Its all about the US market. Even before this deal, PBH was...

Its all about the US market. Even before this deal, PBH was kicking some serious goals...


Legalisation of sports betting in the US

PointsBet is uniquely placed to benefit from a large and growing market. Until recently, sports betting was illegal in most states in the US (except Nevada, where Las Vegas is located).

That is changing. New Jersey legalised sports betting (both offline and online) in June 2018, Iowa followed in May 2019 and less than two weeks ago in June 2019, the state of Illinois (were Chicago is located) also legalised sports betting. Other states such as Pennsylvania and West Virginia also authorise limited forms of sports betting.

We think many US states will continue to follow suit. Why? Because many Americans (14 million according to some estimates) already bet on sports illegally anyway and legalising it would allow the states to at least tax and earn revenue on those transactions (as is the case in Australia). Consider these words by the State Governor of Illinois in June 2019 when the state legalised sports betting,“We legalized sports betting and expanded gaming, leading the Midwest in a new industry and setting us up to generate hundreds of millions of dollars in revenue for our state”.

A Frost & Sullivan market report (commissioned by PointsBet) suggests that there is over US$70 billion of illegal sports betting in the US annually and this could start coming back onshore through licensed operators like PointsBet.

Even if you just looked at New Jersey and Illinois alone where sports betting is now legal, total sports wagering revenue is expected to be well over US$1billion annually. PointsBet is one of the few licensed operators in these states and with their half year revenue only $12 million for the whole group (including Australia), we think there is a significant runway of growth ahead.

Frost & Sullivan also estimate that total sports wagering revenue in the US could reach US$5.7 billion if 36 states legalise sports betting and US$17 billion if all 50 states legalise it.

A narrow but widening moat

You may be convinced that the market opportunity in the US is big but skeptical about PointsBet’s ability to fight off new entrants into this attractive market. If you are, consider this:

In order to get an online sports betting licence in the US, you need to partner with either a casino or a race track (permit holders) and they in turn can only offer two or three bookmaker licences at a time. In New Jersey, the largest permit holders are New Meadowlands Racetrack (with 36% market share) and Resorts Digital Gaming (with a 35% market share).

PointsBet beat many large bookmakers from around the world and obtained its ten year New Jersey wagering licence from New Meadowland Racetrack (after a tender process). The company also recently announced that it had a twenty year licensing agreement in Illinois with Hawthorne Race Course.

These licences and the legislation supporting them effectively limit the number of new competitors entering the market (based on the current lay of the land).

PointsBet also has licensing agreements in New York and Colorado, which means that they are able to commence operations in those states as soon as they legalise online sports betting.