Bet On It: Light & Wonder issues update on Dragon Train injunction compliance

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: Light & Wonder (LNW) released a video statement from president and CEO Matt Wilson on the recent developments on the litigation regarding Dragon Train. Highlights from the statement include: the company is ensuring that its customers “are taken care of” as the company complies with the judge’s order. The company maintains its 2025 consolidated EBITDA target of $1.4B. Regarding the North American market, the company has approximately 33K lease units installed, of which Dragon Train represented roughly 2.2K units. The company is working to convert those games and has not had removal requests at this date. In the Australian market, the company stopped selling Dragon Train and is offering customers a range of replacement games. The company intends to build Dragon Train 2.0 as soon as possible and expects the franchise to remain part of the company’s offer. The company develops over 130 games each year and will present its new pipeline at the Global Gaming Expo, or G2E. The contract with the Dragon Train designer was terminated. The company continues its $1M share buyback program.

Flutter Entertainment’s (FLUT) FanDuel unit was sued by a former Jacksonville Jaguars executive, Amit Patel, who pleaded guilty in December to stealing more than $22M from the team and was sentenced to 78 months behind bars in March, alleging that the website operator knew he was an addicted gambler and offered him more than $1M in credits and “lavish” gifts to make sure he continued to place bets. The complaint, filed in a federal court in New York, alleges that FanDuel ignored its own responsible gaming protocols and “actively and intentionally targeted and preyed” on him with incentives to feed his addiction. The suit seeks more than $250M in compensatory damages.

Macau’s gaming bureau reported September gross revenue from games of fortune in the region was up 15.5% year-over-year to 17.253B patacas.

Genius Sports Limited (GENI) announced the appointment of Mark Kropf as its group chief technology officer, or CTO. Kropf joins Genius Sports from Google (GOOGL), where he held the position of technical director within Google’s office of the CTO. In this role, Kropf played a role in advancing Google’s generative AI capabilities, developer experience and innovation. Mark Locke, CEO of Genius Sports, said: “I am thrilled to welcome Mark Kropf as our Group CTO. His outstanding track-record of technology leadership at both Google and Pivotal, combined with his deep experience in AI-focused innovation, will play a critical role in our future. Our cutting-edge GeniusIQ platform is already driving the AI revolution in the global sports ecosystem and Mark’s expertise will play a key role in amplifying and accelerating that transformation.”

International Game Technology (IGT) “announced that it recently renewed a multi-year retail sports betting agreement with FanDuel, North America’s premier online gaming company and an operating unit within Flutter Entertainment plc (FLUT). Under the terms of the agreement, IGT PlaySports will continue as the exclusive retail sports betting platform provider for FanDuel’s retail sportsbooks across North America for four additional years, starting September 1, 2024. IGT PlaySports and FanDuel have worked together since 2019, when FanDuel opened its first sportsbook in the U.S. at The New Meadowlands Racing & Entertainment in New Jersey.”

The Securities and Exchange Commission charged DraftKings (DKNG) with selectively disclosing material, nonpublic information to investors who followed or otherwise viewed the company CEO’s social media accounts without disclosing that same information to all investors, in violation of Regulation Fair Disclosure. DraftKings agreed to pay a $200,000 civil penalty to settle the SEC’s charges. “The order finds that, on July 27, 2023, at 5:52 p.m., DraftKings’ public relations firm published a post on the personal X account of the DraftKings CEO. The post, according to the order, stated that the company continued to see “really strong growth” in states where it was already operating. DraftKings’ public relations firm posted a similar statement that same day on the CEO’s LinkedIn account. At the time of the posts, DraftKings had not yet disclosed its second quarter 2023 financial results, nor had it otherwise publicly disclosed certain information contained in the posts. Shortly after the public relations firm published the posts, it removed both posts at the request of DraftKings. According to the order, even though Regulation FD required DraftKings to promptly disclose the information to all investors after it was selectively disclosed to some, DraftKings did not disclose the information to the public until seven days later when it announced its financial earnings for the second quarter of 2023,” the SEC stated.

DEBT DEALS: The outlook for operators is mixed, according to Macquarie. Over the past three months, the sector has outperformed the S&P 500, gaining 8% compared to the S&P 500’s 5%, benefiting from a roughly 100-basis-point drop in interest rates. This decline created opportunities for several large companies to secure debt deals, including Caesars. Recent debt market activity suggests that debt investors may currently be more optimistic than equity investors, potentially opening the door for continued share repurchases, Macquarie told investors in a research note. The firm noted some softness at the lower end of the market. Year-over-year comparisons are becoming more “favorable,” possibly setting the stage for same-store growth in 2025, according to the firm. Macquarie told investors that Las Vegas remains stable, but challenges such as a weaker summer season, rising labor costs, signs of softening leisure travel demand, and tougher comparisons in the fourth quarter and first quarter of next year contribute to uncertainty about growth in the third quarter and beyond, despite strong group and convention bookings.

NFL UPDATE: The third consecutive week of favorable results for operators saw seven underdogs win outright and ten cover the spread in NFL Week 4, Canaccord said. So far, 50% of the five largest underdogs in each week of the first month of the season have won outright, and 80% have covered the spread. Betting volumes remained elevated in New York, with total handle growing approximately 12% year-over-year to $480M during the week ending September 22. This was further boosted by another set of favorable outcomes for sportsbooks, as gross gaming revenue, or GGR, rose 21% year-over-year to $44M during week three, according to the firm. However, New York likely saw one of the lowest holds for operators last week, as both the Jets and Giants won outright and covered the spread. DraftKings edged out FanDuel for the top position by handle share in New York for the second consecutive week, holding 38% compared to FanDuel’s 37%. Canaccord contended that Fanatics was a notable mover, with its handle share rising by 620 basis points year-over-year. FanDuel maintained its leading position in New York by GGR share, with 44% of the total, followed by DraftKings at 40%.

PRESIDENTIAL ELECTION BETS GREENLIT: Legal gambling on the presidential election and Congressional races was given the green light on Wednesday, with betting potentially starting as early as this week, Ryan Glasspiegel of New York Post reported. The D.C. Court of Appeals declined to issue a stay in a lawsuit involving the Commodity Futures Trading Commission, or CFTC, which sought to block wagering on U.S. elections, arguing that it would cause “irreparable harm.” Kalshi, a betting exchange startup, had sued the CFTC for the right to offer betting markets on Congressional elections. In September, a federal District judge ruled in favor of Kalshi. Although the CFTC could still appeal to higher courts to overturn the decision, it is unlikely that any appeal would be heard in time to prevent legal betting on races such as Donald Trump vs. Kamala Harris or next month’s U.S. Senate and House contests. “US presidential election markets are legal. Officially. Finally. Kalshi prevails,” Kalshi founder Tarek Mansour wrote on X after the court ruling. DraftKings offers U.S. election odds in Ontario.

ADDITIONAL ANALYST COMMENTARY: Barclays raised the firm’s price target on DraftKings to $45 from $43 and reiterated an Overweight rating on the shares as part of a digital gaming Q3 earnings preview. NFL-driven September handle growth, helped by calendar, reasonable promotions, and strong internet gaming should generate solid results “across the board,” the analyst told investors in a research note.

Wells Fargo increased its price target on Las Vegas Sands (LVS) to $60 from $53 and kept an Overweight rating on the shares, while adding the stock to its Q4 Tactical Ideas List. The firm says Las Vegas Sands’ Q4 setup is attractive, with Macau EBITDA bottoming, Londoner casino opening early/in-time for Golden Week, and self-help positioning the company well into 2025 as both an idiosyncratic story and a Macau/China macro play.

Deutsche Bank lowered the firm’s price target on MGM Resorts (MGM) to $52 from $57 but backed a Buy rating on the shares. The stock has struggled in 2024 and lagged peers more recently, with concerns around Las Vegas Strip trends as well as challenging Strip comparisons for MGM specifically serving as the primary points of contention for investors, the analyst noted. The firm added that Las Vegas Strip trends are likely to remain challenging and given that the stock’s action has long been tied to investor sentiment around Strip trends, it is possible that MGM Resorts shares will struggle to move higher over the near term.

Barclays upped its price target on Flutter to $275 from $263 and maintained an Overweight rating on the shares. The company’s medium-term guidance suggests that the Flutter Edge is “fully intact” and even widening, the analyst contended. Barclay’s added that Flutter’s U.S. business moat is sustainable and should be further enhanced going forward with exciting new product features and scale, data, and AI-driven advancements.

Morgan Stanley upgraded Wynn Resorts (WYNN) to Overweight from Equal Weight with a price target of $104, up from $97, representing 25% upside. Wynn’s “near low” valuation, “underappreciated” growth opportunity in the United Arab Emirates, and optionality around Macau provide a favorable risk/reward and re-rating potential, the analyst tells investors in a research note. The firm sees greater stability in Las Vegas, details on the UAE project at the October 8 analyst event and increased capital return as catalysts for the shares.

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 (FLUT), 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).