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UK sports betting companies gamble on US after sports betting wager ruling

5 June 2018
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By Natalie Sherman

Business reporter, New York

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

From Tuesday, brand-new guidelines on sports betting entered impact in Delaware, a tiny east coast state about two hours from Washington.

Neighbouring New Jersey might begin accepting sports betting bets as early as Friday.

The changes are the very first in what might become a wave of legalisation after the Supreme Court last month cleared the method for states to allow sports betting wagering.

The market sees a "once in a generation" chance to establish a brand-new market in sports betting-mad America, stated Dublin-based financial analyst David Jennings, who heads leisure research at Davy.

For UK companies, which are grappling with debt consolidation, increased online competitors and harder guidelines from UK regulators, the timing is particularly appropriate.

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But the market states counting on the US stays a dangerous bet, as UK business deal with complex state-by-state guideline and competitors from established regional interests.

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

'Take some time'

The US represented about 23% of the world's $244bn (₤ 182bn) in video gaming revenue last year, according to a report by Technavio, external published in January.

Firms are hoping to use more of that activity after last month's decision, which struck down a 1992 federal law that disallowed 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 actually legalise sports betting wagering, leaving that question to regional lawmakers.

That is anticipated to cause significant variation in how companies get certified, where sports betting can take place, and which events are open to speculation - with big implications for the size of the marketplace.

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

"There was a great deal of 'this is going to be big'", stated Will Hawkley, London-based head of leisure for consultants KPMG.

Now, he stated: "I believe many individuals ... are looking at this as, 'it's a chance however it's not going to be $20bn and it's going to be state by state and it's going to take time'."

'Remains to be seen"

Chris Grove, handling director at Eilers & Krejcik Gaming, anticipates that 32 states will legalise sports betting in some form by 2023, producing a market with about $6bn in annual income.

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

US laws minimal sports betting mainly to Native American lands and Nevada's Las Vegas strip up until fairly recently.

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

States have actually also been slow to legalise lots of types of online gaming, regardless of a 2011 Justice Department opinion that appeared to get rid of challenges.

While sports betting is usually viewed in its own classification, "it plainly remains to be seen whether it gets the sort of momentum individuals think it will," stated Keith Miller, law teacher 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 offshore online sportsbook and served prison time.

Now an expert, he says UK firms need to approach the market carefully, choosing partners with caution and avoiding errors that might lead to regulator backlash.

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

'It will be collaborations'

As legalisation begins, sports betting wagering firms are lobbying to ward off high tax rates, in addition to demands by US sports betting leagues, which wish to gather a portion of profits as an "integrity cost".

International business deal with the added obstacle of an effective existing video gaming market, with casino operators, state-run lotteries and Native American people that are seeking to protect their turf.

Analysts say UK companies will need to strike partnerships, providing their knowledge and innovation in order to make inroads.

They point to SBTech's current announcement that it is offering technology for Kentucky Derby operator Churchill Downs as an example of the kind of offers likely to materialise.

"It will be a win-win for everybody, but it will be collaborations and it will be driven by innovation," Mr Hawkley stated.

'It will just depend'

Joe Asher, chief executive at William Hill US, is clear-eyed about the realities.

The business has actually been buying the US market given that 2011, when it bought three US firms to develop an existence in Nevada.

William Hill now employs about 450 people in the US and has actually revealed partnerships with casinos in Iowa and New Jersey.

It works as risk manager for the Delaware Lottery and has invested millions along with a local designer in a New Jersey horse racing track.

Mr Asher said William Hill has ended up being a home name in Nevada but that's not necessarily the goal everywhere.

"We certainly intend to have a very substantial brand existence in New Jersey," he said. "In other states, it will just depend upon regulation and possibly who our local partner is."

"The US is going to be the greatest sports betting market on the planet," he included. "Obviously that's not going to happen on the first day."

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