Churchill Downs has reason to be upbeat about the midterm elections, but Las Vegas Sands doesn’t, in the view of Jefferies Equity Research analyst David Katz and expressed in an investor note Wednesday.
Local Virginia referenda in Amherst and Pulaski counties on historical horse racing machines (HHR) were expected to swing in Churchill Downs’s direction, Katz wrote. The company has been facing competitive pressures in Virginia since the opening of a Cordish Cos. casino in Petersburg.
Admittedly, Katz noted, a pro-HHR referendum in Amherst County failed in 2021 by eight points. “The setup is somewhat improved by a new state law allowing localities to retain all HHR tax revenue,” the veteran analyst observed.
Pulaski was seen as the easier layup, with satellite parimutuel wagering on the ballot. Katz pointed out that local officials are lined up on Churchill Downs’s side.
On the other hand, gambling nemesis Dan Patrick, lieutenant governor of Texas, was seen as having a 71 percent likelihood of reelection. This would seriously impede Sands’s hopes of a casino in the Lone Star State, Katz opined.
New York Democratic Governor Kathy Hochul was viewed as cruising to reelection, with a 94 percent likelihood of winning over prediction-market supporter Bruce Blakeman.
“Hochul has supported downstate casino development, but has not endorsed iGaming and has maintained a restrictive prediction-market posture. We therefore view her favored reelection as more status quo than catalyst for online-gaming expansion,” wrote Katz.
Online gaming’s prospects in Ohio were seen as rosy, with proponent Democrat Dr. Amy Acton given an 83 percent chance of winning the governorship. DraftKings and Rush Street Interactive were said by Katz to be likely beneficiaries.
At the federal level, prediction markets would be tested, Katz continued. Following Election Day, a bill is expected to be introduced by Republican Texas Senator Ted Cruz that would mandate state and/or tribal approval before event contracts on sporting events and other gambling propositions could be offered.
“The proposal could materially alter market access for Kalshi, Polymarket, and traditional sportsbook operators,” Katz wrote, although Polymarket gave it only a 19 percent chance of passage. “Separately, CFTC event-contract rulemaking could influence the permissible product set, while other proposals address sensitive-event contracts, gambling-loss deductions and identity verification.”
According to Kalshi, Nebraska voters have a 68.5 percent chance of passing online sports betting (OSB) into law. Meanwhile in South Carolina, OSB supporter Alan Wilson was overwhelmingly favored to obtain the governorship, with a 94 percent probability.
Chicago Mayor Brandon Johnson was given virtually no chance at reelection, potentially rendering moot a proposed budget that would raise the Windy City’s tax on OSB to 20 percent from 10.25 percent. The budget was in the hands of the City Council and its passage, Katz wrote, would negatively impact BetMGM, DraftKings, Flutter Entertainment, Rush Street, and Caesars Entertainment.
In Indiana, three counties are voting on whether to purse a casino opportunity. (One will be chosen by the state.) Katz deemed the markets relatively small, but felt they could still move the needle for potential operators.
With regard to 2027 legislation, Katz still likes Virginia’s chances for iGaming legalization best. The most recent proposal pitched three online platforms per terrestrial operator at a 20 percent tax rate.
Adjacent Maryland “remains behind Virginia procedurally, but repeated legislative consideration and competitive pressure from neighboring D.C./Virginia keep Maryland relevant for potential expansion,” Katz wrote. He allowed that iGaming had gotten no farther in the last legislature than committee testimony.
Strong potential for iGaming was perceived in Ohio, more moderate chances in Washington, D.C. Two bills have been introduced in the Buckeye State, while the nation’s capital is running out of time to enact anything before current terms expired.
Indiana was another state deemed to have iGaming potential, but not as good as Virginia’s in terms of legislative action. Neighboring Illinois was thought to be even further from legalization, after failing to pass a bill in 2026 that had a 25 percent tax rate attached.
Nor was New York State expected to repeat 2026’s “near-miss” with iGaming. Democratic state Senator Joseph Addabbo has been pushing online poker and slots, Katz observed, with a 30.5 percent impost. Class III casinos, video lottery terminal operators, tribes, and OSB providers would all be eligible. But Katz didn’t think Addabbo had sufficient support in Albany.
