In the past one decade, gambling stocks have been on a roll since they captured the interest of adventurous investors and the major hub for the same has been the United States (U.S). Gambling stock market isn’t as secure and comprises high risk associated opportunities. Yet the returns are usually huge and can lead to big wins for businesses.
In the UK, the online gaming sector has grown about more than 146% since 2009 accelerated by limited bans and a safe regulatory environment. Yet, the U.S remains the most sought-after gambling destination with UK still imposing tighter laws and industry players seeking a flexible conducive platform.
In a sudden turn of events, on January 15, 2019 the share prices of the major UK bookmaking firms such as William Hill Plc, GVC Holdings plc, 888 Holdings Plc, Paddy Power Betfair Plc etc went downhill as the U.S. Department of Justice (DOJ) took a negative stance on legalisation of gambling on the internet.
In May 2018, there occurred an announcement in the U.S that sports betting and online gaming could possibly be legalised in states other than Nevada, the home to gambling capital Las Vegas. The idea driving the amendment could have been that illegal gambling takes place anyway, and therefore, the state could in fact enjoy its share through some hefty taxation policy. As a result, the value of the shares of the UK-quoted gambling firms grew in anticipation of the regulation coming into effect. The largest player in the UK, Paddy Power Betfair, with a significant market cap reported a higher stock price. William Hill, one of the world's leading betting and gaming companies, which employs around 400 people in the U.S and could have largely benefited from the changes unfolding then, also noted such price rises. The companies were strategizing and collaborating to expand operations in the US and include sports betting if legalised. Investors were also thrilled and preparing to take advantage of the possible upcoming boom in the gambling industry.
On the other side, the ongoing scenario clearly depicted how susceptible the fate of UK gambling stock market is to the regulatory environment in the United States.
The American Gaming Association, the premier national trade group for the U.S Casino industry revealed that “it is reviewing the opinion and its implications on the industry, consumers and "the eight states that currently offer legal, regulated sports gaming."
The stakeholders will definitely be affected with this new revised opinion by the U.S DOJ until it is infact challenged in the court. Some of the experts believe that the market reaction has blown out of proportion as the proposition has not been turned into a law yet.
Whatever legal atmosphere transpires in the United States around betting laws, it will not have major repercussions for those firms with limited US presence. Yes, the possible ban on online betting and cross-state gambling could hamper the potential for growth foreseen by the stakeholders. The bookmakers could still encash fortunes out of retail betting businesses within the states.
While the betting stocks saw a fall in the last couple of days, few of them regained momentum post some positive news coming-in on no confidence motion against Theresa May. For instance, William Hill was up 2.84% by mid-day trading on January 17, 2019; and GVC also gained about 1.8%.
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