Broker Check

Sports Betting Opens Up

Let’s say it’s December 2019 and the Detroit Lions are playing the Green Bay Packers for a chance to win the central division championship. Let’s also paint the picture of a foot of snow on the ground in Green Bay where the game is being played. Fans in Wisconsin and Michigan that aren’t going to the game are tuned in on their cable TVs, computers, and cell phones to watch the game as well as get scores from all the other NFL games playing at that time. Due to an important ruling last Monday, it is likely that sitting in your local bar, family room, or even on your cell phone in your car you will be able to place a bet on that game or any other NFL game being played that Sunday. It is also possible that you could place unusual bets such as how many touchdown passes Matthew Stafford and Aaron Rodgers are going to complete in this particular game. Numerous betting possibilities are likely to open to the public as this ruling starts to play out across the country.

On Monday the U.S. Supreme Court ruled that states can legalize sports betting. The court upheld the legality of a 2014 New Jersey law permitting sports betting at casinos and racetracks in the state and voided the federal Professional and Amateur Sports Protection Act. Many states see sports betting, like lotteries, as a potential source of tax revenue. The ruling will likely take the $150 billion illegally wagered each year out of off-shore black markets to legitimate state run and regulated operations for NFL, NBA, MLB, NHL, and other important betting occasions. States are now free to allow residents to place mobile sports bets with licensed, trusted companies based in the U.S. and that pay taxes in this country.

Industry analysts have said that dozens of states are prepared to make sports betting legal including Connecticut, Delaware, Pennsylvania, New York, and Mississippi. Thirteen other states including California, Michigan, Oklahoma, Illinois, Indiana, and Kansas have proposals to consider legalizing sports betting.

From an investment perspective I see numerous opportunities of public companies benefiting from the expanding opportunities. Obviously, established casino companies such as Caesars Entertainment, MGM Resorts, Boyd Gaming, and Penn Gaming are preparing to work with states to open sports betting where they have facilities. Thinking beyond casinos, I can see this improving the audience and advertising dollars for Disney (ESPN), Comcast, CBS, and Twenty-First Century Fox with increased audience viewership. It will be interesting to watch and monitor how quickly this starts to move the needle for both the established and second derivative players. Finally, before you write me about the social issues that will be affected by the expansion of increased sports betting across the country, I understand those issues but the professional sports leagues such as the NFL, NBA, and their owners want to see these opportunities expand and the states want the extra tax revenues. So, the genie is already out of the bottle and plans are being made today to make this happen as quickly as possible. Will we see it in 2018 or 2019/2020? My bet is that a few states will allow sports betting this fall but the biggest impact will come in 2019 and  2020. So, let the games begin and let’s see if Aaron Rodgers once again spoils the taste of victory from the Lion’s mouth.

Have a great day,

Roger N. Steed

May 21, 2018

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