The Early Line: The NYT Tackles Sweepstakes; Kalshi Launches Integrity, Responsible Gambling Efforts
March Madness trading at Kalshi eclipses $200 million in volume; OpenBet buyout complete
TCL offers a roundup of recent US gambling news with analysis called The Early Line every Monday.
New York Times tackles sweepstakes casinos and sportsbooks | “Headline: The Online Casinos That Can Operate as Long as They Say They Aren’t Actually Casinos. In most states, playing slot machines online for real money is illegal. But a group of companies known as sweepstakes casinos has found a way around the law to let users play classic casino games online. Their revenues have grown 10-fold in the last five years, and they’re now large enough to feature ads with Ryan Seacrest, Drake and Michael Phelps. Only recently have states like New York and Maryland contemplated restricting them, with billions of tax dollars at stake. But the loophole used by sweepstakes casinos complicates the states’ ability — and desire — to take action.”
Reading the line: It’s fascinating to me that sweepstakes casinos and sportsbooks have gotten to the point that the New York Times is writing about it. They were also brought up in John Oliver’s episode of Last Week Tonight. This kind of interest and coverage would have been hard to believe a year ago. But you could sense the storm coming as more and more of them cropped up and some of them became more brazen about marketing their products as a proxy for real-money gambling.
This is honestly a pretty fair look at the industry from where I sit (if you’re a sweepstakes operator and you disagree, feel free to yell at me, but it could have been a lot worse.) The story accurately relates that it’s not necessarily easy for states to act to stop sweepstakes casinos and sportsbooks — despite pushback from the regulated industry — and that not every state might even care that the industry exists. Some sweepstakes operators have voluntarily left states with legal online casinos; in theory, those moves should serve to calm the headlines of states trying to ban them. The calculus for the industry’s future depends a lot on how far state legal and regulatory actions go.
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Kalshi Announces Sports Integrity Monitoring, Responsible Gambling Protocols (The Event Horizon) | “The prediction market platform Kalshi is announcing two pieces of news on Monday designed to blunt pushback against its business model on a pair of important fronts: game integrity related to sports betting and responsible gambling. Kalshi is announcing an integration with IC360, the technology firm that works with the regulated sports betting industry, for monitoring of suspicious activity as it relates to trading sports events contracts on its platform. … The company is also announcing the launch of a new "customer protection hub" that will help with concerns beyond just sports betting.”
Reading the line: These are both smart moves and fantastic timing for Kalshi. Game integrity and RG are two of the biggest faults that most people — myself included — have taken with Kalshi rolling out sports betting in all 50 states. There are still lots of other concerns — including whether this is truly legal because of federal preemption of state laws and indeed under federal law. But Kalshi was smart to start getting ahead of both these issues in a material way.
Major League Baseball had specifically called out integrity concerns in a letter to the Commodity Futures Trading Commission. I’d be curious to know how far the IC360 deal goes in addressing the concerns of MLB and other leagues.
Meanwhile, the first weekend of March Madness betting/trading via Kalshi and Robinhood is a success so far. Trading volume on the men’s and women’s college basketball tournaments has already eclipsed $200 million, with the vast majority of that on the men’s tourney. Trading volume is not necessarily a one-to-one comp for sports betting handle, and the economics for prediction markets are far different than regulated gambling. But the metric does help us gauge interest in sports event trading vis a vis sportsbooks directionally. My early look at forecasting college basketball trading at Kalshi (paywall) is already too low/conservative; but I was correct that it is likely to see more action than every legal sportsbook this side of FanDuel and DraftKings.
Gambling news roundup
OpenBet Announces Completion of Management Buyout from Endeavor (press release): “OpenBet, a world leader in betting and gaming entertainment, today announced the completion of its sale by Endeavor Group Holdings, Inc. to OB Global Holdings LLC in a management buyout backed by Ariel Emanuel with participation from OpenBet executives, including Jordan Levin, who continues to lead the business as CEO. Levin said: ‘As this new chapter begins, OpenBet is better positioned than ever to drive market expansion and product innovation while defining the future of betting and gaming entertainment. Our group is extremely excited about OpenBet’s path forward, and we are confident in our business’ long-term growth profile considering our premium product offering, exceptional talent, and existing momentum in the marketplace.’”
Making a Bet on the Future of Betting (Morgan Stanley podcast): “Stephen Grambling: “There's a bit of a give and take wherein existing sports betting markets, that's where it's legal, the industry may face new competition. So, the incumbents will face new competition from these prediction markets being opened up. On the other hand, a new regulatory framework could also open up new states; so the states that I referenced before that are still out there that haven't been legalized, all of a sudden become fair game. Given the size of these new states, as I mentioned, folks like California, Texas, Florida; these are enormous economies, and they're roughly equal to the size of the existing markets. So, the potential upside opportunity, we think, actually outweighs the competitive risks. And we quantify this as being potentially in the hundreds of millions of dollars, an incremental EBITDA to some of the incumbents that operate in the space.”
‘Literally just child gambling’: what kids say about Roblox, lootboxes and money in online games (The Conversation): “In the interviews, we gave children an A$20 debit card to spend however they liked, to help us understand children’s decision-making around spending. While four children purchased non-digital items with their debit card (such as bicycle parts, toys and lollies), 12 children made purchases in Roblox. We found children greatly value their Roblox purchases – but complain of “scary” and complex transactions, describe random reward systems as “child gambling”, and talk of “scams” and “cash grabs”, with the platform’s inflexible refund policy providing little recourse.”
Everton, Leicester accused of breaching guidelines by advertising unlicensed gambling firms (NYT, paywall): “Everton and Leicester City have been accused by an anti-gambling body of breaching the Gambling Commission’s demands by advertising gambling firms which are now unlicensed in the United Kingdom but whose controls against UK customers using the sites are easily bypassed. The Coalition to End Gambling Ads (CEGA) has written to Everton and Leicester, which respectively display Stake.com and BC.Game’s logos on the front of their playing shirts, and urged the Gambling Commission (GC) — the body responsible for regulating gambling in the UK — to take action against them.”
Nickel and dimed: Are Las Vegas casinos pushing visitors to a tipping point? (Las Vegas Review-Journal): “However, more and more people are expressing frustration over rising costs associated with patronizing a Las Vegas casino-hotel, particularly in the years following the COVID-19 pandemic. From resort and parking fees to surge pricing in sundry stores to table games with a greater house edge to exorbitant markups on food and drinks, there is growing sentiment that the public is being squeezed when they visit a Las Vegas casino.”
The vibes have been heading this way for a while in Vegas, but the proof will be in the gambling revenue reports and casino/resort earnings in the coming quarters and years.
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