Proposed regulatory legislation in the Garden State could keep Golden Nugget Atlantic City out of New Jersey’s sports betting market. Plus, if other states follow suit, casinos with ties to pro sports franchises all over the US could suddenly be on the outside looking in as well.
On May 14, the US Supreme Court declared the Professional and Amateur Sports Protection Act of 1992 (PASPA) unconstitutional. This opened the door for all 50 states to join Nevada in legalizing single-game wagering.
Delaware was able to open up its local sport betting market June 5. The quick turnaround is the result of already having the legal framework for sports betting set up.
New Jersey is in the midst of putting together regulatory sports betting legislation to govern the industry there. However, language in the latest bill being considered by NJ lawmakers asks casino and racetrack operators with an ownership interest in a sports franchise to choose between the team and opening up a sportsbook.
New Jersey proposing ownership restrictions
In fact, a provision in sports betting bills in both the NJ Senate and Assembly will restrict sports team owners from offering wagers on sports. A provision that would force Golden Nugget Atlantic City owner Tilman Fertitta to choose between opening a sportsbook and the NBA’s Houston Rockets. A team the Houston billionaire bought for $2.2 billion in 2017.
Caesars properties in Atlantic City could also be affected by the provision. Caesars is owned by Apollo Capital Management, a private equity firm co-founded by Philadelphia 76ers and New Jersey Devils owner Joshua Harris. However, Caesars size and the nature of its ownership arrangements might protect it.
The bill essentially prohibits casino operators who own a stake of 10 percent or more in a sports franchise from offering sports betting. Although there appears to be a few exceptions. Operators qualify for a waiver if:
- The operator owns less than 10 percent of the casino or racetrack
- The sports franchise ownership stake represents less than one percent of the operator’s total business value
Borgata Hotel Casino & Spa owner MGM Resorts would likely qualify for a waiver. It owns the WNBA’s Las Vegas Aces. However, that franchise is worth less than one percent of MGM. MGM reported $10.8 billion in net revenue in 2017.
Fertitta’s Landry’s Inc. posted approximately $3.4 billion in revenue in 2017.
Caesars Entertainment posted net revenues of $4.85 billion in 2017. The 76ers are worth approximately $800 million and the New Jersey Devils are valued at about half that.
The bill would give operators one year to divest their interest in the sports franchise. This provision might allow casinos with sports franchise ownership interests to open a sportsbook. Then they can spend the next 12 months trying to sell the team or lobby state lawmakers to change the law.
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No restrictions in Nevada
There is no restriction on franchise and sportsbook ownership in Nevada. There, Fertitta and Golden Nugget avoid questions of impropriety by not allowing wagering on Rockets games at its sportsbooks in Las Vegas and Laughlin.
Caesars Entertainment Chairman Gary Loveman is also a minority owner of the NBA’s Boston Celtics. The Celtics have been off the board at Caesars’ Nevada sportsbooks since he bought the stake in 2006.
The Las Vegas-based Maloof family previously held ownership interests in both the Palms Casino Resort and the NBA’s Sacramento Kings. The Palms’ sportsbook refused to take wagers on the Kings at that time.
However, as it stands in New Jersey, such compromises may not be enough.
Hope for Golden Nugget and Caesars
Fertitta and Landry’s also own casinos in Mississippi and Louisiana. Caesars has additional casino properties in Arizona, California, Illinois, Indiana, Iowa, Louisiana, Maryland, Mississippi, Missouri, North Carolina, and Pennsylvania.
Golden Nugget and Caesars Entertainment must be hoping amendments can change the ownership restrictions in New Jersey. Although it will have to happen fast. New Jersey is hoping to pass the necessary regulatory legislation and launch legal sports betting this month.
In the meantime, both must also be hoping these type of ownership restrictions don’t become a legislative trend. Considering both companies casino interests in other states that could be considering legalizing sports betting as well.
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