racetracks and anti-gaming interest groups – make gaming bills difficult to negotiate.
“Based on the gaming legislative history more broadly, gaming initiatives take a long time to materialize,” Bumazhny said. “California and Illinois are good examples of where certain gaming expansions have been in political limbo for years.”
Howard Stutz is the executive editor of CDC Gaming. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.
