knowledge | 15 May 2018 |

US Sports Betting Ruling – Potential New Opportunities for Betting and Gaming Operators

On 14 May 2018, in a significant decision that could potentially present a wide range of new opportunities to operators, the US Supreme Court struck down as unconstitutional the Professional and Amateur Sports Protection Act (“PASPA”), a federal law prohibiting gambling on football, basketball, baseball and other sports in the majority of US states, in a 6-3 decision.

PASPA came into effect in January 1993 and banned US states, with the exception of those US states with exemptions such as Nevada, from regulating and taxing sports betting.  However, in a case taken by the state of New Jersey, the Supreme Court upheld the legality of a New Jersey law which permits people age 21 and over to bet on sports at New Jersey casinos and racetracks, but bans wagers on college teams based in or playing in the state.  In the Supreme Court’s majority opinion, Justice Samuel Alito wrote that "[t]he legalization of sports gambling requires an important policy choice, but the choice is not ours to make. Congress can regulate sports gambling directly, but if it elects not to do so, each state is free to act on its own".

It has been reported that more than a dozen US states supported New Jersey’s action, in which it argued that Congress had exceeded its authority when it originally introduced PASPA.  In 2014, New Jersey repealed laws prohibiting sports gambling at casinos and racetracks.  It argued that the US Constitution allows Congress to pass laws barring wagering on sports, but that Congress cannot require states to keep sports gambling prohibitions in place.  New Jersey lost its original case on this point, thereby prompting its appeal to the Supreme Court.

The ruling opens up the possibility of legalised sports gambling in the US and potentially provides new business opportunities for the betting and gaming industry. This was reflected in media reports of increased share prices of betting and gaming operators following the ruling.  Shares in William Hill, which has been expanding aggressively in the US, went up by almost 9 per cent, Paddy Power Betfair shares increased by 10.6 per cent, and shares in GVC Holdings, which owns Ladbrokes Coral in the UK as well as online sites Bwin, Sportingbet, PartyPoker and Foxy Bingo, rose by 5.2 per cent. In contrast, shares in certain Las Vegas casino operators, which currently hold the monopoly on bets on the results of a single game, fell.  For example, share prices in Wynn Resorts fell 1.8 per cent to $192.33 while Las Vegas Sands dropped 0.7 per cent to $77.55.

Analysts have estimated that the market for legal sports betting in the US could range between $1.2 billion and $57.6 billion of total wagers, with proceeds for operators between $62 million and $2.9 billion.  On a more cautionary note, analysts also made the point that negotiating regulations and issuing licenses could be time-consuming and push earnings out further than some investors might expect.

The McCann FitzGerald Betting and Gaming Group will continue to keep you updated on developments in the US.

This document has been prepared by McCann FitzGerald LLP for general guidance only and should not be regarded as a substitute for professional advice. Such advice should always be taken before acting on any of the matters discussed.

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