UK bookies surge as US Supreme Court overturns gambling ban

Judges struck down the Professional and Amateur Sports Protection Act, a federal law that prevented states from permitting gambling on the outcome of sporting events.

The Supreme Court on Monday overruled the ban enacted by Congress in 1992 on states that did not already allow sports gambling, which had left Nevada as the only state where single-game wagering was legal. All states will now be allowed to grant gambling permits in order to reap the tax benefits.

"Just as Congress lacks the power to order a state legislature not to enact a law authorizing sports gambling, it may not order a state legislature to refrain from enacting a law licensing sports gambling,” wrote Justice Sam Alito on behalf of the majority of seven judges against two opposing.

Some $150bn is be wagered annually across the US already, the American Gambling Association has estimated, representing around $30bn of revenue.

New Jersey, which brought the case before the Supreme Court last July, is expected to be the first state to take advantage of the ruling and is thought to be ready to go live in a matter of weeks. Almost 20 other states, including Pennsylvania, New York and Mississippi, have passed bills to legalise sports betting, or have them making their way through the state legislature.

There is expected to be large differences between various state laws and regulations, with some states seeking to impose high levels of tax such as Pennsylvania, which passed a law that includes a 36% tax rate on sports wagering revenue.

Bookies William Hill, GVC Holdings and online gaming companies Playtech and Sportech will be the main beneficiaries, said analysts at Whitman Howard.

All four are already operating in the US. Hills, which has invested heavily Stateside in preparing for a favourable PASPA outcome, has a business based in Nevada and a New Jersey operation that is ready to start taking bets within days.

Paddy Power Betfair is also well set up in the US, through its TVG unit, the largest online horse racing business in the US with account holders in thirty-five states and a TV channel, as well as an online casino and horse racing betting exchange in New Jersey.

PPB and Sportech shares finished up 12% on Monday, compared to 11% for Hills and 7% for GVC, and 3% for Playtech.

"The US Supreme Court struck down the federal law that bars gambling on individual sporting events in most of the country in a ruling likely to unleash a race among the states to attract billions of dollars in legal wagers."

The Whitman Howard analysts added: "Sports gambling could begin in a matter of weeks in casinos and racetracks in New Jersey, which instigated the legal fight by repealing its gambling prohibition."

Broker Shore Capital, which highlighted GVC as the best placed to benefit among the big UK players, said the initial share price reaction had been "a little exuberant" as how the new scene plays out is uncertain. Analyst Greg Johnson pointed out that as well as each state's tax take, there will be a professional sports association share, with the largest believed to be asking for a 1% of wagering “integrity” share, plus the question of who and where gets licensed - though he suspects existing land-based operators and venues will be the likely initial beneficiaries.

"Although a clear opportunity, in terms of economics international gaming operators are likely to be behind both the state and incumbent operators in the pecking order; a revenue share model could be as low as 10-20% of net revenue, noting Playtech.

"We suspect that the next few years are likely to be an investment phase with little meaningful profit contribution expected for operators as part of a land grab as the market slowly legislates with the value added today arguably worth some a near 10% share of current market revenues (after making a number of assumptions)."

Neil Wilson, analyst at Markets.com, said William Hill stands to gain the most. "This was always the main investment thesis for WMH as it battles regulatory pressures elsewhere - the opening up of the US market is a huge opportunity for it. It looks like the decision to swat away merger deals by Parvus has proved wise and now we must look at WMH as a potential bid candidate. The rationale for a merger remains strong."

Wilson urged caution from investors as the UK decision on fixed odd betting terminals is due any day, with the worst case scenario of a £2 cap "probably not quite fully baked into shares".

"Nevertheless as regulatory jaws close in established markets like the UK and Austrslia, it appears as though the US is ready to extend a warm welcome to Britain's bookies."