Good morning. On today’s agenda:

• UK White Paper rumors suggest a cap on slot stakes but no ad ban.

• Bally has completed the sale of two Rhode Island casinos for $1bn.

• Analysts at Roth take a look at Web3 igaming apps and JMP issues a new sector coverage note.

Fare thee well, Miss Carousel. Click below:

White Paper rumors 

Set for publication: The UK government gambling White Paper is set to be published in the next two weeks. The Times reports that key new recommendations will include: 

• Maximum online casino stakes of £2-£5, a ban on free bets and VIP packages for those who incur heavy losses and “non-intrusive” affordability checks.

• However, a potential ban on sports sponsorship from gambling has been dropped following “a backlash from the industry”. 

In harmony: The proposal will also include the establishment of a new ombudsman and new rules for land-based casinos to allow them 80 machines each rather than the present 20.

D-day? Analysts at Jefferies noted this morning in their note on Entain (see below) that a DCMS Q&A session in parliament is booked for 9am on July 7.

Black hole sun: The Sun yesterday reported that UK ministers would recommend a ban on betting promotions and free bets, saying “millions of gamblers could be sucked into black-market betting if government plans to ban freebies go ahead”.

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What we’re reading

Nailing jelly to a wall: The latest issue of the Pinchpoint discusses the broader questions around affordability

The Pinchpoint

Nailing the affordability jelly to the wall

Welcome to the Pinchpoint edition #4. Thank you for subscribing. In this issue we have a report on an enlightening All-Party Parliamentary Group on Gambling conflab; we have also read a book; we ask ourselves what the gambling industry might learn from other approaches to nailing down affordability, as well as taking in some perspectives from Europe…

Read more

2 days ago · 1 like · Wagers.com Earnings+More

Bally casino sale

Sale! Bally Corporation has completed a sale-and-leaseback of its two Rhode Island properties - Bally’s Twin River Lincoln Casino Resort and Bally’s Tiverton Casino & Hotel - to Gaming and Leisure Properties for $1bn. The two properties are the only gaming establishments in the state.

• And rent: Both properties will be added to the existing Bally’s agreement between GLP and Bally’s, with incremental rent of $76.3m a year. 

• Equity offer: GLP has also announced a $308.8m share sale to help fund the purchase.

Consent issue: Bally said the sale was subject to lender consent. Recall, last week reports suggested Bally’s lenders had hired lawyers to represent them with regard to the sale. The suggestion is that they might block the transaction despite Bally offering a 50 basis point fee in return for consent.

• Got a hold on you: The lenders hold the majority of Bally’s $1.9bn senior secured term loan due in 2028.

Bait/switch: in the event of lender consent not being forthcoming, the deal will instead acquire the Hard Rock Hotel & Casino Biloxi in Mississippi (along the Tiverton property), for a total payment of $635m. 

• On hold: GLP will then have the option to acquire the Lincoln property separately for $771m before Dec 2024.

Buyback: Analysts at Jefferies noted that while Bally didn’t specify the use of the proceeds, it recently announced a downsized share buyback of $190m (from the proposed $300m-$500m). “We expect a portion of the proceeds may be used toward shareholder returns,” they said.

• Pipeline: They added that there remain a number of capital projects in the pipeline, including a $1.7bn flagship resort in Downtown Chicago would also be a “logical use” of the proceeds.

In other Bally news: Reports suggest BallyBet will finally launch in New York this coming Friday, It will be the last of the eight licensees to open up for business.

New sector coverage

Jump start: JMP Securities, a part fo Citizens Bank, has issued its initial sector coverage note suggesting the real-money online opportunity will be worth up to $43bn - 45 OSB states by 2030, 15 igaming - but that a crowded OSB field will lead to consolidation, market exits and using sports-betting as a cross-sell to igaming.

• Not sustainable: As a result, the analysts say they “do not believe current market share and 25-35% margins are sustainable outside the top-tier operators, and we would be surprised to see small OSB operators generate profitability”.

Euro advantage: The JPM team suggest that “decades of expertise of European tech” allows for structural advantages. They add that investors are “underappreciating” the tech capabilities behind BetMGM (via Entain), DraftKings (via SBTech) and Flutter.

I eat cannibals: The JPM team also points to evidence that igaming does cannibalize land-based gaming.

• Dog eat dog: “Site visits suggest iGaming is placing downward pressure on casino revenue and up to 5% of land-based GGR could be cannibalized over time,” they add.

Brother can you spare a dime: A recession “could be good for online gaming”, they argue. It’s a “cheap form of entertainment” while hard-pressed legislatures might look to open up online as a source of revenue following a downturn.

Entain analyst update 

Modesty: Entain will publish its Q2 update next week and the Jefferies team said it expects the group to announce a “modest trend improvement” due to a tough trading environment.

The good old days: Retail figures are expected to be “almost back” to 2019 levels but the return of double-digit growth “may be under pressure” due to Netherlands licensing delays, slower growth in emerging markets such as Brazil, higher taxes in Australia and UK consumer softness.

• Always an upside: On the UK White Paper, Jefferies said it views “clarity as a potential positive catalyst”.

• In the US,  Entain’s stake in BetMGM will see it benefit from FY22 guidance of $1.3bn and 7-12% points of margin benefit due to relationship with Entain and MGM parents.   

Cut: Jefferies has cut the group’s EBITDA forecast by 3%. In January Entain issued  FY EBITDA guidance of £875m-£885m. Recall, Entain’s  Q1 update showed group NGR was up 31% but online NGR was down 8% with sports down 7% and gaming off by 10%. 

Web 3.0 igaming analysis

Closer than you think: Analysts at Roth suggest the opportunities for igaming investors in decentralized apps (known as dApps in the jargon), crypto-currency betting, blockchain efficiencies and metaverse and NFT benefits might be “closer than investors expect”.

Emerging market: They point out that “each of these Web 3.0 components are already emerging within igaming” and point to DraftKings’ recent deal with Polygon in the area of NFTs as a sign of the potentially rapid growth.

dApps store: The Roth analysts highlight two decentralized apps that they are aware of - SX.bet and Decentral Games.

• Last train to decentral: They suggest SX.bet (out of Curacao) processes between $10m-$30m a month while Decentral is an online casino has has developed alongside Decentral Land, one of the largest metaverses.

• SX machine: SX.bet operates as a sports-betting exchange, taking a 4% fee on winning bets.           

• Keep it lean: SX offers an “extremely lean” cost structure with payment, bet and transaction processing outsourced to the blockchain network.

The chain: The Roth team notes that igaming dApps can support functionalities yet to be adopted by mainstream OSB and igaming operators. 

• These include ‘betting on chain’, the use of crypto-currencies and the ability for users to earn tokens for using the platform which can act like equity.

The catch: The team notes that regulation is the “greatest inhibitor” for dApps. “This comes as KYC can be more difficult when dealing with crypto currencies, limiting transparency in tracking sources of funds,” they note. 

• Grey limit: This has limited many dApps to grey markets. “Given the high level of regulations associated with iGaming, we believe this is the most difficult area dApps must overcome in order to become mainstream,” they add.   

California ballot measures

Go time: The California secretary of state has verified more than the 1.09m signatures gathered in favor of the DraftKings and FanDuel-sponsored online sports-betting ballot measure. It will now be certified this coming Thursday, 30 June and is now guaranteed to appear on November’s ballot.

• Battle joined: It will be joined by the tribal-backed land-based only betting measure which has already been certified.

Earnings in brief

Camelot: The current UK National lottery provider until Allwyn takes over later this year said sales for the year to Mar22 fell 3.4% to £8.1bn. Instant sales fell 6.6% to £4.6bn which the company blamed on greater competition for consumer spend post-pandemic. The company also noted “growing economic uncertainty”.

• Here comes the judge: The FT reported that the High court is set to rule over Camelot and partner IGT’s legal challenge to the Gambling Commission’s award of the contract to Allwyn as soon as today, Wednesday.

Groupe Partouche: H1 GGR increased 21.3% YoY to €290m while turnover rose 33.5% to €187.2m. EBITDA returned to positive territory at €34.2m vs. -€42m loss in 2021. Partouche said the “gradual return to usual casino operations” was a significant factor in the improved results, but ongoing health constraints “continued to penalize attendance”.

Newslines

GridRival: the motorsports sports-betitng startup has bolstered its advisory board with Lloyd Danzig being added to its advisory team as well as Joe Solosky, managing director of sports betting at NASCAR and Menlo Ventures partner Mark Siegel. 

Matchbook: The betting exchange has launched Matchbook Brokerage, a service to match large or bespoke trades that may not be immediately possible on its exchange markets.

FansUnite Entertainment said it has received conditional approval to list its shares on the Toronto Stock Exchange.

Catch a falling Star: According to reports, Star Entertainment will be found unsuitable for a casino license in New South Wales. This follows a damning report which found multiple AML and fraud failings. 

Audacious: BetMGM is now the exclusive sportsbook of Audacy’s sports-betting network BetQL. As part of the deal, Audacy will produce content for audiences at BetMGM Sportsbooks at MGM properties.

Sportradar has launched its new full-service online sportsbook platform and technology offering Orako.

Ohio applicants: Jack Entertainment’s two casinos in Ohio have applied for both online and retail sports-betting licenses. DraftKings has submitted an application for online operations.

Genius Sports has partnered with Clue, a provider of investigation software, to launch a new integrity platform to monitor suspicious betting patterns.

Paysafe has integrated the real-time payment service Mastercard Send into its UK and EU solutions platform. 

NeoGames will supply Intralot do Brasil, the lottery operator of Brazil's second-largest state Minas Gerais, with its online lottery and sports-betting solution.

On social

Useful once OSB opens up.

MarketWatch @MarketWatch

If you’re a California taxpayer being hurt by inflation, you may be getting some financial relief. The state is sending 23 million residents “inflation relief” checks of up to $1,050 this fall. See if you qualify: California sending ‘inflation relief’ checks up to $1,050 — here’s who qualifies23 million California taxpayers are set to get the inflation relief money this falltrib.al

June 29th 2022

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Calendar

• July 7: Entain Q2

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