Massachusetts is getting legal sports betting | LSR 159
Welcome back to the Legal Sports Report Podcast, Ep. #159! The governor makes it official for the Bay State, (00:53) but when will physical sportsbooks and online apps go live? (3:02) We discuss California spending around sports betting ballot measures, we also update Kansas launch, and Penn Entertainment winning the race to profitability.
Matt Brown (00:12):
Hello and welcome to episode number 159 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 one of those minds in Dustin Gouker. He’s going to keep you up to date with everything that went on in this crazy industry this week. But before you get going, you can follow him on the Twitter machine @dustingouker. It’s free, so go ahead smash the button @dustingouker. You can follow me if you hate yourself @mattbrownm2. We are going to talk about Kansas. We are going to talk about what’s going on with Penn. We are going to talk about some more money being spent over in California. But first let’s start with some good news here, Dustin. Let’s talk a little bit about Massachusetts.
No firm details for Massachusetts sports betting launch after meeting
Dustin Gouker (00:53):
Yeah, nothing surprising here, but it’s official that legal sports betting is coming to Massachusetts. If you remember from last time or have been following the news, we were waiting for the governor to sign the bill allowing for legal sports betting in Massachusetts. He did that on Wednesday, and that paves the path, that was the last official step. Again, we didn’t have any reason to believe he would veto it or let it not become law in some way, but we have that final confirmation that this is coming. It’s important to note, and this is I know one of Adam’s pet peeves, it’s not legal to bet on sports in Massachusetts today. Lots of people will say, “Sports betting is now legal in Massachusetts.” That is not the case. We are now on a path that Massachusetts can have legal sports betting.
It’s not going to be tomorrow. There are definitely lots of different timelines floating about out there about how this is going to go down, but it is not legal today. That is when people put that out there, you’re helping the offshore sportsbooks by conflating legalization with what’s coming. That’s also what we saw around the Supreme Court decision, just confusion. People don’t know. People will see tweets, “Oh, sports betting is legal.” Nope, not legal yet. You can’t be in Massachusetts at a legal and regulated site. Nothing has changed on that front until the regulator, the gaming commission there gets everything squared away. The one piece of good news is there is a path here for retail sports betting to launch pretty quickly. Depends on state regulators, how they use a temporary license provision in the bill. Whether they allow for these physical sportsbooks to go live really quickly. That’s at least a feasible way for there to be a temporary license and for this to go.
I think we talked last time and this is still the case, the timeline for online sports betting is unfortunately going to be a little longer. There is no, again, as we sit here, no clear path to exactly when this will happen. If you’re planning on putting bets down for the start of NFL season, you’re going to have to be driving across the border. That’s not happening.
If you’re in Boston, you’re already betting in a regulated site, you know where those states are, in New Hampshire, Rhode Island, Connecticut, stuff like that. So that’s not going to be a case. It’s also probably not going to be this calendar year, that seems like an optimistic timeline. The best timeline that we think is early next year, I would say pre-Super Bowl is the target that is at least feasible to hit, and then if not, sometime later in the year. But that’s the news in Massachusetts. We can do the little check mark, ding, what have you, Massachusetts on the board for legal sports betting here in the near future.
Matt Brown (03:37):
And looks like 15 mobile licenses. I know there’s five retail operators there in the state or something like that. So they’re going to be able to divvy up some as well and taxing just a little bit higher on the online side than over-the-counter stuff.
Dustin Gouker (03:54):
Yeah. This should be a consumer-friendly market. It’s not totally wide open, but 15 is about what you need. I think that’s a pretty good number, right? That’s obviously totally competitive. Anybody wants in, that can get regulated, should be able to get in, in an ideal world. But 15, that gets you critical mass of sportsbooks. All of the major players that we always talk about will be in Massachusetts, that’s a no doubter. Then it’s just a matter of whether there will be more than 15 applicants. Pretty clearly, I would say. So there may be some people left outside looking in, but these will be these players on the margins, less … This is more open than New York, which we know limited to nine operators. Fifteen gets you a pretty good number of sportsbooks, and that should be a good use case for the bettor at the end of the day.
Five sportsbooks give $50M more to California sports betting battle
Matt Brown (04:45):
We know they are trying to get stuff done over in California, Dustin. And it looks like some of the guys that would like to see something done over there are ponying up, they’re coming to the table, they are speaking with their dollars.
Dustin Gouker (04:59):
Yeah, we’re going to be reporting on this pretty much all the rest of the summer and into the fall. Is just this money that is pouring into California to get one of these propositions passed. One, again for online sports betting, pretty open model. Another, retail sports betting only at tribal casinos. So both these propositions are getting tons of money coming in on both sides. So when you’re lobbying for or against propositions in California, you have to disclose that you’re doing so. And latest, $50 million more from some of the sportsbooks that we all know and love, DraftKings, FanDuel, MGM, Penn Entertainment, which operates Barstool and theScore. And then Fanatics, which, not even live anywhere yet, is putting up $12.5 million of its own money hoping that it can get into what would be a pretty open California market.
The amount of money may not be a record in terms of propositions in California because this is big money in California always. Propositions are always on the ballot, people get these on the ballot. But we have two sides that are very motivated to get their way. The tribes who want the status quo or for this to run on their terms, and then these big operators who would really like to have online sports betting in California, this is a huge market. I mean we’re talking tens of billions of dollars in handle in a mature market, hundreds of millions of dollars in revenue up for grabs. This is the big … With New York was big, that is not chump change compared to California, but it’s a different story. California’s a game changer for the online sports betting industry if it goes, and that’s what you’re going to see in terms of the money spent.
This is still, again, still just beginning of August. We have just under three months until it’s on the ballot in California, and you’re going to see hundreds of millions of dollars, probably more, spent on this and more advertising in California. It’s just not going to stop, and it’s going to be a dominant storyline here in our industry over the next several months.
Matt Brown (07:00):
Yeah. It’s important to note here, for every dollar that we talk about from a Penn or a BetMGM or a DraftKings or a Fanatics or whatever in support of Proposition 27, there’s an equal amount of dollars coming back on the other end opposing it. San Manuel out there already having spent four different donations that total up to $28 million. Some of the other tribes that you’re familiar with, Pechanga, Pala, all these are coming in against it, as well. But we are finding that there are some allies for people who are already operating in the state, in the card rooms out there, Dustin, because not only would it expand what they were able to offer, it also kind of protects them a little bit.
Dustin Gouker (07:42):
Yeah. I mean, the other proposition, they get cut out. This gives them at least some other way. The political and gaming situation in California, I won’t bore you with it, I’ve been a part of this for 10 years, you have too. We always talk about poker was the slog, never got anywhere there. We have the card rooms on the side, which would like to see something open up too and not for the tribes not to get their way because they’re constantly at loggerheads about what’s going on in the state in terms of gaming. So yeah, this is not going away. I would turn off my TV until November. I mean you’re going to have to watch. If you’re watching sports, I’m going to guess you’re going to see these commercials on these two propositions.
And it’s going to be confusing. You have two different props, they’ll both legalize something. This messaging is going to be really key and does that confusion go away? Do people just want sports betting? There’s a lot of unanswered questions. Polling has looked fairly good for sports betting, but there’s a lot to be done, and I’m not sure what people even will know what they’re voting on. They’ll see two things that say, “legalize sports betting,” and they may not even understand. This one’s for online, this is what maybe a regular user would want, and this other one is a little more limited. Or they may just say, “Screw it all. No, to both.” So there’s a lot to be learned and a lot of rubber to meet the road still, in California
Kansas sports betting news
Matt Brown (09:13):
Over in Kansas. We started off with some good news in Massachusetts. Over in Kansas, maybe not so good news. If you live within the state and you were thinking that that week one game between the Bills and the Rams might look a little juicy, you might have to get in the car and go make a bet.
Dustin Gouker (09:27):
Yeah, I mean this is the only launch we have upcoming, right? The only state that’s going to go live the rest of this year, we believe, unless Maryland pulls a miracle out of its derrière. We have Kansas, which is likely going to launch sometime this year, but there’s been no hard launch date. There’s been a lot of talk that they would like to get up and running by September 8th, first game of the NFL season. And it’s starting to look pretty doubtful. Again, we’re sitting less than a month away from the start of the NFL season, and they haven’t said, “Yes, this is happening.” That would lead us to believe that, that’s an unrealistic timeline. Now, it’s not impossible, nobody said, “This ain’t happening. That we’re definitely not going to launch in the start of NFL season.” But it may be soon thereafter. Again, we even couch it as unlikely by first NFL weekend. I mean, it’s at least possible, but reading the tea leaves here in Kansas, we’re probably looking at a later date, but still sometime this year for Kansas to go live.
Penn expects to win race to profitability among US sportsbooks
Matt Brown (10:28):
And we’ll take this thing home by looking at profitability by one of the companies out there. We talk about this quite often here that, listen, as of right now, these companies are in customer acquisition phase. They are spending a ton of money to try to get people to trust them, use their product. And we understand that that is tough to get to profitability when you’re in that phase of the business. That said, we do have one company that thinks they are going to win that race.
Dustin Gouker (10:57):
Yeah, this is an interesting story. By the way, Brad Allen, I thought left, and then here comes the story from this week. I mean, he already had this in the can before he left, but, yeah.
Matt Brown (11:07):
The ghost of Brad Allen posted this.
Dustin Gouker (11:09):
Brad is still here in spirit with us raving about Barstool and Penn National, one of my favorite topics. But yeah, Penn says it hopes to flip to profitability by the end of the year. But based on its latest earnings call, that would be quite a boon. Again, we talk almost ad nauseam on this podcast and in our articles at LSR about this race to profitability, that the growth is not enough. That you have to start turning a profit on your online gambling business, and Penn believes it is almost there. Penn’s entertainment CEO, Jay Snowden, said, “We feel very good about being profitable in the fourth quarter and not just in online casino, and it’s not going to be a real significant profit, but being profitable in the fourth quarter when the rest of the market isn’t is a big accomplishment.”
So, you got that. Again, how important is that if you don’t have a sizeable amount of the market, that is also a question. Barstool has a relatively small share of both handle and sports betting and revenue overall in casino and sports betting. Again, sometimes the Barstool brand, sometimes the Hollywood brand for online casino across the country, depending on where you are. So yes, you’re turning a profit, but this is not like a FanDuel turning a profit when it has a huge amount of the market. You’ve turned profitable on a very small amount of the market share. So there’s this sliding scale like, “OK, is that great? Can you grow then from there?” Maybe, maybe not. Without the market share to back up the profitability, it’s not a really exciting business necessarily, yet.
Yes. Again, I’m always going to sound like a downer I think on this, but just getting to profitability also isn’t the goal.
That’s great. But if you’re number five, number six in the industry, is that, again, they’ve put a lot of money and resources, M&A and internally, to this. Is that enough? Is that going to really excite people? And can you then grow, once you’re profitable, can you then grow? Or do you need to go turn it back into the red in order to grow again? So those are the questions that remain to be seen. Again, we look at some of the larger operators, we’ve had a lot of earnings calls lately. FanDuel and DraftKings targeting 2023 for a profit. Caesars, second half of 2023. Rush Street, which is the BetRivers brand, also second half of 2023. So, again, winning the race, great, but if you’re FanDuel and DraftKings, one and two in the market, Caesars is right behind at three, and you’re turning a profit but you have a much larger user base, you’re starting at a higher point. That’s probably more exciting than being a relatively bit player in the market and turning a profit.
Matt Brown (14:07):
Absolutely. Guys, everything we talk about here on the podcast, you can find over at legalsportsreport.com. So go in and take in all the great words that are being written over there. Interesting article on Bally Bet if you’re curious of some updates with those guys. Another interesting article on Fubo, as well. So be sure and read those articles by Pat Evans over there on legalsportsreport.com. If you want to follow Dustin, you can, it’s absolutely free. You just smash the button @dustingouker. If you hate yourself, you can follow me @mattbrownm2. For Dustin, I’m Matt. Talk to you guys next week.