Bet On It: Mississippi mobile sports betting bill shot down

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: In a regulatory filing, the board of directors of Light & Wonder (LNW) approved a new share repurchase program under which the company is authorized to repurchase, from time to time through June 12, 2027, up to an aggregate amount of $1B of its outstanding common stock. As of June 13, the company has exhausted the $750M share repurchase authorization under the company’s prior share repurchase program.

In a regulatory filing, DraftKings (DKNG) said that its board of directors appointed Erik Bradbury as the company’s chief accounting officer and principal accounting officer, effective on or about August 12. Effective as of Bradbury’s appointment, Alan Ellingson, the company’s CFO and principal financial officer, will no longer serve as the company’s principal accounting officer. Bradbury most recently served as the senior VP controller and chief accounting officer for IAC Inc. (IAC) where he oversaw IAC’s company-wide accounting and financial reporting from September 2023. Bradbury is returning to DraftKings after having served as the company’s chief accounting officer from September 2020 until September 2023.

STATE UPDATE: In May, according to Benchmark, New York’s mobile sports betting market reached a gross gaming revenue, or GGR, of $203.3M, the most since January, marking a 33.8% increase from May 2023. The handle reached $1.97B, reflecting a substantial 45.9% year-on-year growth. Among mobile sports betting operators in New York:

• FanDuel (FLUT) secured an $88M GGR from a $747.5M handle, translating to a 43.3% GGR market share and a 37.9% handle market share, with an 11.8% hold rate
• DraftKings achieved $84.2M GGR from an $812.3M handle, resulting in a 41.4% GGR market share, a 41.2% handle market share, and a 10.4% hold rate

Jefferies contended that sports margins stabilized in April. as 26 states have now reported OSB data for April. In these states, the handle surged by 34% year-on-year, or YoY. while GGR saw a 42% increase. Margins improved by 0.6 percentage points, reaching 10.2%. This represents a 2.3 percentage points sequential improvement from March’s weaker margins marking a return to more normalized levels—the first time since January, according to the firm. The contribution from new states accounted for 16 percentage points of the headline GGR growth. Excluding these new states, the April handle still grew by 24% YoY, and GGR increased by 26%. In April, across the 26 online sports betting, or OSB, states and five iGaming states that reported data, combined GGR for OSB and iGaming increased by 34% YoY. This acceleration surpassed the 25% headline GGR growth observed in Q1. OSB drove this surge, growing by 42% in April, while iGaming remained robust, Jefferies noted. Among operators, FanDuel achieved the highest April GGR growth at 45%, followed by DraftKings at 30%. FanDuel also maintained market leadership, with a combined GGR share of 37%. Regarding promotions, April’s free bet spend as a share of handle declined slightly to 2.5% across the 26 reporting states. ESPN Bet (PENN) kept promotional spending rational at 3.1% of handle. FanDuel led in net gaming revenue (NGR) market share, holding 54%.

MOBILE STILL ILLEGAL IN MAGNOLIA STATE: The potential adverse effects on Mississippi’s tourism industry seem to have hindered the passage of a mobile sports wagering bill during this year’s legislative session, Jeremy Pittari of Magnolia Tribune reported. Although lawmakers have attempted similar legislation in the past, it has consistently failed to advance. In 2018, Mississippi legalized placing wagers on athletic events, but with the condition that bets must occur within the confines of a physical casino. Despite the current prohibition on mobile sports betting outside casinos, such activity still takes place within the state. Notably, geospatial checks revealed approximately 9.3M recorded visits to illegal gaming sites by users in Mississippi. House Bill 774, introduced by State Representative Casey Eure, aimed to grant legal-age Mississippians access to sports betting services via their smartphones or other electronic devices from anywhere within the state. During a committee meeting in January, Rep. Eure emphasized that legalizing such services can significantly reduce illegal betting. The bill died in conference prior to the end of the 2024 session. State Senator David Blount, who chairs the Senate Gaming Committee, explained that the bill’s demise was due to its perceived overreach. The proposed HB 774 aimed not only to legalize sports betting but also to extend mobile access to other casino games like poker, craps and slot machines. Senator Blount acknowledged differing opinions on whether offering these services outside of casinos would harm Mississippi’s tourism industry. He emphasized the need to protect the state’s brick-and-mortar casinos and the jobs they provide, considering that Mississippi relies significantly on tourism.

ADDITIONAL ANALYST COMMENTARY: It was announced earlier in the week that Penn is to be replaced in the S&P MidCap 400. Separately, hares of the stock moved lower after Truist this morning raised the firm’s price target on the shares to $25 from $23 and kept a Buy rating on the name. Penn is “hyper-focused on meeting if not beating expectations – specifically Interactive,” the analyst wrote after spending time with management. The firm continues to believe the market is undervaluing the company. However, despite the activist letter from Donerail, Truist said it does not think any sort of formal strategic review at Penn is likely in the near-term. The company has a clear ESPN Bet product roadmap, football season is on the horizon, and higher interest rates are still impacting acquisition values for now, the analyst noted. The firm also believes Penn is one of the most efficient land-based operators in its coverage, “which limits any low hanging operational synergies.” In afternoon trading, the shares are down 9%, or $1.68, to $17.37.

Citi resumed coverage of Genius Sports (GENI) with a Buy rating and $9 price target after a period of having the firm’s rating suspended. The firm’s 2024-2026 revenue and adjusted EBITDA figures move up “slightly” from its previously published estimates, but its thesis remains unchanged that the company is well-positioned within the sports betting value chain, the analyst told investors.

JPMorgan lowered the firm’s price target on Flutter Entertainment to 20,700 GBp from 21,300 GBp and keeps an Overweight rating on the shares.

Morgan Stanley added DraftKings back as the analyst’s Top Pick in North America Gaming and Lodging, as the firm told investors in a research note that the firm sees positive catalysts alleviating recent pressure from the recent tax headlines following Illinois’ move to a higher, progressive tax structure. The firm sees capital return being announced along with the company’s Q2 release as free cash flow is still poised to inflect and the company reiterating guidance even with the headwind from Illinois, reflecting strong underlying market growth, says the analyst, who keeps a $51 price target and Overweight rating on DraftKings 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).