Bet365’s New York Sports Betting Deal Signals Greater Ambitions For US Regulated Market

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The deal between European online betting and gaming powerhouse bet365 and New York casino proprietor Empire Resorts has the significance that might resonate beyond state borders.

The “strategic alliance,” announced Nov. 14, to build a bet365-branded online and land-based sportsbook at the Resorts World Catskills marks a departure for the Stoke-on-Trent, Staffordshire-based firm.

The 20-year agreement, which will come into force if New York issues regulations on sports betting, is more than just a 50/50 distribution deal. Under its terms, bet365 will also acquire up to $50 million of Empire Resorts shares at a price of $20 a share, representing 5 percent of the company. This understandably put a rocket under Empire’s share, which rose 50 percent on the week:

Empire Resorts share price — Oct. 18, 2018, to Nov. 15, 2018

What does the bet365 deal mean?

Such an equity stake is unusual for privately held bet365, which remains wholly in the hands of the founding Coates family and its close associates. It also signals a step-change in the UK market leader’s US ambitions compared to the skin arrangement with Hard Rock in New Jersey.

Partly the deal with Empire Resorts is an acknowledgment that, as it stands, New York licenses might be scarce. With the legislation as proposed, there could be potentially only one license for each of the four casinos currently in operation within the state.

With the other three having also chosen partners — DraftKings Sportsbook for Del Lago, FanDuel Sportsbook with Tioga Downs and Rush Street/Sugarhouse with Rivers — it left Empire as the last game in town.

If you can make it there

The nature of the arrangement in New York suggests bet365 sees more scope and potential there compared with New Jersey, said Simon French, longtime gaming and leisure analyst in the UK and also now a partner at advisory and consultancy Bixteth Partners.

“This is a bigger deal in New York than what they have in New Jersey with Hard Rock, where it is a simple branding deal,” he said.

“New Jersey is a crowded market and you have to question how many of them are going to be profitable there. Whereas New York, it is likely to be the biggest state that will open up for a while and even though it isn’t up-and-running right now, it means that getting in now will give bet365 the opportunity to shape the market.”

Lee Richardson, a consultant with Gaming Economics, agrees the arrangement with Empire Resorts is a “slow burn deal.”

Nevertheless, the status of bet365 in its home country and further afield means that any move the company makes is inherent of interest, he added. “It is such a goliath in the UK, Europe and Asia, of course.”

The revenue backdrop

According to the last annual results available from 2017 through Companies House in the UK, bet365 made a total of £2.15bn ($2.75 billion) in gaming turnover and a pre-tax profit of £525m ($671 million.)

Sources close to the company previously indicated the geographic revenue split is roughly one-third UK, a third from the rest of Europe with the last third coming from Asia-Pacific and elsewhere.

One analyst who preferred to remain anonymous pointed out that the UK business had done “exceptionally well” throughout the past decade, adding that it been “helped” by the Asian liquidity.

Talking of the Empire move, he added it was “very interesting, particularly given bet365’s activity in Asia … all it takes is one state to have an issue with that.”

Opaque areas could be an issue

When it comes to regulated sports betting and gaming, the Asian markets remain a gray area — as does, apparently, the attitude of US state regulators toward that type of activity on the part of their licensees.

Speaking on a panel at G2E in Las Vegas in October, Jay McDaniel, deputy director at the Mississippi Gaming Commission, indicated the thinking of state regulators is nuanced and evolving.

“We wouldn’t license anyone who has broken the law,” McDaniel said. “Is it a gray market or is it truly illegal? … We have to stay on top of that. If they don’t have licenses where they operate, why?”

George Rover, managing partner at Princeton Global Strategies and previously deputy director at the New Jersey Department of Gaming Enforcement (NJDGE) added on the same panel that US state regulators “can’t be the policeman of the world.”

The Asian connection to the Empire deal

Asia looms large with the Empire Resorts deal for other reasons. While bet365’s US subsidiary Hillside New York is putting in $50 million to buy shares in Empire, it was also announced that Empire’s largest shareholder Kien Huat Realty III had also committed itself to purchase $126 million in convertible preference shares at the same strike price of $20 a share.

Kien Huat Realty is the investment vehicle of the Lim family, the founders of Asian gaming giant Genting of which it still controls 39 percent. As well as owning casino interests in Malaysia, Singapore and the UK, Genting is also set to expand the Resorts World franchise to Nevada in 2020.

French noted that the stake in Empire Resorts might be the opening gambit in the move toward bet365 becoming a “global, omnichannel operator.”

“Could this be the start of something huge?” French said. “The move is particularly interesting given bet365’s reportedly huge Asian business and Genting’s position in Asia, but also soon in Nevada. It is quite possible we might see bet365-branded sportsbooks in Genting casinos. This could be a big, strategic play.”