So You're Saying There's A Chance
Penn sale rumors gain some legitimacy, but is there any there, there? DC City Council approves new sports betting scheme. GeoComply acquires a stake in Betting Hero.
The Bulletin Board
VIEWS: Insiders: There is some there, there when it comes to Penn sale rumors.
WEEKEND HOUSEKEEPING: 2023 Tribal Gaming numbers; Kero Sports funding round; VA PG treatment program; NJ RG Task Force.
NEWS: DC City Council passes a budget that includes provisions to end the lottery’s sports betting monopoly.
NEWS: GeoComply enters the affiliate business with a 40% share in the on-site activation company Betting Hero.
AROUND THE WATERCOOLER: Nice guys, finish first.
STRAY THOUGHTS: There’s no achievement without risk.
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Penn Sale Talks Gain Steam
Per the latest reporting from Earnings+More, “sources indicated this week that activist investors on the shareholder register at Penn would be supportive of a deal at ~$25 a share if it involved cash and a proportion of Boyd shares.”
E+M reports that many of the seemingly insurmountable hurdles to a deal of this magnitude can, in fact, be overcome, including Disney and Gaming & Leisure Properties:
“Disney… would only get involved if there were a separate transaction for ESPN Bet, while Gaming & Leisure Properties wouldn’t get involved unless there was a change in lease terms and would likely be supportive of any forced property sales.”
It is believed Penn has hired bankers at Goldman Sachs and Evercore to advise on the company’s options.
Penn is in a bit of a pickle. Before deciding on a potential acquisition, it would like to see if the expected product and integration enhancements can change ESPN Bet’s fortunes during the upcoming football season.
As I wrote in June:
“While I’m a big believer in the dangers of the sunk cost fallacy, pulling back on ESPN Bet before it’s been given a chance seems like absolute folly. Penn has admitted the product is not on par yet, nor has it made a full-scale marketing push – Penn’s goal is to have both remedied near the start of the NFL season.”
A solid performance could satisfy activist concerns that leadership is spending too much time and energy on the digital arm. If ESPN Bet gains a foothold in the US market, Penn could breathe a sigh of relief and refocus its attention on its land-based portfolio, leaving the digital side to Penn Interactive. That would make a sale either less likely or increase the sale price.
However, if the upcoming NFL season is more of the same, it might further devalue the company and possibly force a spinoff of the digital arm to facilitate an acquisition – at a significantly lower price.
Weekend Catchup: 2023 Tribal Gaming Numbers; Kero Sports Funding Round; VA PG Treatment Program; NJ RG Task Force
Tribal gaming revenue increases again: The FY 2023 numbers are in for the 245 gaming tribes spread across 29 states. According to the National Indian Gaming Commission, FY 2023 gross gaming revenue for the 527 tribal gaming locations reached $41.9 billion, an increase of 2.4% over the $40.9 billion in FY 2022. The image below shows that the $41.9 billion is a new record and extends tribal gaming’s steady growth over the last decade (Pandemic excluded).
Micro-betting company completes funding round: Kero Sports, a company I’ve been watching, has successfully closed its latest funding round. Kero secured $2 million in additional funding “to expand Kero’s data science team and enhance its sports coverage. The company plans to add NCAA football and NCAA basketball to its existing portfolio, which already includes NFL, NBA, MLB, and soccer.” Eberg Capital, led by Kero’s board member Roger Ehrenberg, and Avenue H Capital, led by board member Benjie Cherniak. Other investors in this round include Yolo Investments, Sharp Alpha Fund, Paris Smith, SIG Sports Investments, an affiliate of Susquehanna International Group, S2 Growth, and AngelList’s Quant Fund.
A problem gambling treatment program with results: There is a huge focus on problem gambling but very little evidence of efficacy. Maybe that’s changing? Per Carolyn Hawley, Director of the Virginia Partnership for Gaming and Health, the program saw “166 referrals to the partnership with over 50% of those people connecting with treatment,” and most importantly, “96% of the people that end up in treatment say they’ve stopped or decreased gambling after six months.”
New Jersey’s RG Task Force: In June, New Jersey Gov. Phil Murphy signed an executive order creating the Responsible Gambling Task Force. So, what is the task force’s mandate? Per the press release, it will “review several areas of the problem gambling landscape, including the effects on underage and vulnerable communities; develop strategies to achieve responsible gaming; and make recommendations for policy changes to address the issue of problem gambling.”
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The End of the DC Sports Betting Monopoly
The Washington, DC, City Council has approved its budget, which includes the Sports Wagering Amendment Act of 2024. If Mayor Muriel Bowser signs the budget and Congress approves it (a quirk of DC), the district’s lottery-run sports betting monopoly will end.
Presently, Intralot is contracted with the DC Lottery as the sole district-wide mobile sports betting operator. Earlier this year, Intralot subcontracted operations to FanDuel after the performance of Intralot’s Gambet DC app was roundly criticized.
DC also allows sports franchises to operate mobile betting within a small geographical area around the stadium, known as a Type-A license.
Under the Sports Wagering Amendment Act, a new category of licenses, Type-C, would be created. Existing Type-A licensees could convert their licenses to Type-C.
A type-C license costs $2 million for five years and has a $1 million renewal fee. Revenues are taxed at 30% — FanDuel is taxed at 40% through its contract with Intralot.
The license allows sports franchises and stadiums to partner with an operator to offer district-wide mobile betting, which could create up to seven new mobile sports betting licenses.
However, this change could have significant implications for the existing contract. FanDuel has indicated that it will not honor its contract with the DC Lottery if it loses its mobile monopoly.
“Any District-wide sportsbook operations by OLG would no longer have participation from FanDuel,” FanDuel President Christian Genetski wrote to Council Chairman Phil Mendelson in a letter dated June 5.
GeoComply Acquires 40% Stake in Betting Hero
FansUnite is selling Betting Hero, an on-site customer activation and research company, to co-founders Jai Maw and Jeremy Jakary and GeoComply in a deal worth $37.5m. Maw and Jakary will control 60% of the company, while GeoComply’s stake in Betting Hero is 40%.
As Earnings+More reported, “the Toronto-listed FansUnite will pass on $20m of the proceeds to shareholders, leaving it, after fees and certain liabilities, with no functional business and about $500k in cash.”
FansUnite emerged in November 2021 when the company purchased American Affiliate (a small collection of affiliate sites founded by Chris Grove), which had previously merged with Betting Hero in a $58.2 million deal.
FansUnite was supposed to be a major player in the North American affiliate sector, but its flagship online properties, Props.com and Wagers.com, failed to gain traction (disclosure: I worked for Wagers.com from March to November 2022). Separately, Betting Hero has carved out a place in the affiliate sector as an on-site acquisition company while also leveraging its face-to-face interactions to support its market research arm.
In Q1 2024, Betting Hero generated $8.3 million in revenue and has registered 500,000 bettors across legal North American markets.
The stake in Betting Hero further diversifies GeoComply’s portfolio, which is no longer exclusively a geolocation company. Along with the acquisition and research capabilities of Betting Hero, GeoComply has branched into fraud detection, KYC, and licensing, the latter via its 2023 acquisition of OneComply.
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Around the Watercooler
Social media conversations, rumors, and gossip.
You may know Mark for his advocacy on the responsible and problem gambling fronts, but he is also an excellent poker player, evidenced by his near-complete control of the final table (with the usual good luck that every tournament winner experiences).
But as he noted in a tweet, some tournaments are more important than others.
Stray Thoughts
In his 1961 inaugural address, John F. Kennedy said, “Every accomplishment starts with the decision to try.” In poker, we say, you can’t win what you don’t risk.
Combine the two, and you get: Every accomplishment starts with a risk.
I'm interested in the selling of Penn because it impacts two casinos in New England. If it hinges on sports betting, Plainridge has ESPN BET, so it'll affect them, but not so much Maine, since the four Maine tribes run it with DraftKings and Caesars. Even with that, sports betting operations in Maine might come to a halt in November this year.
If Boyd is interested, I can't imagine they would want Hollywood Bangor. I used to like Boyd's when I visited Vegas more often. Maybe only buy one?