Opening Bets: MGM Deals Foreshadow New Gambling Culture

Not quite three months after the U.S. Supreme Court struck down state bans on sports betting, MGM Resorts International has signed deals with the NBA and other operations that could mark the first chapter of the country’s new sports and gambling culture.

But challenges remain — not the least of which includes how gamblers will place bets, and whether gambling really will spread to enough new domestic markets to significantly challenge the Nevada’s dominance.

First, here is a look at what MGM has done in recent days.

NBA Data and Logos

MGM announced a deal to become the first sports gambling partner of the NBA. The deal, reportedly worth no less than $25 million and running for three years, provides proof that major sports leagues have overcome their reluctance to being officially associated with gambling, lest they lose the trust of consumers.

The MGM gambling platform will use official NBA data, though that part of the agreement is not exclusive, demonstrating how sports leagues intend to try to get data integrated into gambling platforms, pushing out third-party providers. MGM officials will also reportedly help the league detect fraud and game-fixing. In another signal of how this new world of sports betting might develop, the NBA wants to charge royalties on each bet that gamblers place on its games, along with having veto power over “certain kinds of betting,” according to The New York Times.

The deal also involves an exclusive branding arrangement: MGM can now use NBA and WNBA logos and team visuals, and craft coordinated marketing efforts.

“Integrating the NBA’s assets and having official NBA data showcased across the MGM Resorts platforms will provide us with a distinct advantage and instill more confidence in knowing that our data is directly from the NBA,” MGM CEO Jim Murren told The New York Times.

GVC Joint Venture

Besides betting on the NBA as a solid method of gaining market share in this new world of sports betting, MGM will work with UK-based sports betting operator GVC Holdings on a 50-50 joint gambling venture. The goal is to “create a world-class sports betting and online gaming platform in the United States, well-positioned to engage in the new opportunities created by the recent Supreme Court decision” in overturning state sports gambling bans, MGM said in a press release.

MGM and GVC will each put $100 million toward the venture, and the headquarters of the new operation will be located in a “major U.S. technology hub.”

The driving idea behind the deal is that the reputation, technological experience and gambling expertise held by both firms — the GVC umbrella includes Ladbrokes Coral Group, Sportingbet, Betboo and other brands — will result in lower risk for the venture, along with speedy entry to the market.

“The new venture will have exclusive access to all U.S. land-based and online sports betting, online real-money and free-to-play casino gaming, major tournament and online poker and other similar future interactive businesses – facilitating entry into multiple digital gaming verticals under the playMGM and partypoker headline brands,” according to the statement. The two companies also plan to combine their loyalty programs for gamblers served by the venture.

Boyd Gaming Partnership

Another deal involves Boyd Gaming Corp., which owns and operates two dozen gambling properties in seven states, including Nevada and Louisiana.

“Under this partnership, MGM Resorts and Boyd Gaming will both have the opportunity to offer online and mobile gaming platforms — including sports betting, casino gaming and poker — in jurisdictions where either Boyd Gaming or MGM Resorts operate physical casino resorts and online licenses are available,” the companies said in a press release. “Under this market access agreement, each company will have a path to expand [its] online and mobile gaming presence across 15 states.”

Gambling Challenges

The three recent MGM deals provide ample reasons for optimism about the profit potential of the country’s sports and gambling culture after the Supreme Court decision. That said, knots still have to be worked out.

For one, how gamblers will pay for bets remains an issue.

The largest credit card companies, while certainly not closing the door to enabling those payments — U.S. consumers place an estimated $150 billion in illegal bets annually — have, since the ruling, taken a cautious approach. What if certain gamblers suffer vicious losing streaks? Some bettors suffer from gambling addiction, after all — while others might just walk away from their debts — and that could leave lenders on the hook for defaults.

Beyond that, legal gambling culture in the United States, despite the Supreme Court ruling, remains a tangle of state laws and regulations. According to a recent estimate from ESPN, 25 states have yet to make any moves toward the legalization allowed under that Supreme Court ruling, and only three have fully approved legal sports gambling. However, five more appear to be getting close to that point.

The lack of movement by the majority of states could certainly give some investors pause. Sure, U.S. gambling promises to produce an 81 percent gross profit margin, according to a Barclays calculation, but as a Bloomberg columnist recently noted, “states will no doubt want compensation for their part in fighting fraud, money-laundering and addiction. That could lead to additional taxes, possibly at or above 15 percent.”

And that says nothing of the potential costs of keeping sports gambling honest, the column continued. As the MGM-NBA deal demonstrates, integrity is top-of-mind for any operation that wants to keep gamblers coming back, and that desire, at least generally, could lead to compliance regulations that impose heavy fines on gambling providers for any slip-ups. Beyond fines, “integrity” taxes imposed by states could also eat into those fat margins.

Everything known about human nature indicates that no matter what, the Supreme Court ruling will open the gates for the spread of more legal sports gambling, and that some companies — or maybe a lot of companies — will cash in big. One of the questions now is how much of this will be controlled by the big players, and how quickly others will follow in their wake.