Sports betting has been illegal in the United States in most locations since the early twentieth century. However, Congress is now reviewing the three main sports betting laws on the books, a process that could have major implications for U.S. casino stocks.
ESPN has reported that a congressional committee is reviewing sports gambling laws. Sports gambling in the U.S. is currently regulated by the following three laws:
- The Interstate Wire Act of 1961 makes all sports betting using the internet and other forms of connectedness a federal crime.
- The Professional Amateur Sports Protection Act of 1992 (PAPSA) banned sports betting nationwide, with the exception of Nevada and a few other states.
- The Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA) is the law that banned online poker websites, but explicitly excluded fantasy sports from the ban.
Instead of the current patchwork of outdated laws, Congress may choose to create a new, comprehensive law to legalize sports betting nationwide.
With that in mind, here are three casino stocks that would benefit from this legalization.
Casino Stocks to Buy: Amaya Inc. (AYA)
On the surface, it may seem like legalized sports gambling would be nothing but good news for U.S. gambling stocks. However, legalization would certainly create a tidal wave of new online sports betting competition.
Hundreds of new online gambling websites and apps would likely pop up overnight. Online and mobile gambling could siphon off potential gamblers from casinos. Of course, sites and apps that are already established will have a leg-up on the new competition.
Canadian company Amaya Inc. (NASDAQ:AYA) launched its PokerStars online platform back in March. If U.S. sports betting is legalized, look for AYA to expand its platform to sports betting and invade the U.S. market. Amaya reported only $59.6 million in casino and sportsbook revenue last quarter. If the U.S. sports betting market opens up, AYA’s sportsbook revenue could easily approach its $215 million quarterly poker revenue.
With a market cap of only around $2 billion, even a fraction of a new U.S. legalized sports betting market could have a big impact on AYA stock.
Casino Stocks to Buy: MGM Resorts International (MGM)
Despite the risk of new competition, casinos are making a big bet that legalized sports gambling would be good news for their bottom lines. MGM Resorts International (NYSE:MGM) is one of the major gambling stocks at the table.
The American Gaming Association estimates that U.S. gamblers already place $149 billion in illegal sports bets each year. That number dwarfs the $4.3 billion in sports bets gamblers make each year at Nevada’s legal sportsbooks. If sports gambling is legalized, casino stocks like MGM are hoping that a large portion of that $149 billion will be headed their way.
MGM has a huge presence in both Las Vegas and in Atlantic City. The 2,002-room Borgata owned and operated by MGM and is the largest hotel in the entire state of New Jersey.
Casino Stocks to Buy: Boyd Gaming Corporation (BYD)
ESPN reports that American Gaming Association is expected to lead the Congressional lobbying efforts to overturn PAPSA starting in 2017. The American Gaming Association’s membership is no secret. According to the organization’s website, gambling stocks like MGM, LVS and WYNN are all members. Regional U.S. casino operator Boyd Gaming Corporation (NYSE:BYD) is also a member.
BYD runs 10 casinos in the Las Vegas area. It also runs 10 additional casinos in a number of different states throughout the U.S. As an added bonus, Boyd stock is a U.S. gaming pure-play, with zero exposure to Macau.
BYD recently updated its B-Connected Sports mobile app, Nevada’s first licensed mobile sports gambling app. This summer, B-Connected became the first sports gambling app to feature horse racing. Regardless of any changes to U.S. law, Boyd announced that it wants to add live video streaming to its app. The app already provides customers with odds on all major sporting events and horse races.
If Congress opts for sports gambling legalization nationwide, BYD stock could get a major B-Connected bump.
As of this writing, Wayne Duggan did not hold a position in any of the aforementioned securities.