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Betting on the Success of Legalized Gambling in Professional Sports

In June 2018, the U.S. Supreme Court approved legalized sports gambling in the state of New Jersey; on the heels of that decision, several other states have recently introduced bills to legalize sports betting.  Previously, Nevada was the only state authorized to offer sports betting in the U.S.

The Odds of Higher Revenue

Legalization of sports gambling has had a significant effect on professional U.S. sports leagues through the creation of a new, very lucrative, revenue stream. For example, the National Basketball Association (NBA) was the first league to strike a deal with MGM Resorts International where it will supply MGM with data for use in betting. This model was followed by the National Hockey League (NHL). While the leagues do not get a portion of the gambling proceeds, they do hope to explore this as more states legalize sports gambling. This could produce even more revenue opportunities to grow the leagues. Why? The America Gambling Association has estimated that there is a $150 billion illegal sports betting market. Just think how that amount of legal revenue could impact the leagues.

Enhancing the Fan Experience

Another impact of sports gambling is that it has incentivized league franchises to add sports gambling into the overall fan experience. The fan experience has morphed into a major part of attending live sporting events over the last decade or so. Take the New Jersey Devils. They opened a lounge area in the Prudential Center that will have screens with live betting odds across all sports. This will help centralize gambling options for fans who can then place bets quickly and easily on their smart phones. This collaboration with sportsbook operator William Hill could further create revenue opportunities via increased attendance as well as sponsorships.

NFL Plays It Cautiously

While both the NBA and the NHL launched partnerships with MGM, it is unusual to not see the same level of activity with the National Football League (NFL). The NFL is at the forefront of sports betting; it is one of the most popular leagues in the U.S.; and there is a tremendous fantasy football community. What may be prompting the NFL’s reluctance to enter into this type of partnership? Do they not agree with the concept? Do they feel they deserve a larger revenue share than the other leagues? In the meantime, the New York Jets football team has entered into its own partnership with MGM. The deal does not give MGM the data it receives from the NBA and NHL for sports betting, but it has created a partnership for additional MGM advertising in states where gambling is legal. 

Location and Valuation

As legalized sports gambling continues to grow and create additional revenue opportunities, this could impact where league franchises wish to be based. Over the long history of U.S. sports leagues, many new franchises have been created in one city only to eventually move to another. Could legalized gambling in a state create a higher valuation for sports franchises where they would want to move their teams into those states? It’s a fascinating question. Professional sports franchises are both limited in number and very sought after. So, with high valuations already, it could be interesting to see how legalized sports gambling could push these valuations even higher.

Jeffrey Boyle is a Senior Audit Manager, providing services for both private and public clients. He has particular expertise in the sports and entertainment industries, as well as emerging and established media and technology companies.

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