Economics

Research Brief: State Legislative Update on U.S. Sports Betting & Online Gaming February 2020

As we are coming off one of the most heavily watched sporting events and one of the most gambled-on events, we are just entering the proverbial Super Bowl of legislative activity. Numerous states are in the thick of their legislative sessions with numerous hearings and pieces of legislation surfacing as states work through sports betting, online gaming, brick-and-mortar casinos, and how to deal with the illegal/gray market.

As we look at states this month, there are four real groups to consider. In keeping with the football theme at the close of the 2019 season, we will classify these groups of states as “Professional Players”, “Draftees”, “College Players”, and “Signees”. Professional Players are those states that have already legalized sports betting and are up and running. Draftees are those jurisdictions that have legalized but have yet to launch in the market. College Players are those states that appear ready to launch and are in active debate to take it to the next level. Finally, in light of National Signing Day this week for future college football players, Signees are the states that are just starting their journey down the path of sports betting.

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Bouncing POGOS

Online gaming has been on the radar of mainland Chinese authorities over the last six months, as they seek to stop online operations in Asia. They are particularly focused on online gaming markets in Cambodia and the Philippines, which are suspected of targeting Chinese nationals.

In response to several compliance issues and concerns raised by Beijing, Cambodia has effectively shut down its online gaming operations. However, the Philippines and President Rodrigo Duterte, even after meeting with the Chinese President Xi Jinping, decided to keep its online gaming operations open. The market is thriving throughout the Philippines and looks to continue to grow under the regulatory structure of the Philippine Amusement and Gaming Corp. (PAGCOR).

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Rising Sun: Japan begins to enter the homestretch in 2020

Like the cherry blossoms in the spring in Japan, integrated resort developments will begin to emerge into full bloom starting in January 2020. The coming year will see significant progress at the central government level that will then launch the RFP process at the prefecture level.

If the level of activity in the second half of 2019 is any indication, 2020 will prove to be a very robust year. However, there is still a lot of work to do before Japan awards up to three of the coveted IR licenses established through the IR Promotion and IR Implementation Acts.

Since the market began to emerge some 20 years ago, Japan appears to be in the homestretch for the initial round of development of integrated resorts. The movements not only by operators but also by interested prefectures will continue to evolve in the coming weeks and months.

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Crystal Ball Gazing

Predicting the future of any industry has always been an inexact science. It requires an examination of historical trends, possible changes in public policy, the application of a variety of macro-economic theories, the unlikely entry of a disruption industry that could emerge as a worthy competitor, and a substantial amount of guesswork.

The problem is, when it comes to Macau, more often than not the soothsayers have been unable to predict the future.

When predictions are made, word spreads quickly. The number of media outlets devoted to the casino industry has increased and amplified the distribution of news. Casinos are now part of
the 24-hour news cycle; the industry has its own forums, dedicated writers and avid readership.

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Cambodia Rising

Major casino operators have long perceived Cambodia as a tertiary gaming market – a collective mix of border casinos that catered to residents of adjacent countries seeking a convenient place to gamble. The absence of robust gaming regulations further discouraged larger operators from considering acquisitions or developments in the Kingdom. That perception is changing.

Anticipated changes in the regulatory environment coupled with dramatic growth in casino markets throughout the country has caused casino developers to take a closer look at Cambodia.

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The Quiet Casino Boomtown

As the gaming industry’s collective attention is focused on what casino development might look like in Japan, a small seaside resort town on the coast of Cambodia is quietly emerging as the
world’s fastest-growing gaming jurisdiction. The town is called Sihanoukville.

Sihanoukville is a port city and down-market vacation destination on the Gulf of Thailand in southwest Cambodia. It has long appealed to backpackers
for its pristine beaches and low-priced accommodations. It also has served as a gambling and vacation destination for Thais and Chinese.

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Home Stretch in Japan

For nearly 20 years, Japan has gone through several false starts and iterations in its attempt to legalize integrated resorts. In December 2016, Japan took its first official first step toward legalization with the passing of the IR Promotion Bill. Later this spring, Japan is poised to take the final step in this process with the introduction of two bills that will help solidify the initial act: the IR Implementation Bill and the Basics Bill on Gambling Addiction Countermeasures.

The government of Japan has been contemplating what items to include within these bills in its quest to create an environment that maximizes the potential benefit realized by the country in terms of investment and tourism as well as to attract quality operators to the market.

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The Millennial Is Not Your Customer

Millennial has become the new buzzword and focus of the gaming industry and commerce as a whole.

What do millennials like? How do we design our product to attract millennials? Should we serve only organic food in our restaurants and provide beard trimmers in our bathrooms?
Some casinos believe that millennials prefer table games over slots. Or, for slots, millennials will like skill-based games, so money should be invested in skill-based pits. Despite many casinos trying to attract millennials, not one casino has succeeded in a meaningful way.

The reason is that millennials will not be valuable casino customers for another 20 years

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White Paper: Japan Integrated Resorts Executive Summary

The next emerging integrated resort market is on the horizon in Japan. After years of debate, Japan is in the process of developing legislation to create the regulatory and market structure for integrated resorts (“IR”). While the debate still has several issues to work through, Japan has the potential to be one of the largest gaming markets in the world with a revenue potential of $24.2 billion, assuming fully developed IRs are introduced in six regions. Global Market Advisors (“GMA”) completed a detailed analysis that examined the current gaming market, the prospective legislation, components of the RFP process, potential sites, definition of an integrated resort, and the full market potential.

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