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Breakingviews - U.S. is promised land for online gambling

A man watches the game after betting at the FANDUEL sportsbook during the Super Bowl LIII in East Rutherford, New Jersey , U.S., Feb. 3, 2019.

HONG KONG (Reuters Breakingviews) - U.S. online gambling is one of 2021’s better bets. After a painful pandemic, wagers will become a welcome source of tax dollars across America. The potential market for internet sports betting could be worth up to $23 billion, twice the annual gaming revenue of Nevada casinos, according to company estimates compiled by Bernstein. Websites and old-school casino companies are set to pocket winnings.

Online betting shops have faced tricky odds in the United States. A 2018 Supreme Court ruling allowed states to legalise sports bets. But the federal Wire Act still complicates some ventures by limiting gambling across state lines. Only a handful of states have taken a chance on an online sports book, with much of the action in New Jersey, Pennsylvania and Delaware.

Those few are enjoying a windfall. New Jersey’s sports wagers totalled $4.1 billion through October 2020, with virtual gambling accounting for more than 90% of October’s bets, according to PlayNJ analysts. Like other home entertainment, digital sports betting had a captive audience when Covid-19 struck and is on track to rise by around a fifth globally in 2020, Fitch Ratings estimated in November. There is scope for further growth. New habits may stick, and legal options could displace illegal ones.

More states are likely to take the plunge, too. With typical tax rates on internet gambling in the mid-teens or higher and growth accelerating, it’s an opportunity to top up their coffers. And while online casinos come with a stigma, a nation of football, basketball and baseball fans may find sports betting more palatable. Massachusetts is debating the inclusion of online sports betting in its economic development bill. Ohio and New York are also looking at the idea.

Dublin-based betting behemoth Flutter Entertainment just committed $4.2 billion to increase its stake in U.S.-based sports betting site FanDuel, hailing easing American rules as “the single biggest market opportunity” today. A fellow investor, media group Fox, secured the option to raise its own stake. Meanwhile, casino operators are overcoming fears of cannibalizing their in-person business: MGM Resorts International and Caesars Entertainment are building up online, and Wynn Resorts started offering online sports betting in the third quarter. After the tax collectors get their cut, shareholders can divvy up the jackpot.

- This is a Breakingviews prediction for 2021. To see more of our predictions, click here

Breakingviews

Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.


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