What Were the Top Gambling Stories of 2018?
Posted by Harry Kane on Wednesday, February 20, 2019
Now that the dust has settled on 2018, it’s worth looking back on what was a seminal year for the global gambling industry.
From significant developments in the U.S. market to increasingly stringent regulatory changes in the UK, both on and offline gambling channels have experienced significant peaks and troughs over the course of the last 12 months.
In this post, we’ll look back at some of the most interesting stories from the industry, while asking how they impacted on sports betting and casino gameplay across the globe.
Sports Betting and the Burgeoning U.S. Market
Arguably the most striking story emerged in May of last year when the U.S. Supreme Court took centre stage by reversing the 1992 Professional and Amateur Sports Protection Act.
This federal law had effectively outlawed sports betting nationwide in the States for more than 25 years, aside from a few exceptions including Delaware, Oregon and Montana and Nevada.
Despite a number of legal challenges that were focused on the Tenth Amendment of the U.S. Constitution (which reserved all rights not explicitly granted to the federal government for individual state authorities), this law remained unchanged for years and played a key role in preventing the nation’s gambling sector from being regulated.
By striking down this law, however, the Supreme Court laid the foundation for significant growth in the U.S. gambling sector while enabling states like New Jersey, Nevada and Delaware to build on their lucrative casino markets.
Not only this, but the new ruling paved the way for greater collaboration between European and U.S. gambling operators. While UK firms were already looking to forge new relationships with their American counterparts against the backdrop of Brexit, the decision of the Supreme Court helped to accelerate this process and intensify negotiations.
In the wake of the announcement, GVC Holdings quickly launched a joint venture with MGM Resorts, while Paddy Power Betfair made the bold move of acquiring the American-based daily fantasy sports brand FanDuel.
William Hill also sought to fortify their position in the U.S. market, having bought into the Nevada sports betting sector years ago. To this end, they set up a sportsbook-in-waiting at New Jersey’s popular Monmouth Park racetrack, while it’s thought that the brand is also planning several potential acquisitions in order to compete more aggressively with Paddy Power.
Interestingly, some of this enthusiasm may have dampened at the beginning of 2019, after the U.S. Justice Department took the controversial decision to reverse an amendment made to the Wire Act back in 2011.
The initial act essentially outlawed interstate betting and identified this as a criminal act in 1961, but the amendment from seven years ago opined that this piece of legislation had exceeded its original scope.
More specifically, they suggested that any “interstate transmissions of wire communications that do not relate to a sporting event or contest” should fall outside the act, and this allowed several U.S. states to form liquidity pacts relating to poker and online casino gameplay.
Now the Justice Department’s latest legal opinion has challenged the 2011 interpretation, while once again reimagining the scope of the Wire Act to encompass all forms of interstate gambling.
This will threaten future pacts and potentially hinder growth in the market, meaning that UK firms may have to work a little harder to forge lucrative partnerships with their American contemporaries.
The Regulatory Crackdown in the UK Market
Back in 2017, the UK Gambling Commission (UKGC) announced a number of core strategic objectives through 2021.
These included a renewed focus on safeguarding the interests of customers online, along with a desire to raise regulatory standards in the sector and improve its perception among the general public.
Last year undoubtedly saw the UKGC take proactive steps towards realising these objectives, in conjunction with the existing Government’s Department for Culture, Media and Sport (DCMS) and various charitable organisations.
One of the first brands to feel the renewed force of the UKGC was William Hill, who was fined £6.2 million for failing to adequately protect customers and prevent money laundering through their sites.
At the same time, the Commission announced that they were probing a further 17 online casino licenses for a host of perceived shortcomings and before the year was out more than a dozen operators had been sanctioned with combined fines in excess of £27 million.
The operator 32Red became one of the highest profile brands sanctioned in June, with the UKGC issuing a £2 million fine for missing 22 opportunities to help a problem gambler (who deposited £758,000 over a little more than two years) despite admitting to representatives that he was continuing to chase losses.
Another key development revolved around the numerous fixed-odds betting terminals (FOBTs) that populate high streets throughout the UK after an investigation by the DCMS resulted in the maximum betting threshold being slashed from £100 to just £2.
This sent shockwaves throughout the UK’s gambling sector, with bookmakers claiming that the move would cut their profits by more than half, cost thousands of jobs and trigger the closure of up to 9,000 outlets nationwide.
While the controversial decision to delay the implementation of the cap appeased bookies to some degree and boosted their coffers to the tune of £4 billion, it will finally come into force in October and will undoubtedly undermine growth in the offline sector.
Even before the scale of the cap was announced, the investigation took its toll on the share prices of market-leading operators, with both William Hill and Ladbrokes Coral shedding 10% from their values after the initial investigation was concluded.
These brands experienced similar declines when the £2 cap was announced, while both William Hill and Paddy Power Betfair were forced to slash their earnings forecasts for the second half of 2018 as a result of the new legislation.
As if this was not enough, multi-channel operators in the UK were also hit when the government moved to offset the tax revenue that would be lost through the impending FOBT cap.
To this end, it pledged to increase the Remote Gaming Duty (RGD) from 15% to 21%, with this significant change coming into effect in October of this year. This was 1% higher than the initial projections made by online operators, while it will undoubtedly place a squeeze on profit margins in the sector against the backdrop of Brexit and other regulatory shifts (we’ll have a little more on this later).
The cumulative effects of these changes have been significant, particularly in terms of market sentiment and the profitability of individual operators. Margins will arguably become even more strained this year, as the new rules come into effect and Britain attempts to take its first steps in a post-Brexit world.
The Changing World of Gambling Advertising
When Italy voted in a new and diverse coalition of left and right-wing populists last year, the gambling industry was one of the first to be disrupted. In May, the country’s new political leadership unveiled its so-called ‘Dignity Degree’, which proposed a 35% in electronic gambling machines (similar to the FOBTs in the UK) and an absolute ban on gambling advertising and sponsorships.
This controversial proposal was passed into law on January 1st, 2019, while it was subsequently confirmed that all sponsorships involving gambling brands would expire on June 30th. This surprised some operators who had looked to circumnavigate the regulations by quickly signing new deals before the end of 2018, as all arrangements will be terminated in the summer regardless of when they were signed or their duration.
This news has had a detrimental impact on what was a burgeoning gambling sector in Italy, while tech providers like Playtech were also adversely affected.
After all, the brand completed the $1 billion acquisition of Italian operator Snaitech in August, and while the new regulatory approach has yet to impact online it has created considerable uncertainty industry-wide.
The advertising ban also sent ripples throughout the UK market, while it arguably convinced a number of operators that the Conservative government was about to introduce a similar restriction.
In order to steal the initiative, several market-leading brands and members of the Remote Gambling Association (RGA) announced a voluntary advertising ban during live and pre-watershed sporting broadcasts.
It was hoped that this would appease an increasingly tenacious group of anti-gambling campaigners and government officials, while also reaffirming a commitment to the UKGCs’ core strategic principles.
Most importantly, operators were hopeful that the move will deter regulators from restricting online advertising, with brands spending five-times more on digital marketing than they do on TV slots. There was also an expectation that the decision would help some operators to retain their lucrative sponsorship deals with English football clubs, which remained an ongoing source of controversy in 2018.
Whether these proactive steps yield rewards for UK operators has yet to be seen, but they have certainly helped brands to seize the initiative and safeguard their immediate growth prospects.
The Stars Group (TSG) Steals a March on Its Rivals
While most British and European operators spent 2018 licking their wounds and counting the cost of various regulatory changes, those further afield have looked to leverage this uncertainty to their own advantage.
Take the Canadian-based Stars Group (TSG), for example, which started last year with a number of modest acquisitions of Australian online sports betting brands.
However, this did little to prepare the industry for the subsequent $4.7 billion acquisition of Sky Betting and Gaming, which transformed TSG from a specialist poker brand to the world’s largest publicly traded online gambling firm.
The brand looked to build on this momentum by launching its first stateside sports betting operation in New Jersey, while also negotiating with potential partners in the region of Pennsylvania.
TSG also completed its incredible journey by being announced as a member of the American Gaming Association in March, despite being derided by the AGA as being detrimental to the integrity of the nation’s gambling sector back in 2013.
TSG was undoubtedly inspired to move by the instability that undermined the UK and European markets last year, while it was also forced to adapt its business model as the popularity of online poker continued to decline across the globe.
At the same time, the group’s flagship PokerStars brand was forced out of the Australian market by legislation that banned all online products unrelated to sports betting.
This compelled the brand to act, by dramatically diversifying their interests and acquiring a number of prominent, profitable and firmly established operators.
The Last Word and a Look Ahead to 2019
The last 12 months have undoubtedly seen seismic changes in the global gambling industry, and it’s fair to say that not all of them have been positive.
Regardless, operators throughout the world have experienced a significant period of disruption and transition, with this likely to extend well into 2019 and beyond.
One trend that ran throughout the global market was the aforementioned decline of online poker, with this niche accounting for a paltry 5.9% of the UK gambling industry’s GGY in 2018. This decline was reflected stateside too, with the revenues generated through online poker in New Jersey sinking to a record low in November.
The way in which operators have responded to this particular challenge should offer hope to the industry, however, with New Jersey’s online casino market generating a record $269.7 million during the first 11 months of 2018 despite the demise of virtual poker.
Similarly, the online GGY in the UK increased by a hefty 13.7% to $5.4 billion in the year ending March 2018, as operators leveraged the growing popularity of slots to negate the declining interest in poker gameplay.
So while the numerous challenges facing operators in 2019 may be more difficult to overcome, there’s no doubt that the industry boasts the audience, resources and level of innovation required to continue its growth during a period of sustained transition.
The one nagging concern for UK operators revolves around the impending spectre of Brexit, which has already cast doubt over the future of Gibraltar and contributed to some operators relocating to various tax havens in Spain.
Make no mistake; a no-deal exit from the UK would dramatically compound the issues facing British iGaming brands, while it may also be the catalyst for further disruption in the months ahead.