• DraftKings and FanDuel tipped to be the most likely entrants into the space.

• In +More: debt, debt and more debt news, plus RSI in Colombia.

• Light & Wonder snaps up charitable gaming provider Grover Gaming.

• Venture playground: RokkerX is the growth company focus.

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A step closer

A dawning reality: The prospect of unfettered multi-operator sports prediction markets across all 50 states has moved perceptibly closer with the appointment of Brian Quintenz as chair of the Commodity Futures Trading Commission, according to leading sector watchers.

• The a16z alumni and current Kalshi board member Quintenz has inherited a roundtable set up by interim chair Caroline Pham at the start of this month.

• Quintenz previously served as a commissioner at the CFTC and is known to favor the reduction of regulatory burdens he views as unnecessarily constraining market participants.

Regime change: Paul Leyland, analyst at Regulus, said the nomination of Quintenz “puts an entirely different spin” on the proposed roundtable, which is set to discuss whether previous prohibitions on contracts that were seen as constituting gaming were now “obstacles to balanced regulation.”

• He said the mood music has morphed from how the regulator “might limit the creep into betting and gaming” into how can the CFTC “help drive innovation and business growth in precisely that direction.”

Greenfield opportunity: Chris Grove from EKG argued that he no longer sees “many – if any – meaningful bumps in the road” towards CFTC-mediated sports prediction markets. “Yes, some states and some tribes may pursue legal action,” he suggested.

• “But will legal action on this matter be a priority against the broader backdrop of federal issues in play right now? It seems doubtful.”

The rules of attraction: According to Grove, both DraftKings and the Flutter-owned FanDuel, could be viewing the “measurable upside” from the potential to either partner with Kalshi – as Robinhood has done – or go it alone with prediction offerings.

• “Prediction markets are a threat only if DraftKings and FanDuel sit back and take no action,” he added.

• He said they are “far and away the best positioned” among sportsbooks operators to capitalize on the prediction market opportunity.

• “They have the user base, the liquidity and the existing experience with running parallel products like fantasy sports in non-OSB states.”

Flanking maneuver: But Grove argued that the emergence of prediction markets at scale does pose a dilemma for operators further down the OSB ladder such as BetMGM, which will “have to make tough decisions” about whether to follow the market leaders down the prediction path.

• “Can they be competitive?” he asked. “Is it worth taking resources away from their current efforts to close the product gap on the sports-betting front?”

• Leyland suggested the possibility of “several years of revenue growth, legal confusion and boardroom second guessing” of the right approach.

• Operators will “feel like they are being commercially outflanked” even as they keep “at least one eye on their own state regulators,” he said.

Disruption eruption: Meanwhile, Grove suggested one conversation the market “hasn’t even started having” is how the adoption of prediction markets reshapes the M&A landscape for online gambling operators.

• “There wasn't much logic in Robinhood swallowing up DraftKings before this shift at the CFTC,” he argued.

• “We’re still a bit away from that kind of transaction being a fait accompli, but we’re miles closer to it than we were a year ago.”

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+More

• DraftKings intends to raise $500m via a senior secured term loan B, which it said would be used for general corporate purposes. On its earnings call last week, CEO Jason Robins had indicated it was open to “optimizing” the company’s debt structure while “maintaining a prudent approach to leverage.” CFO Alan Ellingson said the raise would be to “establish our presence in the debt market.”

• Las Vegas Sands has secured $9bn of financing to fund its proposed IR II development at Marina Bay Sands in Singapore, led by a consortium of 22 banks including DBS Group, Malayan Banking, Oversea-China Banking Corp and United Overseas Bank. According to Bloomberg, the financing is the largest ever in Singapore’s history.

• Private equity outfit Bain Capital has taken over operational control of the Inspire resort in South Korea from Mohegan. Bain Capital said in a press release that it had secured a controlling stake in MGE Korea, the South Korean subsidiary of US-based Mohegan Gaming & Entertainment (MGE), which owns the resort complex on the island in Incheon. According to reports, this follows the failure of MGE Korea to repay $275m in term loans borrowed in 2021.

• Las Vegas could be handed the Super Bowl again as early as 2029, according to a report in Sports Business Journal. The report suggested that, alongside the SoFi Stadium in LA, the Allegiant is the other Tier 1 stadium where the NFL wishes to steer the Super Bowl as often as possible.

• Star Entertainment has received a debt financing proposal from Oaktree Capital that would see the financial firm inject A$650m ($414m) in debt in two tranches. This would see existing debtholders sell Oaktree the A$430m currently owed by Star at a discount. But the Australian Financial Review suggested the willingness of the holders to take a haircut is “limited.” Previous rumors implied Blackstone is ready to step in should the company enter voluntary administration.

• Rush Street shares were down over 4% after the company released information about the likely tax hit in Colombia where the president has declared a state of emergency decree. Among other measures, he has imposed 19% VAT on player deposits, effective for now until the end of 2025. Analysts at JMP said Colombia is worth ~13% of total revenue for the operator.

Charity case

Grover paid: Light & Wonder has completed the sector’s first big M&A deal of the year with a $850m all-cash deal for charitable gaming supplier Grover Gaming. Including a $200m four-year earnout, the deal could be worth up to $1.05bn.

• Grover provides so-called e-pull tab gaming cabinets, which mimic casino slot games in bingo clubs, social clubs and bars and taverns in five states: North Dakota, Ohio, Virginia, Kentucky and New Hampshire.

• It generated revenue of ~$135m in 2024 and ~$111m of adj. EBITDA.

• Grover founder Garrett Blackwelder will “collaborate” with L&W for up to three years.

The Light is on: Light & Wonder said the acquisition had “several compelling” strategic and financial benefits, including a leading supply position in a fast-growing sub-segment, complementary positioning, a loyal customer base and an attractive financial profile.

• The upfront element of the deal represents a multiple of 7.7x Grover’s adj. EBITDA for 2024 and 7.1x its run-rate adj. EBITDA.

• It said the deal would be financed via existing cash and “incremental” debt financing, leaving its net debt/EBITDA ratio within the 2.5x-3.5x target range.

• An Earnings Extra covering the call with analysts overnight will be sent to paid subscribers later today.

Quick takes: The analysts at Jefferies noted the charitable gaming sector was growing in comparison with the class III slot market, which is not. They noted the profitability of Grover “appeared high and therefore accretive.”

Reaction: Investors welcomed the deal, ending the shares up nearly 5% in early trading.

Earnings TL;DR

Gentoo Media

Separate lives: The gaming affiliate successfully completed its separation from the platform business GiG late last year, marking a “major strategic shift” as it became a stand-alone gambling affiliate business.

• This transition involved significant operational restructuring, debt realignment and brand repositioning, which chair Mikael Harstad said had proved to be a “very transformative year” for the company.

• CEO Jonas Warrer added that the company has further opportunities to improve its brand and revenues.

• Q4 revenue came in at €35.9m, up 38% YoY with organic growth of 18%, while Q4 EBITDA of €14.3m was up 25% YoY but was down 2% sequentially.

• Management emphasized that 2025 will focus on optimization, organic growth and capital allocation, with an emphasis on shareholder value creation.

• See yesterday’s Earnings Extra edition for more (paywall).

In brief

Fellow gaming affiliate and affiliate services provider Raketech isn’t faring so well. Q4 revenues fell 45% YoY to €12.3m while EBITDA was off by 50% to €3m.The company said the performance in Q125 was “in line” with the prior quarter but with “somewhat overall lower revenues.”

FDJ: The French lottery and sports-betting operator said it expected revenue to come in at €3.07bn for 2024, up 17% or 10% excluding the Kindred acquisition. EBITDA is also expected to rise 21% to €792m.

• The company said the increase in betting and gaming levies contained within the government’s Social Security Financing Act, which will come into effect on July 1, will equate to an annualized hit of nearly €90m.

Upcoming calls: Flutter is set to release its Q424 and FY24 earnings on Tuesday March 4 AMC with the analyst call hosted that evening.

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Venture playground

In focus – RokkerX

Who are you? The UK-based RokkerX, founded by Andy Rogers in May 2023, is the independent global managed services division of Rokker, a professional services company established in 2015.

• With a hub in Sofia, Bulgaria, and currently employing 50 people, RokkerX is planning to expand into South America in Q1 and will grow to 100+ staff.

What’s the big idea: RokkerX provides customer support, player retention and KYC, AML, fraud and payment services.

• “We aim to fill a gap for operators who want more control over their technology and have therefore probably not gone with one of the full-services, white-label suppliers,” says Rogers.

• “We also provide a B2B2C service for platform providers who don’t have the capability to offer operational services to their clients in a structured or fulsome manner.”

• He says demand for these services is strong, particularly in LatAm, hence the expansion plans, while sweepstakes and crypto are “growing opportunities we are exploring.”

KPIs: Rogers says RokkerX boasts of 95% of calls being answered within 30 seconds, 90% of emails answered within four hours, 90% of chats answered within 30 seconds and 80% of issues resolved on first contact. Client churn rate is below 5% annually.

Funding backgrounder: RokkerX has not received any external funding. “We are fully self-funded, operating independently and sustainably as part of Rokker, which has been successfully servicing tier-1 suppliers and operators since 2015,” Rogers says.

Growth company news

The bet tracking app Pikkit said it tracked $64m in handle and 1.8 million picks during the recent Super Bowl across all its users’ accounts nationwide. This compares with $46m and 1.5 million picks for last year’s game.

Affiliate provider North Star Network has acquired UK-facing iCasino affiliate provider Bojoko.

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Upcoming earnings

• Feb 19: Tabcorp

• Feb 20: Better Collective (call), Churchill Downs (call), Codere Online

• Feb 21: VICI Properties, GLP (call)

• Feb 24: Playtika

• Feb 25: IGT, Super Group, Light & Wonder, Caesars

Venture capital firm Yolo Investments manages in excess of €500m in capital across 100 exciting fintech, gaming and blockchain companies. The Yolo Investments' Gaming fund, regulated by the Guernsey Financial Services Commission, has taken positions in fast-growth suppliers and operators, including Dabble and Enteractive. Yolo Investments (yolo.io) wants to hear from readers of this newsletter. Get in touch with your pitch, or for a chat about innovative products which can plug into our investment ecosystem.

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