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US Supreme Court boosts UK gambling

The US has struck down a law that made sports-betting illegal in most US states. UK companies could benefit from the new regime, including William Hill, Paddy Power Betfair and GVC.

Garry White

in Features


The UK gambling sector has been weak recently because the UK government is looking at cutting the maximum allowable bet on fixed-odds betting terminals (FOBTs) in their high street outlets. Reports suggested that the UK Treasury was only going to allow bets of £2. These machines have been highly profitable for UK betting groups – but have been heavily-criticised by gambling awareness groups, as they had allowed bets of up to £100 every 20 seconds. We are likely to have confirmation of the rule changes later this week.    

However, on Monday, the Supreme Court of the United States (Scotus) boosted the UK sector. In a 7-2 decision, it ruled that the Professional and Amateur Sports Protection Act of 1992, known as Papsa, was unconstitutional following a challenge by the state of New Jersey. The act outlawed sports betting outside of Nevada, with Montana, Oregon and Delaware also allowed to offer a limited form of betting.

This ruling now opens up the possibility of widespread sports betting throughout the nation, although it remains unclear whether the ruling refers to just land-based betting or digital betting as well. States are likely to be keen to allow gambling because of the tax revenues it is likely to bring in. It will also help to rein in illegal betting operations. Indeed, five states – Connecticut, Mississippi, New York, Pennsylvania and West Virginia – had already passed bills which would permit sports betting ahead of Papsa being repealed. This means it could be a matter of months before sports betting is introduced. Another 14 states have introduced similar bills.

The news has boosted shares in UK gaming groups significantly. Paddy Power Betfair shares gained 12.2% by the close of trading on Monday, with William Hill up 10.7% and GVC 7.4% ahead, as each group has an established position in the US. This means these companies have relationships, technology and licenses already in place in the country, all of which should be relevant assets in new markets.

According to Nevada's Gaming Control Board, $4.8bn was bet in sportsbooks in the state over the course of 2017, with a mere $248.7m won by casinos. This implies the decision could spark a wave of consolidation. Casino operators are likely to want to get some sports betting exposure and sports betting operators need locally-licensed partners. Also, UK companies are experienced in running sports books, retaining customers and marketing – all valuable skills in the fledgling US industry.

All of this is exciting, but the share price gains in the wake of the decision may limit any upside. There are also a number of potential risks. These include the fact that the size of the US market is difficult to judge as it is dependent on single states’ decisions, taxation models, implementation, and whether UK-based operators would be eligible for licensing. However, as the FOBT decision looms large, Scotus appears to have handed UK-listed gaming groups a significant win.  

Nothing on this website should be construed as personal advice based on your circumstances. No news or research item is a personal recommendation to deal. Past performance is not a reliable indicator of future results and that the price of shares and other investments, and the income derived from them, may fall as well as rise and the amount realised may be less than the original sum invested.

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