Bet On It: Brazil sports betting legislation awaits President’s signature

Welcome to the latest edition of “Bet On It,” where The Fly looks at news and activity in the sports betting and iGaming space.

SECTOR NEWS: Gan Limited (GAN) announced changes to its board of directors and accompanying committees. Seamus McGill will step down from his role as chairman of the board, while continuing in his role as interim CEO and will be focused on guiding the company towards a timely closing with Sega Sammy Creation. David Goldberg will assume the role of chairman.

Bragg Gaming (BRAG) has taken its aggregation platform live with Superbet in Brazil, following a deal that sees the provider become a partner to the operator. As well as third-party content from the industry’s most sought after providers, Bragg now supplies Superbet with its proprietary games portfolio, including popular titles from in-house studios Atomic Slot Lab and Indigo Magic. The deal sees Bragg cement its presence in the Brazilian market with the country’s long-awaited and much anticipated reform that could regulate online sports betting and gambling nearing completion. New legislation would make Brazil the most important new regulated market for the global online gambling sector in 2024. The agreement follows successful launches with Superbet’s new Happening platform in Serbia and Belgium, where Bragg provides content aggregation for the operator’s superbet.rs and napoleongames.be online casino brands. Matej Nemec, Commercial Director at Bragg Gaming Group, said: “We have already seen tremendous growth with Superbet through aggregation partnerships in several countries, and this Brazilian launch is another important milestone which throws a spotlight on Bragg’s position as a leading supplier in this fast-growing iGaming market.”

BetMGM (MGM) and the National Hockey League announced a multi-year North American partnership extension. BetMGM continues as an Official Sports Betting and Gaming Partner and will create specialized VIP fan experiences, utilize NHL imagery to design team and League-branded casino games, and be featured during nationally televised broadcasts. BetMGM will receive significant branding within nationally televised broadcasts in the U.S. BetMGM’s camera visible signage will extend across the NHL’s regular season and Stanley Cup Playoffs, highlighted by inventory that includes Digitally Enhanced Dasherboards, the League’s advanced approach to dynamic dasherboard advertising and virtual slot in-ice ads.

NFL WEEK 15: In Week 15, sportsbooks faced tough outcomes with no underdog victories or covers among the major spread games, according to BTIG. Public betting heavily favored favorites to win outright or cover the spread. When the win margin falls below the approximately 1.5 neutral mark, it can significantly impact hold rates, sometimes reaching around 10% for NFL action. However, despite the unfavorable setup, reports suggest the week might not have been as bad as anticipated. There’s also a possibility that handle is benefiting after a few player-friendly weeks. Yet, as more November reports surface, it becomes evident that both DraftKings (DKNG) and FanDuel (PDYPY) might be heading towards less robust Q4 reports, even with a normal or improved December. Estimated revenue for DraftKings could reach around $1.2B in total, although there’s room for a healthier EBITDA outcome due to potential adjustments in direct costs and operational expenses, depending on December’s performance., according to the firm. For FanDuel, revenue might align at or below the lower end of the U.S. revenue guidance. Similar to DraftKings, there might be scope for more adaptable cost management to achieve a healthier EBITDA, especially if lower Sales and Marketing expenses are possible considering the higher promotional spending incorporated in revenue assumptions. Looking ahead, the notable Christmas day match-up between conference leaders with SF leading by five points, and slightly over half of the public bets backing the Niners, stands out in the holiday weekend slate.

Macquarie told investors that its statistical model forecasts an 8% hold in the sports betting market for the week of December 11-17, assuming a 7% hold for football and a 9% hold for all other sports. In the previous week, New York reported a 14% sports betting hold, while the trailing four-week handle growth stands at a year-over-year increase of 30%, with a 20% weekly increase. As of December 10, the firm’s estimations indicate that the Q4 New York market hold is trending towards 8.2%. This trend poses a headwind of 260 basis points for FanDuel, 140 basis points for Caesars (CZR), 67 basis points for BetMGM, and 19 basis points for Rush Street Interactive (RSI). However, it acts as a 33 basis points tailwind for DraftKings, based on New York data. Among operators, DraftKings and Rush Street Interactive lead the trailing four-week gross gaming revenue, or GGR, growth at 25% and 124% year-over-year, respectively, while other operators are experiencing negative growth. Despite this, Macquarie anticipates the fourth quarter could serve as a significant catalyst for the sector, driven by expectations of record profits. 

NEW KID ON THE BLOCK: ESPN Bet made substantial inroads in online handle share, Barclays noted. In Pennsylvania, ESPN Bet initial market share surpassed expectations. In the five reported states where ESPN Bet operates, online handle share increased to 5% in November from 2% in October, indicating a double-digit online handle share. DraftKings notably experienced a four percentage point loss, contributing to ESPN Bet’s market share growth. For GGR, ESPN Bet’s November share stood at 8%, with a win margin of 13%, significantly higher than the market’s approximately 7%, potentially due to promotional activity and high margins on free bets. Trends in app downloads reflect ESPN Bet’s product trial, as it emerged as the most downloaded app in November according to Apptopia data. In December, ESPN Bet held the highest share of daily actives, while in terms of app time, it aligned with BetMGM’s position. Notable improvement was also observed from bet365, closely trailing ESPN Bet in terms of app time in December.

STATE UPDATE: All but two states have now reported October data. Jefferies said Gambling Capital estimates that total handle and GGR will reach $12.8B and $1.22B, respectively, with both setting new historic monthly records. Meanwhile, eight states have reported data for November. Thus far, these states have generated $252M of GGR, down 20% vs October due to weaker sports margins. Sports margin volatility. DraftKings management recently commented publicly on the notably low sports margins over recent weeks, particularly for the NFL. Indeed, margins in NY were as low 4.2% and 6.7% for Weeks 12 and 13, with the former the lowest in the season to date. Initial Kentucky numbers. Kentucky has now reported its first full set of monthly numbers, having launched on September 28. The state has generated $324M handle and $54M GGR since launch, implying a strong 16.8% sports margin. FanDuel and DraftKings have established dominant early leading positions, with 37% and 36% GGR share, respectively. Interestingly, Bet365 has emerged in a strong third position with 16% share, followed by BetMGM with 5% and Caesars with 4%. New entrant Fanatics has recorded just 1% share thus far. Promotional data through the launch period supports our previously expressed view that FanDuel could invest to drive greater share gains in Q4. Since launch, FanDuel has issued the most promotional credits at $43M, compared to $29M for DraftKings and $22M for Bet365.

SPORTS BETTING ABROAD: Brazil’s lower house approved bills aimed at taxing online betting, Reuters reported. These initiatives are part of a larger economic strategy designed to bolster government revenue and promote environmentally friendly programs. The bill concerning betting, considered pivotal for the government’s target of eliminating its fiscal deficit next year, is awaiting President Luiz Inacio Lula da Silva’s signature to become law. Under the betting legislation, online betting companies will face taxes, including a 12% revenue tax and a 15% tax on the winnings paid to bettors. Additionally, regulations will be implemented to oversee the online gambling industry. Although sports betting was legalized in Brazil in 2018, it has remained unregulated. Subsequently, numerous betting companies such as bet365, Betano, and Betfair have aggressively expanded their operations in the country. Lower house Speaker Arthur Lira emphasized, “We are not amplifying or diminishing gambling, rather aiming to regulate the sector and impart seriousness to prevent issues like money laundering.”

PUBLICLY TRADED COMPANIES IN THE SPACE INCLUDE: Accel Entertainment (ACEL), Bally’s (BALY), Boyd Gaming (BYD), Caesars (CZR), Churchill Downs (CHDN), DraftKings (DKNG), Flutter Entertainment (PDYPY), Gambling.com (GAMB), Gan Limited (GAN), Genius Sports (GENI), Las Vegas Sands (LVS), MGM Resorts (MGM), Penn Entertainment (PENN), Rush Street Interactive (RSI), Super Group (SGHC) and Wynn Resorts (WYNN).