Don't Come Around Here No More
States are experiencing buyer's remorse when it comes to gambling and are now looking to prohibit everything from lottery couriers to mobile sports betting.
The Bulletin Board
THE LEDE: Several states are looking to roll back gambling approvals.
ICYMI: Scandals, Industry Fights, and New Ideas.
NEWS: Gambling.com defies affiliate slump.
QUICK HITTER: NY Bill Increases OSB Licenses & Decreases Tax Rate
AROUND the WATERCOOLER: You’re going to fire [competent employees] and give me more money?
STRAY THOUGHTS: Wise words from the Oracle of Omaha.
SPONSOR’S MESSAGE - Yes, Sporttrade is indeed a prediction market. Always has been. Find out more here
The Lede: Prohibition, Not Legalization Is on the Menu
It started over a year ago when states that had signed off on certain plyer-vs-the-house DFS contests (DFS 2.0) decided to reverse course.
Around the same time DFS operators had the rug pulled out from under them, states also began to toy with the idea of increasing tax rates on sports betting operators. I wrote at the time:
“Whether or not you agree with these decisions, the now-looming threat of abrupt changes puts operators in a tricky situation. These companies are investing millions, sometimes tens of millions of dollars, to operate in a state under the assumption that the conditions will remain the same, or at least close to the same (some regulatory changes are expected), for a significant period. That confidence is eroding.
“Pulling the rug out from under the operators is a surefire path to losing businesses and creating adversarial relationships.”
A year later, the dial has been cranked up to 11.
Earlier this week, Jackpocket, which has sought regulatory approval from every state it operates in (and is even licensed in New Jersey and New York), was told it was no longer welcome in Texas, the biggest market for lottery couriers.
Two other states, Connecticut and South Carolina, are looking to prohibit couriers through legislation.
There’s also a fight in Tennessee over the Tennessee Lottery’s decision to offer Powerball tickets online. The legislature says the Lottery overstepped its bounds. A similar situation occurred in Minnesota a decade ago when the Minnesota Lottery authorized online lottery, only to have the legislature pass legislation prohibiting online sales.
Then there are the myriad efforts to prohibit sweepstakes, election betting, proxy betting, new casinos, and others that take aim at specific policies like advertising and prop betting.
Two states, Vermont and Maryland, are even trying to roll back their mobile sports betting laws. Mississippi lawmakers filed a bill aimed at sweepstakes that would also prohibit the state from legalizing mobile betting.
Vermont Lawmakers Introduce Sports Betting Repeal Bill: Three lawmakers have introduced legislation to repeal the state’s 2023 sports betting law. Vermont State Rep. Troy Headrick, a co-sponsor of H133, called the state’s sports betting law a “regressive” tax.
Maryland bill would prohibit mobile sports betting: Maryland State Sen. Joanne Benson introduced SB 1033, a bill that would repeal online sports betting in the state but leave retail betting unchanged.
Dueling visions of online gambling in Mississippi: A mobile sports betting legalization bill, HB 1302, is making progress in the House, while at the same time, a bill passed in the Mississippi Senate, SB 2510, would codify the illegality of online gambling, including sweepstakes.
This is an interesting time for the industry. Whether you want to call it a legalization hangover, buyer’s remorse, or just a general malaise around online gambling, repeal (or even restrictive) bills used to be rare. That’s not the case anymore. Couple that with efforts to increase the tax rate on online gambling operators in Maryland, Ohio, Massachusetts, and New Jersey, and it’s clear the ground is shifting beneath everyone’s feet.
As I said earlier this week when the Jackpocket news broke: “Things can abruptly change in this sector, and you’re not “safe” until you’re expressly legal.” And even then, you’re not 100% protected.
ICYMI: Scandals, Industry Fights, and New Ideas.
Another college basketball betting investigation: First there was the Temple Basketball program, then there was Fresno State, and now we have the University of New Orleans under investigation for for possible NCAA violations related to sports gambling. As STTP previously reported, as many as six NCAA were under investigation. As one insider told STTP, “drip, drip, drip.”
More lottery courier fallout in Texas: After prohibiting lottery couriers and pulling the licenses of their retailers, the Texas Lottery Commission has instituted a new policy that caps the number of lottery terminals at any retailer at five — a de facto ban in and of itself. And in related news (h/t Daniel Wallach), “Texas AG Ken Paxton has announced an investigation into the Texas lottery process, “including two suspicious and possibly unlawful lottery ‘winnings’ that involved bulk lottery ticket purchases and the utilization of a third-party courier service.”
Previous STTP coverage of Lt Gov. Patrick’s claims and the subsequent fallout
Joe Brennan Jr. leaves Prime Sports to advocate for change: Joe Brennan Jr. has been at the forefront of bringing regulated online gambling to the US, and now, after spending the last few years building up Prime Sports, he plans on trying to fix the industry he helped create. “Brennan told Covers on Monday that he resigned from the online sportsbook’s board to tackle some of the gaming industry’s most pertinent issues, like operator taxation, the battle against unregulated markets, and responsible gaming.”
NASCAR turns to parimutuel wagering: NASCAR and 1/ST TECHNOLOGY (part of the Stronach Group) announced a first-of-its-kind parimutuel betting partnership for wagering on stock-car racing. “I looked at the format of horse racing, and I looked at the format of motorsports racing, and it's not that dissimilar,” said Joseph Solosky, managing director of sports betting for NASCAR, in an interview with Covers. Per Covers: “The hope is that applying the parimutuel model of betting to stock car racing will mean more wagering opportunities, more interest in races, and less risk for sportsbook operators that may be shying away from offering markets to bettors.”
Online operators push back against New Jersey tax hike: As they did in Illinois, online gambling operators are trying to mobilize support to prevent New Jersey from nearly doubling the tax rate on online sports betting and casino games. Meanwhile, New Jersey Rep. Rosy Bagolie has introduced a bill, A 5349, that would push the rate to 30%, even higher than the Governor’s proposed 25% - a similar bill has been introduced in the Senate, S 3064.
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News: Gambling.com Is a Bull in a Bear Market
The past few quarters have been rough for gambling affiliates.
“Gambling affiliates had a challenging year in 2024, with rounds of layoffs at former juggernauts Catena Media and Better Collective, XL Media selling off its assets, and Google taking aim at the entire sector with site reputation updates in May and December.”
The Q4 results from Catena and Better Collective weren’t much better.
Catena CEO Manual Stan said the company was scrapping a much-ballyhooed AI project. Still, the real focus was on the company’s “cratering” financials, per Earnings+More: “Revenue remains under pressure, particularly in sports, which suffered a 54% cratering, while the earnings generated by iCasino leads was off by 15%, leaving the total down 30% to €10.2m. FY24 revenue from continuing ops was down 35% to €49.6m, while adj. EBITDA fell off a cliff, down 79% to €5.4m.”
Better Collective CEO Jesper Søgaard pointed to “unexpected challenges shaped by significant external headwinds” during the company’s earnings call. You can find more analysis of Better Collective’s Q4 earnings here.
That said, one affiliate is not only surviving, it’s thriving: Gambling.com Group.
Most of the sector is bleeding out, with layoffs, scrapped projects, and financials that look like they’ve been run over by a truck, and then there’s GDC, pulling off what looks like a magic trick.
I talked about Gambling.com’s successes in December following its $160 million acquisition of OddsJam:
“GDC is bucking the affiliate sector’s downward trend. The acquisition, which follows a previous deal in which GDC acquired XL Media’s European and Canadian assets, is positive news for a sector that sorely needs some victories.”
And its Q4 earnings are looking strong. As SBC Americas reports: “The Dublin-based digital marketing services provider reported a quarterly record $35.2 million in revenue in Q4 2024, up from $32.5 million for the same period the year prior. The historic results during the quarter generated approximately $7.8 million in net income.”
Quick Hitter: NY Bill Increases OSB Licenses & Decreases Tax Rate
A bill filed by Carrie Woerner, the new Chair of the New York Assembly Racing & Gaming Committee, would open the New York mobile sports betting market to seven new licensees and decrease the tax burden on all operators from 51% to as low as 25%.
Per the bill summary (S 6013):
“Amends the definition of sports wager to include other things of value; changes the licensing requirement for mobile sports wagering operators; provides the state shall by no later than January 31, 2026 have fourteen operators and by January 31, 2027 have sixteen operators; provides tax rates shall be determined based on the number of operators.”
The number of operators in the market would determine the tax rate:
THE NUMBER OF LICENSED MOBILE SPORTS WAGERING OPERATORS AS LISTED BELOW:
4-5 OPERATORS.......................SIXTY-FOUR PERCENT (64%)
6 OPERATORS..........................SIXTY-TWO PERCENT (62%)
7 OPERATORS.......................SIXTY PERCENT (60%)
8 OPERATORS.......................FIFTY-EIGHT PERCENT (58%)
9 OPERATORS..........................FIFTY-ONE PERCENT (51%)
10-12 OPERATORS.........................FIFTY PERCENT (50%)
13-14 OPERATORS........................THIRTY-FIVE PERCENT (35%)
15 OR MORE OPERATORS...................TWENTY-FIVE PERCENT (25%)
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Around the Watercooler
Social media conversations, rumors, and gossip.
Author's Note: It has been brought to my attention that the LinkedIn post below was not specifically directed at Heather Fletcher’s most recent workplace.
This is a pretty wild chain of events (Heather worked for Catena Media and was a casualty in its most recent round of layoffs):
Live look at the consultants:
Stray Thoughts
"In the business world, the rearview mirror is always clearer than the windshield." ~ Warren Buffett