The U.S. Supreme Court has dropped something of a bombshell in agreeing to hear New Jersey’s court appeal aimed at legalizing sports betting in the Garden State.
The decision raises a lot of questions, such as whether the Supreme Court will stand with the federal ban on sports betting, nibble away at narrow legal issues or broadly decide that the federal ban is unconstitutional.
The possibilities could range from initially New Jersey alone being allowed to have sports betting by, effectively, exploiting a loophole in the federal ban, to leading other states to challenge the federal ban in new court cases, to giving Congress guidance on a new federal law, to stating that sports betting is a states’ rights issue.
If the last possibility occurs, the floodgates would open. A number of states have already considered legislation to legalize sports betting if the federal ban goes away.
The question for investors then, is who would benefit?
Assuming a state-by-state solution, beneficiaries, obviously, would differ state by state.
However, two groups would almost surely stand to benefit:
• Those companies already in the sports betting business.
• Casino operators.
Existing Sports Betting Operators
Among those already in the business, two London-listed companies stand out: William Hill (WMH) and PaddyPowerBetfair (PPB).
William Hill has clearly positioned itself to hit the ground running anywhere sports betting becomes legal.
The company already has an organization and infrastructure in place in Nevada where it operates sports books in many casinos and in taverns owned by Golden Entertainment. WMH has dipped its toe in waters elsewhere in the US. It sets odds for Delaware’s limited sports betting, has a contract to provide sports betting at Monmouth Park racetrack in New Jersey—if that opportunity arises, and it operates the racebook at Prairie Meadows racino in Iowa.
WMH also has the leadership to exploit the opportunity. William Hill US CEO Joe Asher is a lawyer who understands the legal issues and a politically savvy executive who can work through the legislative process.
Like William Hill, PaddyPowerBetfair is a major sports betting operator in the British Isles with an American presence, with TVG account wagering service.
Other sports betting companies could benefit, including London-listed Sportech, which operates the OTBs in Connecticut, or Ladbrokes, which could jump into the US.
However, WMH and PPB appear the best positioned to take advantage of what could be a huge new market for them.
Casino Operators
With a presence in so many states, casinos are in a position to lobby legislatures to limit sports betting licenses to them, at the casinos and through satellite operations to cover a state’s entire geography.
The argument would be that limiting licenses to existing operators would limit the spread of gambling and make it easier to regulate the industry.
In that scenario, there would be a role for companies like William Hill and PaddyPowerBetfair to contract out their services to casino companies that do not have their own sports books.
Big companies like Caesars, MGM Resorts and Boyd could operate their own sports books regionally just like they do now in Nevada.
One small company of special interest in this realm is Churchill Downs, which, in addition to offering sports betting in its casinos and at its racetracks, could offer sports betting through its TwinSpires.com account wagering service.
