Will Asia join the U.S. sports betting gold rush?

Friday 31st of August 2018

*By John English

Four months after the U.S. Supreme Court repealed a federal law limiting sports betting to just four states, there has been a mad dash by bookmakers and system providers from all over the world to descend on U.S. soil and plant their flag.

This change in regulation can truly be likened to the California Gold Rush of 1849, when thousands of 49’rs raced to California to mine the tons of plentiful gold and create immense wealth for their families.

Behemoths like William Hill and others have positioned themselves early on. Paddy Power after merging with Betfair has a strong U.S. presence with their TVG horse racing network and with the recently acquired FanDuel, a dominant fantasy sports provider; MGM has partnered with Boyd Gaming and with the NBA, WNBA, and European gaming giant GVC, that’s just to get started.

There is still plenty of room, as only a small handful of states have gone live so far and approximately seventeen have legislation in the works. States like New Jersey, which deserves a huge amount of credit for challenging PASPA to begin with, has been very progressive in moving forward with casino and mobile offerings to accompany their sports betting and are also allowing licensees to have multiple skins for sports betting.

So, although the rush is underway there is room for much more, particularly with the expansion of mobile betting technology and content such as eSports, which has global appeal and reach especially in Asia.

It is important to note that historically sports betting is a high-volume low margin business and after 50 years of operation all the sportsbooks in Nevada generate approximately $5 billion in bets annually, with an average 5-6 percent win rate.

New bettors will need to be developed through innovation and creativity, and illegal or offshore punters will need to be wooed back home to create a truly explosive marketplace.

Many sports enthusiasts are Asian and it would make sense to have either wagering operations or branding that relates to the culture and appeals to the betting style they are accustomed to. Asian handicapping methods are also very popular in various parts of the world and have taken hold with some U.S. operators.

Although there is strong argument for those to enter the U.S., the market needs time to find its own footing. Regulations, compacts, lobbying and lawmaking need to come first. Unlike the California Gold Rush, the State of California has yet to agree on an online poker bill that has been in the works for a decade, we’ll see soon how they do with sports.

For the most part, to operate a sportsbook or to supply systems in the U.S requires extensive licensing, laboratory approved technology, and a very strong marketing effort. It’s going to get very complex and competitive, especially with state by state laws to follow and no federal all for one rule.

Some jurisdictions will only allow for casinos, race tracks or current licensed gaming establishments to offer sports wagering, some may not allow mobile or online wagering, some have onerous tax rates and buy in fees, and some will just get it right from the get go.

The largest issue that all comers need to understand is that realistically this market is only a very small percentage of what is bet on sports offshore. Just being legal may not be enough to break a long-term bond with their current bookmaker. After all, they’ve been in business for years, they can offer competitive pricing, a wide variety of wagering options, credit, and cash back. Often they have no licensing fees and don’t pay state taxes.

Customer acquisition, or transition will be a battle for the ages, so bring on the massive marketing efforts!

Europe, India, Israel, LATAM, and Asia are all are cutting edge in gaming technology and content development. The United States is new outside of Nevada to legal sports betting, so it’s an open market for all comers who are willing to face state by state licensing scrutiny and feel that they have a competitive product.

At the time of going to press, each state and most tribal nations are developing their own set of regulations or standards, so for any outside jurisdiction, including Asia, it would be wise to prepare for intense examination and suitability requirements. For the product requirements, it would be highly recommended to seek counsel familiar with the landscape and perform focus studies to determine if your offering has competitive potential in the marketplace.

Specifically, with Asian facing companies, few have made a U.S. facing branding effort with their casinos or suppliers and could look to start there. Partnering with well-known, large-scale brands, such as like Wynn Resorts, Las Vegas Sands, Genting, or a strong tavern, or restaurant brand such as Buffalo Wild Wings or Hard Rock Cafe, which many operators are doing now, could possibly be a solid option for those Asian companies looking for a familiar connection with the American public.

For Asian companies that already have strong global branding, simply licensing their brand to a regulated risk management group would allow their presence to grow in the U.S. sports betting market in a shortened time frame. Asian companies have had their own limitations, in Mainland China, sports betting is limited to the sports lottery which is state owned. In Macau there is only one operator, while in Singapore, Singapore Pools has a monopoly. There is a limited, but growing offering in the Philippines.

Without doubt, just like there is in America, a massive black market utilizing large networks of agents or proxies to assist in their betting activity exist.

I see that the Asian market, much like the Europeans, will find their fit in either the technology side, or with seasoned operating partnerships and will have the ability to access the public and to prosper.

After 25 years of waiting for this to happen, it sure is happening fast and furious and the media and public excitement is completely focused on sports betting. With good intent, strong relationships, and reasonable expectations the U.S. will be a viable market for Asia and those around the world looking to get in the game.

*John J. English, Partner, Managing Director of Sports Betting & Technology, Global Market Advisors