Wrapping Up SBC North America 2024 | Sports Betting News | LSR Podcast 234
The crew leads off their discussion with the latest from the Minnesota sports betting debate, then talks about this year’s SBC, which topics were hottest on the floor, and how responsible gambling could shape future discussions throughout the North American sports betting and iGaming industries.
Full transcript
Matt Brown (00:13):
Hello and welcome to episode number 234 of the LSR podcast. My name is Matt Brown, joined each and every week by the brightest minds in all of the gaming industry. With me, I have my friend and yours, Adam Candee. You can find him on the Twitter machine @AdamCandee. If you hate yourself, you can follow me @MattBrownM2. Really just wanted to get to you guys, make sure you know that we didn’t forget about you here, but we’ll do a tiny bit of news to kick things off. But really we’re just going to ask Adam about the conference that he went to, which is why we weren’t here last week and we’ll see what went down over there, any conversations that were interesting for him. But Adam, let’s just kick things off. A brief bit of news here coming out of Minnesota.
Latest from the Minnesota sports betting debate & SBC
Adam Candee (00:54):
Yeah, we’re coming up on the end of the legislative session here in Minnesota. May 20th is the final day, and they went deep into the night last night on Wednesday as we record this on Thursday, and apologies as I hear my own voice begin to scratch there. I’m not sure any human being has ever come home healthy from the SBC Conference. Two years ago, I came home with COVID, and this year I came home with some sort of cold/flu bug that refuses to let go of me and my voice. So you probably heard me talking to you scratchy at the conference, and you’ll hear me talking to you scratchy a little bit right now. So in Minnesota, the bill that had initially been proposed for sports betting has been rolled into a historical horse racing bill. The concern here really hasn’t changed over the course of time.
(01:42):
Horse racing tracks in the state have been unhappy with the structure of the bill. They want licenses to offer sports betting. Tribes have exclusivity in Minnesota. They have offered a cut of revenue, an increased cut this year from what it was in the 2023 proposal that has not yet been enough. There was a long floor debate in which it started to come up last night and then was tabled back to Friday. So when you think about that, you think about the fact that we are running out of days when we start talking about getting something done by May 20th when this is going to come up on May 17th. The feeling in Minnesota is that this does not happen this year. And what seems most remarkable about that is that there appeared to be broad consensus two years ago to get this done in Minnesota. There appeared to be at least an understanding this year of what went wrong two years ago, and things seem to have gone even farther off the rails this year.
(02:46):
When we look at what happened involving HHR and then the lawsuit between tracks/tribes, we are farther away from this happening in Minnesota, I think, than we were in 2023. And it just goes to show that not all of the states that have legalized were easy. Some had their challenges, but there are reasons that the states that are still on the board are still on the board. And when you talk about having to address tribal exclusivity and other interests like horse racing and then the usual politics, which got in the way last year because the Democrat Farmer Labor Party last year was leading this charge, and when they saw that there was resistance, they knew they had both chambers of the legislature and the governor’s seat and they wanted to be able to go to their constituents and say, “Look what we got done for you.” And sports betting was too hard of a lift for that and it got left out of the package of things that got done. So Minnesota has a few days left but not looking promising at the moment.
Matt Brown (03:48):
One other bit of news guys over at LSR, you can read the full story for yourself. A guy that we’ve mentioned a ton out of New York, Joe Addabbo going at it again over there, introducing some stuff that would raise the fantasy sports age to 21 from 18 also introduced 1% of the tax revenue would go towards problem gambling, which also would be a good thing. And then getting rid of the ridiculous deal that we’ve talked about multiple times in this podcast where … so you can’t bet on awards market.
(04:13):
There’s these certain states that for whatever reason, don’t allow you to bet on in-state stuff, which is just silly because it doesn’t change anything. You still bet on other stuff you can on NCAA stuff. So it would allow New Yorkers to place award market bet futures and stuff like that on New York players and New York teams and things like that, which weirdly was not allowed somewhere along the way. But again, all of that over on LSR as well. But Adam, do want to get to you. We were out last week as you were over there with all the rest of the newsmakers, all the headline makers over there talking some stuff at SBC. So what were your biggest takeaways?
Topics were hottest on the floor
Adam Candee (04:50):
I would amend that to say the newsmakers and me. That’s definitely not a category that I would ever place myself in. I will give credit to our team at Legal Sports Report. We had three guys on the floor plus myself and there were a number of panels at SBC. They did great work did, Mike Mazzeo, Sam McQuillan, and Jim Gazzale to get around and not only take in those panels, but of course talk to some of the people that we don’t get the opportunity to see day to day very often. Now, I’ll take you back a little bit to the beginning of the conference on Monday. Not something that everyone attended, but I was at the Capital Markets Forum at the New York Stock Exchange and a lot of very, very interesting discussion about the future of investment in the space. These were folks that we don’t hear from as often who are more in control of the purse strings than on the legislative or the regulatory side.
(05:48):
These are the folks who are talking about investing in the space and where they see that going. And Matt, what’s really shocking to me in a way, probably shouldn’t be shocking, but I was surprised is what would you say? Two plus years ago we began talking about the DFS plus flex space, the sweepstakes space, what the future of that was going to look like and why there wasn’t more attention being paid to it, right? We talked about the fact that we were surprised that the legacy operators were not challenging what was going on in the PrizePicks and Underdog space. Then we spent last year talking about almost nothing but that, and that really was the big topic of discussion at both the Capital Markets Forum and then on the floor of SBC. What does the future of investment in those spaces look like? Heard different visions of that, right?
(06:46):
We heard some say, “Yeah, it’s going to be difficult for the DFS plus sweeps companies to get investment because there are regulatory gray clouds hanging above them,” also heard some opinions that said maybe the clouds aren’t as gray as they were a few months ago. We saw a flurry of regulatory action at the end of football season, which as we discussed was no surprise, right? The regulators allowed these companies to finish football season and then once they finished football season, a number of cease-and-desist letters came in across the country. So where does that leave us now? It leaves us in a very interesting spot where everybody in the industry is quite well aware of how difficult it’s going to be to not only legalize sports betting, but to figure out the future of what happens with these daily fantasy plus flex, whatever you want to call it, companies.
(07:38):
And then as we start to see these sweepstakes sports betting operators come around as well, what happens with those in the future also? That’s one area. Then of course the natural topic of discussion for everyone as we talk about the difficulty of sports betting legislation. If you want to talk about an even heavier lift than sports betting legislation, why don’t you talk about iGaming legislation because that was what was next on everyone’s lips in New York and New Jersey during the SBC North America Conference. We know there are only seven states that have some form of iGaming right now. There were lobbyists who expressed their frustration. There were industry observers who said, “Don’t hold your breath because this is a much heavier legislative lift than sports betting was.” There are those who are kind of dreaming on the potential of it for a few years from now and saying, “This is what goes on down the line.”
(08:33):
I overheard a couple of conversations as I was just standing around the floor, the sorts of conversations, Matt, that you only hear when you just happen to be in a big group of people and you’re listening to things. But I heard some of the folks from one company that has been making a lot of noise lately in terms of legacy sports betting and casino saying, “Yeah, you know what? We really are looking at casino more than we are at sports betting. We see where we can get to a bigger market share in casino when it comes to being able to activate the people who we have right now. There are more people that we think we can get into casino and iGaming than into sports betting.” So really we’ve moved to another phase of this conversation. Do I want to call it 2.0? No, not necessarily, but we have moved to another phase of conversation here where it’s not so much a matter of the gold rush and going out and getting people and what do you do in order to get them in the door.
(09:29):
But as we’ve talked about, it’s now a matter of not only how do you get them in the door, and that discussion’s not over of course, because there was also talk of online lottery and the Jackpocket deal with DraftKings and how do you bring people in at lower costs. But it’s also very much a discussion of if we are going to have to bring people in at those types of lower costs, what channels do we have available to us? And then of course, how do we expand the map? Can we expand the map? Sports betting looks like it’s going to be very difficult maybe outside of Missouri, where it appears that it will qualify for the ballot this year to get anything done within 2024. So overarching themes, that’s what I noticed on the floor at SBC over the course of my time there.
How responsible gambling could shape future
Matt Brown (10:11):
Did you even hear the word poker mentioned at all? One of the things that I’m just curious about with understanding how difficult it’s going to be to get iGaming approved in a lot of these states, or at least the long road, it does seem poker is a little bit more palatable for whatever reason, for people. And I wonder why we haven’t seen that avenue broach, and I understand there’s not a big revenue generator, but I almost think the conversation then if you get poker done is kind of like, “Guys, we’ve got poker, we’ve got sports betting. What the hell are we doing? What is a big deal about iGaming?” It almost seems like at that point where you just go like, “Come on people, what are we doing here? We’ve got these other things. Why don’t we do this? It makes more sense that way.” So I was just curious if you even heard anything about poker at all.
Adam Candee (10:55):
Most of the discussion about poker that I heard, and it was minimal discussion in the first place, was in the past tense and talking about what got us here versus where do we go in the future. Very little discussion of poker. Now, I don’t know if that is just lingering scars for people and not wanting to even open the discussion again of the legality of online poker. Again, those are things that I think are discussions to be had in the future, but when we look at what happens right now, I’m not sure it’s seen as that different of a lift than iGaming. I’m not sure that anybody looks at it as anything more than another game to be able to try to get legalized in various places. And that is something where I’m sure there are a lot of educational hurdles that have to be overcome right? If I were to ask you right now what you think most people remember about online poker in the US, what would you say?
Matt Brown (11:54):
Well, I mean probably just Black Friday getting shut down and all that, all the websites getting shut down. Yeah.
Adam Candee (12:00):
Right. Exactly. I think that’s really where most people remember, and I think that’s where you start in terms of educating anybody who … and think about the fact that, how long ago was that, how many state legislators have turned over since that time? Are you starting from a brand-new place in educating people with poker? And as you said, it’s not going to be as big of a revenue driver just because of the structure of the game.
Matt Brown (12:24):
Yeah, it’s one of those things where I wonder, there has to have been enough research done to where they just don’t think that the crossover is enough to really push for anything like that. And plus just it’s a liquidity issue. I mean, if you have to be state by state and yeah, I know there’s compacts and things like that, but still, if you don’t have 20 states going at it, Adam, because you really need the thousands of players playing at a time, not the hundreds of players playing at a time, if you don’t have 20 kind of states going at it to where you have games and tournaments going at all hours of the day and you have kind of a robust ecosystem going on in there, it’s just not really going to work. I mean, listen, I live here in Nevada. We have it.
(13:05):
The only time it’s really ever super, super bustling is when the World Series of Poker is going on out here because there’s so many people in town that are poker players, and so that’s really the only time you have games going at all hours of the day with stuff like that and everything. So yeah, until we can get to a point where there’s that, it probably won’t even be part of the conversation. And hell, as you mentioned, we always knew the eye was on the prize of casinos it was anyway, if you go get casino, do you even care if you have poker? I mean, you probably don’t even care.
Adam Candee (13:35):
No, you probably don’t care at all, Matt. And to the discussion of liquidity, how different really is it than the discussion we have around exchanges, right? Because you’re still talking about-
Matt Brown (13:47):
It’s true. It’s almost exactly the same. I rely on you who relies on someone else, who relies on someone else, who relies on someone else to make it worthwhile.
Adam Candee (13:55):
Right. It’s the same discussion of we are talking about something where it’s a matter of a per-transaction fee that ultimately it comes off the top to create the ability for this company to stay alive. And what did we just see in New Jersey? We see Prophet Exchange, one of the two exchanges operating, along with Sporttrade, in New Jersey has stopped taking wagers. They say that they might open again at some point, but again, we come back to the same place that we were I think at the beginning of this discussion about why haven’t exchanges really taken off? And it’s the same thing you just mentioned there just is not the liquidity to make it happen.
Matt Brown (14:33):
Was there any scuttlebutt of any of the stories that we’ve gone over the last six months here on any of this? Was there any of the, “Oh man, did you hear this or did you know about this,” or, “Hey, I heard this company’s interested in maybe doing this or this company might this,” whatever, something like that? Or is that something you’re not really comfortable talking about here in a public forum, which is perfectly fine?
Adam Candee (14:57):
No, it’s fine. I mean, you have conversations of all shapes and sizes, and there are folks who when they talk to you, begin the conversation by saying, “This is off the record, right?”
Matt Brown (15:06):
Yeah.
Adam Candee (15:06):
And you understand exactly what you’re doing when you have those conversations, and we will always be sensitive to that in terms of our sources. Not a lot of M&A based talk. We did recently see that, I believe it was Sharp Alpha Advisors had a $25 million funding round to invest in some companies. But again, what is $25 million really in the long run when we talk about M&A in this business, it’s just not that much. When it comes to stories that we have talked about, I mean, I’ll quickly go back to the idea of DFS plus flex, et cetera, and say the talk is of course what happens in Texas and what happens in California.
(15:52):
And that is something that everyone will talk about. I think there is … how would I put this? Guarded optimism. And I think that’s the highest level of positivity that is out there for either of those states. Guarded optimism at best, outright skepticism at worst, that Texas gets done or that the California opinion when it does come in from the AG comes in any sort of favorable way for DFS as the industry that it looks like today. So that really raises a whole separate question that I’m sure we’ll be talking about is that if this attorney general opinion comes down before the beginning of football season when it comes to the future of PrizePicks, Underdog, and the like in California, will that potentially spur M&A? Because that was discussion that was had at that Capital Markets Forum was to say, OK, whereas some of these companies you might not have wanted to touch six months ago, it has quieted down a little bit in the regulatory space for those companies at the moment.
(16:56):
And so would there be an opportunity right now for them to be able to at least entertain a reasonable price from someone for an offer? But that being said, if California comes in favorably, well, that multiple goes up quite a bit now, doesn’t it? If California doesn’t come in favorably, then if I’m an acquiring company, I’m going to start looking at total addressable market and say, well, you just lost the biggest population in the country after you already lost New York. So it’s a lot to be discussed when it comes to that particular piece of the ecosystem. Beyond that, if I look at who was on the floor, Matt, at SBC, your usual mishmash of operators who are part of the gray market, who are willing to operate in spaces that are unregulated throughout the world, a lot of folks in the payment processing space, which ultimately is an undercover aspect of all of this, and I will give you a little bit of a hint into something we’re working on a story on now at LSR, because I did talk to a couple of folks long in this space.
Matt Brown (18:02):
I like it. Long tease.
Adam Candee (18:05):
Yeah. Yeah. Little-
Matt Brown (18:05):
Let’s do it.
Adam Candee (18:06):
Little thinking. Little thinking.
Matt Brown (18:07):
Yeah, there we go.
Adam Candee (18:08):
So as we talk about a little bit of the thinking that’s out there, will there ever be a challenge to the GeoComply monopoly in the geolocation space? There are definitely some companies who are making noise in this area about wanting to be part of sports betting and iGaming in that space. So talked to some folks about that. I think it’s an interesting concept to explore, to see is that really a stranglehold on the market that can ever be affected? We know Xpoint is out there, and we’ve talked about that company a bit. We’ve talked about some other companies as well, and I think that’s something we’ll be following over the next six to 12 months for sure.
Matt Brown (18:46):
Yeah, we don’t talk a ton about poker here on the pod mainly because it’s kind of a dying breed, but it is interesting because we do talk a lot about Texas, and there is that weird carve out in Texas that allows for cardrooms to operate because it is a membership that you pay to be a part of the club. And so then at that point you are able to operate these cardrooms. And by the way, they are huge businesses.
(19:14):
I mean, because there is no traditional casino gambling in any of these main cities in Texas, you sit there and you look and it’s like there’s a huge cardroom in Austin and there’s huge ones in Houston and San Antonio and all this stuff that are packed all the time that run all of these. And it’s like, I’m wondering how long we are until where if Texas can’t get sports betting down or something like that, you pay a membership to be able to make sports bets or something like that where they challenge this law even more, Adam, because it’s kind of like, look, we’ve gone through a couple cycles now with Texas. If we get through this one and can’t get something done, it wouldn’t surprise me to see people just go off the rails here.
Adam Candee (19:54):
I mean, we could have a whole separate pod just about cardrooms and their impact on the overall ecosystem. We know that card ooms are at the center of the discussion in California and the tribes battle with them. We know we had a major discussion up in Washington about cardrooms and their place in the ecosystem. Minnesota, the lawsuit that is going on right now has to do with card games and whether or not they are illegal. So there’s lots going on in terms of that, whether it’s the discussion about, like you said, about the carve out, whether it’s the California discussion of whether there are house-banked games. Because remember, you’re the dealer in California, and I put the wink in there, not because I take a side in this, but when I’ve driven down a California freeway and one of the casinos has an ad on the board saying, “We’re hiring dealers,” it kind of takes a little bit out of the steam of that argument, doesn’t it?
Matt Brown (20:49):
It’s so funny. The other reason I bring that up there is there’s a couple of lawmakers who are … and a lot of those card rooms are backing a thing where they’re trying to get the wording changed to that law to keep them from operating in the “gray area” right now. That’s something we’ll follow up on later down the line here as more clarity if that all comes down to, but just there are things going on still in the country. I know that we slowed down as far as state legalizations and things like that or whatever, but now we have, as we just mentioned in New York, they’re trying to change some things here and there. We still have Texas, still have California, still have other stuff that’s going to come down the pike here, Adam. So there’s still lots of stuff to talk about.
Adam Candee (21:25):
Yes. And you know what? I completely blanked on one thing that I talked to a number of people about that not only was a major topic of discussion among the panels and among people in the industry, but also I had it brought up to me in conversations and I brought it up to people in conversations, is responsible gambling. And one of the most interesting panels I thought in the entire SBC program was during the Player Protection Symposium. On Tuesday, the heads of responsible gambling for DraftKings, MGM, and FanDuel were all present and having a collaborative conversation about not only some of the things that they’re trying to do, some of the innovation they’re trying to do in the space. A very interesting note from the head of responsible gambling for BetMGM saying that he has never had his accounts team push back a single time on a recommendation that they made from the responsible gambling side of saying, “Hey, you need to shut down this account. This is someone who has gone a little too far here and we need to close down this account.”
(22:34):
So a lot of discussion and naturally so with all of the scandals that we’ve seen throughout the college and professional sports betting landscape, right? That’s always going to naturally bleed over into SBC. I thought it was really interesting to see that this discussion, whether it’s being forced into the spotlight or whether it was in the spotlight naturally, I don’t really think it matters ultimately, right? It’s just a matter of are we having the conversations we need to have? Is there truly going to be some level of self-regulation attempted by the industry prior to it being done by somebody else?
(23:11):
And I will say it was encouraging to hear about the things that were being done from those three operators in particular, the beginning of the coalition that these operators have put together. There was definitely some pushback, definitely some pushback to the idea that this was being done in response to Ohtani and Jontay Porter and so on. And one person said, “Do you realize how long we’ve been working on this to try to put it together? And if so, sorry, because the timing doesn’t look spectacular.” But yes, we understand that a lot of coordination has gone into this. So that was a major topic of discussion throughout SBC.
Matt Brown (23:50):
Guys head over to legalsportsreport.com early and often next week as we get all the stories up on the site coming out of SBC. Of course, we will continue to monitor everything going on across the gambling landscape and get it up over there on LSR. For Adam, I am Matt. Talk to you guys next week.