Go Your Own Way
Penn CEO Jay Snowden intimates that the ESPN Bet partnership could dissolve if progress isn't made in 2025.
The Bulletin Board
THE LEDE: Lackluster results leave the future of ESPN Bet in doubt.
ROUNDUP: Oklahoma Gov on sports betting; Caesars ponders digital spinoff; GeoComply announces new CEO; Quote of the Week
NEWS: New bills take aim at online gambling in Florida.
BEYOND the HEADLINE: A second set of Florida gambling bills.
AROUND the WATERCOOLER: The latest salvo targeting sports betting.
STRAY THOUGHTS: Three ways to deal with a songless cuckoo bird.
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The Lede: Will Penn and ESPN Dissolve Their Partnership?
When Penn Entertainment and ESPN announced their sports betting partnership in August 2023, many threads existed to explore. The announcement will forever be etched in my mind as it happened the week I launched the Straight to the Point newsletter.
In a wild turn of events: Penn scrapped its Barstool Sportsbook, sold Barstool back to Dave Portnoy for $1, and entered into a 10-year, $2 billion deal with ESPN. Somewhat lost in the shuffle was a clause that allowed either side to exit the relationship after three years if certain (unannounced) market share thresholds were unmet.
During Penn’s recent earnings call, CEO Jay Snowden hinted that a divorce may be on the table — August 2026 is the third anniversary of the deal.
“When we announced our partnership with ESPN in the summer of '23, both sides of this partnership made it very clear that we expected to compete for a seat at the podium. And we're not on pace right now to do that.”
Snowden pointed to two possibilities.
The first would be a pullback on marketing and costs, and relegating ESPN Bet to the kids’ table of sports betting operators:
“We've got a cost structure that right now is built for us to be a scale player because that's where we expect to be. That's where ESPN expects us to be. But if you're not trending in that direction, then obviously, you're not going to be operating a business from a cost structure standpoint at a scaled level.”
The second lever Penn could pull is ending its relationship with ESPN:
“And of course, as you get into 2026, you hit the third anniversary of our relationship with ESPN, and both sides expect to be in a really good place. I mean we are heads down laser-focused. We have tremendous plans in place for 2025 and 2026. But for whatever reason, if we're not hitting the levels that we need to… You have a 3-year clause in the contract that both sides will have to do what's in their best interest.”
Option #2 would be a much bigger deal, representing Penn’s second failed sports betting venture in five years, which has cost the company many billions of dollars.
The question is, what performance indicators will ESPN Bet need to reach (likely by the end of the 2025 NFL season) to justify the following:
Penn and ESPN continuing to fight for a podium spot.
Pulling back the reins but not dissolving the partnership.
When the deal was announced, Snowden put the market share target at 10%-20%, with 15% to 20% being ideal. At the time Snowden said the deal wasn’t consummated to have a sub-5% market share.
Given the current market dynamics, ESPN Bet will likely need to be approaching double-digit market share, or a strong upward trend, to justify its original goal of challenging for the #1 spot in the US sports betting market.
When it comes to potentially dissolving the partnership, Snowden intimated that its revised target is 5% by the end of Q4 2025. If the company can meet its growth assumptions for OSB and iCasino, “we anticipate being over 5% by the fourth quarter.”
Currently, ESPN Bet has a market share (handle) of around 3% in active states.
An investment executive who opted for anonymity told Earnings+More, “the call undeniably had a tone that the partnership was not going well.”
Recall that in April 2024, Snowden mentioned integrations were going slower than expected. “They have to get work done within their media app, within their fantasy app, and the Bracketology,” Snowden said during the JP Morgan Gaming, Lodging, Restaurant & Leisure Access Forum. “That’s on ESPN to get these integrations going faster.”
Roundup: OK Gov on Sports Betting; Caesars Digital Spinoff; GeoComply Has a New CEO; Quote of the Week
Oklahoma Gov. vows to veto any sports betting bill with tribal exclusivity: During his weekly press briefing, Gov. Kevin Stitt said he would veto any sports betting bill that gives the state’s tribes a monopoly, favoring a free market approach: “Some of the bills that you're seeing come through, which I'm not supportive of, and I would absolutely veto any of the bills that hit my desk that are exclusively giving a monopoly to the tribes.” Stitt said, adding the measures lack transparency and aren’t a “fair deal.”
Caesars ponders online spinoff: Caesars Entertainment hinted at a potential spinoff of its digital business in its recent earnings call. “We recognize that a digital business trading at a blended brick-and-mortar multiple of 7-8x (means) there's dollars left on the table,” CEO Tom Reeg said. Newsletter sponsor Eilers & Krejcik Gaming recently noted that DraftKings trades at 27x and RSI at 36x. Reeg also stated, “operationally, it makes the most sense to keep everything together as one,” as a spinoff would disrupt the company’s symbiotic rewards program.
GeoComply names Kip Levin as CEO: GeoComply (a newsletter sponsor) has announced the appointment of Kip Levin to CEO. Levin, who spent over a decade at FanDuel/Flutter, will replace Anna Sainsbury, who cofounded GeoComply with David Briggs (podcast guest on episodes #Bonus and #40). Sainsbury will move into the role of Executive Director. “I am incredibly excited to join GeoComply, a company with a strong reputation for innovation and a commitment to customer success,” Levin said. “The opportunities in this space are immense, and I look forward to working with Anna, David, and the entire GeoComply team to build on the company’s success and drive further growth for our clients.
Quote of the Week: "The issue of raising these tax rates has been something I have championed for over a year now, so I commend the governor for recognizing the revenue-generating potential of these rapidly growing industries for our state. Online gambling and sports betting companies have not paid their fair share in taxes. The current rates in New Jersey are comparatively low when looking at competitors in nearby states, like Pennsylvania and New York, which have rates double and triple those of our state, respectively." New Jersey State Sen. John McKeon
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NEWS: Florida Bills Prohibit Online Gambling; Sort Of
New legislation that has been filed in Florida would extend the state’s prohibition on gambling to include online betting. The bills are SB 1404 and HB 953.
The bills broadly define internet gambling in what appears to be an effort to cover sweepstakes gambling sites. Per the legislation, illegal internet gambling includes “any game in which money or other thing of value is awarded based on chance, regardless of any application of skill, that is available on the Internet and accessible on a mobile device, computer terminal, or other similar access device and simulates casino-style gaming, including, but not limited to, slot machines, video poker, and table games.”
They also cover “operators, vendors and suppliers, payment processors, and media affiliates,” (h/t Daniel Wallach).
The bills explicitly carve out any gambling conducted under an approved tribal compact:
“This section does not apply to participation in, or the conduct of, any gaming activities authorized under s.285.710(13) and conducted pursuant to a gaming compact ratified and approved under s. 285.710(3).”
And of particular interest, Wallach also noted:
“The last time that criminal penalties in Florida were increased for illegal sports betting (from a misdemeanor to a felony) was during the 2021 special legislative session. The same one in which the Seminole Tribe’s online sports betting compact was approved… Don’t be surprised if the Seminole Tribe and Gov. DeSantis soon announce that they have reached a deal on an amended compact that would grant the Tribe statewide exclusivity over online casino gaming.”
The possibility of an online casino compact was first broached at the NCLGS Winter Meeting in December:
“There is always the chance of a surprise, and STTP considers tribal gaming states the best dark horse contenders in 2025.
“One such state is Florida, where the legalization of online casinos can be achieved through a tribal compact between the governor and the Seminole Tribe. The legislature would then need to ratify the compact.
“The compacting process helps insulate lawmakers from much of the criticism in an increasingly charged political environment around online gambling.
“Also working in Florida’s favor is that the original compact that brought mobile sports betting to the state requires the Seminoles and the governor’s office to begin the online casino compacting process within three years after the sports betting compact’s effective date.”
Beyond the Headline: Two More Gambling Bills
Florida lawmakers have also introduced more focused bills (h/t Daniel Wallach).
Here are the pertinent details of each bill, summarized by Wallach.
A new criminal offense for advertising illegal gambling (F.S. 849.105), punishable as a second-degree felony;
Regulation of fantasy sports contests (F.S. 840.0932), using UIGEA-type definitions which do not specify whether DFS 2.0 is banned;
And the bill summary: “Revises contents of report by Florida Gaming Control Commission; prohibits certain employment for period before or during service with commission; revises when commission approval is needed for transfers of stock or other evidence of ownership of certain pari-mutuel permitholders; removes provisions requiring reissuance of escheated permits; prohibits betting on athletic contests with knowledge that results are prearranged or predetermined; revises criminal penalties for specified offenses; requires fantasy sports contests to meet specified requirements; prohibits certain offenses related to games of chance; prohibits trafficking in slot machines, devices, or parts thereof; prohibits transportation of specified numbers of persons or persons of certain ages for purpose of facilitating illegal gambling; preempts to state regulation of gaming, gambling, lotteries, or any activities described in specified provisions.”
Increasing criminal penalties on most gambling offenses from a misdemeanor to a felony;
Revising "slot machine" definition (F.S. 849.16) to more directly apply to sweepstakes casinos (i.e., "direct or indirect payment," removal of references to insertion of money into a machine).
And the bill summary: “Providing that the Florida Gaming Control Commission is exempt from specified state contracting provisions; authorizing the commission to acquire land, property, interests, buildings, or other improvements for a specified purpose; deleting specified premises as being prohibited from allowing minors to place bets; prohibiting a person from advertising illegal gambling; deleting a rebuttable presumption that a device, system, or network is a prohibited slot machine or device under certain circumstances, etc.”
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Around the Watercooler
Social media conversations, rumors, and gossip.
More sports betting takes in the wild, this time from Dave Ramsey, who hosts The Ramsey Show, who tweeted to his 1 million X followers:
Needless to say, sports betting Twitter was not a fan of Ramsey’s views.
Stray Thoughts
I love two periods of history: The 18th Dynasty of Egypt and the Sengoku Period in Japan.
Despite its historical inaccuracies, I love the Tom Cruise movie The Last Samurai. The most glaring plot hole in the film is the not-so-small fact that Samurai were using firearms as early as the 1600s, with Oda Nobunaga (one of Japan’s unifiers) revolutionizing the use of firearms on the battlefield.
I ran across this the other day, which describes the three different personalities the unifiers of Japan possessed:
Oda Nobunaga (ruthless, innovative conqueror): "If the cuckoo does not sing, kill it."
Toyotomi Hideyoshi (cunning, charming unifier): "If the cuckoo does not sing, coax it."
Tokugawa Ieyasu (patient, strategic mastermind): "If the cuckoo does not sing, wait for it."
In the same vein, a Japanese proverb says, "Oda Nobunaga makes the pie and Toyotomi Hideyoshi bakes it, but Tokugawa Ieyasu is the one who gets to eat it."