Are Gambling Operators a Safe Bet in the Current Volatile Stock Market?

It certainly looks like they’ll be attracting a lot of attention in the months to come.

As the world continues to find its feet after being knocked to the ground by the Covid-19 pandemic, traders and investors will be forgiven for feeling a touch cautious about the state of global markets. However, one source of soaring excitement in North America is the gambling sector – specifically, the companies that stand to make big profits in Canada if new sports betting legislation goes through.

On 22 April, Bill C-218 passed its third reading in the House of Commons. If it gains Senate approval and becomes law, this legislation will eradicate the current federal ban on single-event sports betting in Canada. Under the current rules, the only legally permissible sports bets are multi-game parlay bets placed through provincial lotteries (with the exception of horse racing). This hasn’t done much to curb Canada’s appetite for single-event betting, though. It’s estimated that Canadians spend an estimated $10 billion annually at illegal bookies. Plus, many online casinos actively serve Canadian players, while being safely based beyond the country’s borders.

If Bill C-218 does go all the way, Canada’s provinces will finally have the right to determine their own laws regarding single-event betting, which could spark a digital gold rush among sportsbooks keen to set up shop in the Great White North. We’ve already seen what this looks like across the border, when the US overturned its own federal ban on sports betting back in 2018. Despite initial pushback from the major leagues, who were concerned about corruption and match-fixing, the post-2018 landscape has been a lucrative one in states like New Jersey and Michigan, with millions being wagered in online and retail sportsbooks, and sports teams themselves enjoying big sponsorship deals with betting companies.

DraftKings Marches On

One of those companies is DraftKings, which became the exclusive daily fantasy sports sponsor of the NFL in 2019. This gave DraftKings the right to use NFL branding across its platforms, and that agreement has now expanded to include Canada. It’s clear to industry commentators that this is less about daily fantasy sports than it is about laying deeper foundations in Canada ahead of a possible revolution in sports betting. Indeed, DraftKings CEO Jason Robins has openly talked about how “Canada is going to be a really exciting opportunity, should it open up.”
Investors are certainly getting excited about DraftKings’ potential – Bernie McTernan of asset management firm Needham & Company has singled the company out as an attractive opportunity thanks to its status as a “leader in the emerging North American online gambling market”.

Competition remain hungry

Of course, DraftKings will have plenty of competition on its hands. Other major players include Canada’s own FansUnite and Score Media and Gaming, both of which have seen their shares shoot up in value in response to the gambling bill. Score Media runs the hugely popular theScore app, which provides users with real- time sports news and stats. A few years ago, the company launched a US online sportsbook to capitalize on the overturning of the federal ban, and has enjoyed large success in this new market.

In April of this year, its CEO John Levy proudly announced record growth, with second quarter takings showing 491% year on year growth. He also signalled his ambitions in his native Canada, saying that he’s “encouraged by the recent momentum in support of Bill C-218” and that his company’s “popular brand and dominant Canadian market position will enable theScore to participate as a market leader in what is expected to be a very large addressable market, including in our home province of Ontario.”

An added beneficiary of theScore’s sportsbook success north of the border would be the gambling behemoth Penn National Gaming, which owns a percentage stake in Score Media and Gaming (as well as in other big names that could travel northwards, like Barstool Sports).

The sports betting tech company FansUnite has also been seeing growth across the world – for example, it owns Scottish brand McBookie, which has placed over $100 million in bets during the last three years alone. Unsurprisingly, FansUnite is eyeing the possibilities in Canada, with CEO Scott Burton saying: “As a gaming operator in regulated jurisdictions, we have sports betting companies around the globe that are currently utilizing our technology to enable their growth. With the advancement of Bill C-218, and our relationships with stakeholders here in Canada, we are in a favourable position to replicate our global gambling strategy and capture market share here on our own soil.”

Whatever happens, and whoever ends up taking the biggest slice of the Canadian pie, it certainly looks like gambling operators are going to be attracting a lot of attention in the months to come – barring, of course, a sudden scuppering of Bill C-218. If, as is generally expected, single-event betting does become the new normal, there may be an eye-watering $28 billion in wagers up for grabs, if a new report by Deloitte Canada is to be believed. With this kind of prize pot on offer, it won’t be a surprise if investors bet on gambling firms as excitedly as hockey fans during the Stanley Cup playoffs. It just remains to be seen which teams will go the distance.