(Bloomberg Businessweek) -- When the Vegas Golden Knights score their second goal against the Edmonton Oilers—a nifty midair redirection of a shot from the blue line—the foghorn blasts and chants of “Go Knights go!” take a couple of minutes to die down. It’s a Thursday night in February at the new, 20,000-seat T-Mobile Arena on the southern end of the Las Vegas Strip. “They have cost us a lot of money,” says Joe Asher, who’s watching in a suite above center ice in blue jeans and a half-zip fleece. Asher, chief executive officer of William Hill US, oversees the largest collection of sportsbooks in Nevada, and the Knights—an NHL expansion team in its first season—have been winning more than expected. Each victory can cost William Hill as much as $250,000, as local bettors have been enthusiastically backing their team.
Not that Asher is complaining. Every bet that William Hill takes on the Knights is a reminder of how far the company has come in gaining a foothold in Nevada. The renowned British bookmaker owns more than a quarter of betting shops in the U.K., but as recently as 2012, it had no U.S. presence. Now it runs 108 of Nevada’s 190 sportsbooks and takes in about 30 percent of the state’s $250 million annual sports betting revenue.
Pro hockey in Las Vegas is a good omen for William Hill. The NHL’s 2016 announcement that it would expand to the city marked the first time one of the four major American sports leagues had blessed it with a franchise. Until then, Las Vegas had always been seen as too risky because of its gambling industry and the potential for games to be fixed. The breaking of this taboo is part of why Asher is confident that sports betting will soon reach beyond Nevada and why William Hill is laying the groundwork to operate in other states. Nationwide, attitudes are changing. Support for legalized sports betting hit 55 percent in a 2017 Washington Post poll, the first time a majority had backed the idea. “The U.S. market is going to open up,” Asher says. And it could happen soon.
In December the U.S. Supreme Court heard an appeal filed by New Jersey asking the court to strike down the federal law standing in the way. The Garden State has wanted to add sports betting at casinos and racetracks since 2011. But it’s been blocked by joint lawsuits from the National Collegiate Athletic Association and the four major leagues, who argue that the plans violate the Professional and Amateur Sports Protection Act (PASPA), the 1992 prohibition that stopped the spread of betting beyond states that already had it; only Nevada, where sportsbooks have been a part of casinos since 1975, has licensed betting houses.
New Jersey argues that PASPA is unconstitutional. The state says the federal government can directly set rules for sports betting or allow states a free hand, but, under the 10th Amendment, can’t “commandeer” states to do its bidding. Lower courts have repeatedly sided with the leagues. But the Supreme Court, just by taking the case, seems to find something amiss. President Trump’s appointee, Neil Gorsuch, a states’ rights advocate, could tip the balance in New Jersey’s favor. A ruling is due before the end of the current term in June.
“All signs point to New Jersey prevailing,” says Daniel Wallach, a gaming lawyer at Becker & Poliakoff, who predicts that Atlantic City casinos will take bets by the start of the NFL season in September. Traders on political odds market PredictIt give PASPA a 27 percent chance of surviving. If it dies, other states will follow New Jersey’s lead: Nineteen have passed or introduced laws to allow betting if the law is overturned. Research firm Eilers & Krejcik Gaming LLC estimates that 32 states with a combined population of more than 215 million would be on board by 2023, creating a $6 billion industry. Asher says William Hill intends to be in every state that opens as soon as the law allows. The goal is for the brand to be as recognized in the U.S. as it is in the U.K., where it’s been taking wagers for more than 80 years and now runs 2,342 betting shops.
William Hill began looking for a way into the U.S. as soon as New Jersey started poking at PASPA. According to the company’s U.K. management, it was wary of missing the land rush—leagues, casinos, other overseas books, and daily fantasy companies are all now fighting for a piece of the potential U.S. market—but also leery of spending too much to prepare for a day that might never arrive. That’s where Asher came in.
Asher, 50, grew up in Wilmington, Del., where his father owned a newsstand. He used to help his dad place bets at local raceways. When his father (now deceased) wasn’t playing the ponies, he played cards, shot dice, or bet on the NFL with a bookie. “He couldn’t control it,” says Asher. “For a very small segment of the population, it’s just like alcoholism or opioid abuse.” At 16, Asher got a job at Brandywine Raceway, a since-shuttered track outside Wilmington, and by 18 he was calling races at Harrington Raceway—he’d fallen in love with horse racing despite its role in his father’s undoing. He worked at tracks while at the University of Delaware, then went to law school and landed a job at the white-shoe firm Skadden Arps, Slate, Meagher & Flom.
In 2003 he left Skadden for a job at financial-services firm Cantor Fitzgerald, which had plans to revolutionize gaming with its bond-trading technology. The company wanted Asher, who’d previously represented the company in a legal case, to lead its efforts in Nevada. Asher left Cantor abruptly in 2007 and started his own company to operate sportsbooks for Nevada casinos. (Cantor sued him for breaching his noncompete obligations; the case went to trial, and Asher prevailed last year.) He called his startup Brandywine Bookmaking LLC, after the bygone Delaware raceway, and raised about $7 million.
By 2011, Brandywine was running 17 books, mostly at smaller casinos off the strip—and losing money. On Sundays during the NFL season, Asher watched the scoreboard, unsure whether he could pay bettors and make payroll. Despite the adage that the house always wins, sportsbooks are a volatile business. If enough games go in unexpected ways, a bookie with a small bankroll can be wiped out. Adding to his problems, the real estate crash had drained locals’ gambling budgets. “I picked a terrible time to start a business,” Asher says.
A local bookmaker down on his luck was a perfect opportunity for William Hill. In 2011 it agreed to buy Brandywine for $15.7 million and, at about the same time, made deals to buy two of Asher’s biggest competitors. All three purchases were contingent on the Nevada Gaming Commission granting William Hill a license, which it did after a year—a first for a British bookmaker. Asher was named CEO of the combined business. William Hill provided cash and technology, Asher provided the local relationships, and the combination of the three operators provided scale. Last year more than $1 billion in bets came in through William Hill’s 108 Nevada locations and its mobile app (which only works in-state). The house kept $73 million.
After becoming William Hill’s CEO, Asher reached out to a man named Dennis Drazin with a proposition. Drazin—best known in New Jersey from TV commercials for his personal injury law firm—had recently started running Monmouth Park, an almost 150-year-old thoroughbred raceway on the Jersey shore. Monmouth, which was state-run until 2011, was bleeding millions of dollars a year. To keep the track from closing, Drazin wanted to introduce sports betting. In early 2012, at the urging of Drazin and Atlantic City casinos, New Jersey passed a law to make sports betting legal. That summer, as the state moved forward with its plan, Drazin told the local press he was ready to start taking wagers. Before he could, the leagues sued to stop him and won the case in federal court.
Asher, who’d seen Monmouth’s story in the press, told Drazin he wanted William Hill to run the track’s sportsbook—if it ever opened. In 2013, Monmouth signed a deal giving the company rights to sports betting at the track; William Hill paid $1 million and agreed to split revenue evenly. Monmouth used the money to renovate a cafeteria behind the grandstand, turning it into a 100-seat William Hill-branded bar that, if all goes to plan, will someday be a sportsbook. There’s a gleaming semicircular bar with counters on both sides where betting windows would go and rows of tables along windows that overlook the track’s parking lot. On an afternoon in March, workmen are hanging brackets for TVs and painting walls blue in the hall beneath the grandstand, where an additional 30 betting windows will go. There’s a cafe next to the paddocks where, if betting becomes legal, William Hill has promised to build another sportsbook at a cost of $5 million. “If I really wanted to, I could start taking bets the next day,” Drazin says of a Supreme Court win. More likely, he says, it will take a couple of weeks.
After the courts rejected New Jersey’s 2012 attempt at legal sports betting, the state tried a second strategy. PASPA says states can’t “sponsor, operate, advertise, promote, license, or authorize” the practice. It doesn’t say states must ban it. During arguments before the court of appeals in Philadelphia in 2013, lawyers for the leagues, speaking hypothetically, said New Jersey could decriminalize betting and create a free-for-all for bookies as long as it didn’t license them. In 2014, the state decided to see if the lawyers were right and passed legislation legalizing betting at casinos and tracks. It didn’t include plans to issue licenses, levy taxes, or otherwise regulate the activity—operators would self-govern. The leagues again sued to block the state, and lower courts again stopped it from proceeding. The Supreme Court is weighing this second try.
New Jersey has two clear paths to victory: The high court could overturn PASPA or let New Jersey proceed while leaving PASPA intact. The second scenario would temporarily scuttle plans in other states that have written laws in the event that PASPA falls—while New Jersey’s tracks and casinos could take bets with minimal oversight. If that happens, William Hill says it will take bets—and the leagues will lobby furiously for a federal law to establish new rules.
At this point the leagues have mostly stopped resisting sports betting and begun figuring out how to profit from it. In recent weeks, NBA assistant general counsel Dan Spillane, with backing from Major League Baseball, has been trying to persuade state legislators to make sportsbooks pay leagues 1 percent of all wagers placed on their sports. “Betting is built on our games,” Spillane said at a Connecticut hearing in March. “If there’s a scandal, something that tarnishes the image of the game, that’s going to be a cost borne by the sports leagues.”
The American Gaming Association, an industry lobbying group, says a 1 percent fee is a 20 percent tax on revenue. In Nevada last year the state’s books kept $249 million of more than $4.8 billion wagered, a little better than 5 percent; if leagues kept 1 percent of the total bet, they’d take $48 million of this revenue. The NBA says using Nevada as a baseline is flawed because a multistate market would spur investment and innovation and drive profits higher. Bookmakers counter that margins in every state will be about the same as they are in Nevada, and that if league fees force William Hill and other books to offer stingy odds, bettors will stay in the black market. For now, Connecticut, Kansas, and New York have settled on a compromise fee of 0.25 percent.
On Super Bowl Sunday in February, about 200 people showed up at the William Hill bar at Monmouth to watch the game. The crowd was a mix of college kids, middle-aged couples, and older men who’d come to the track to bet on horses and stuck around. Many weren’t waiting for the Supreme Court’s approval to bet on sports. A man in a New York Giants jersey said he wagers a couple hundred dollars a week through a college friend. At a nearby table, a twentysomething man in jeans reviewed a combination bet that he made on a website provided by his bookie: $50 that Eagles quarterback Nick Foles would score a nonthrowing touchdown and that the Eagles would win. Near the end of the first half, Foles caught a touchdown on a trick play, and the Eagles won 41-33. His $1,100 payout was delivered by Venmo.
Nobody knows how many bettors there are like this or how much they spend. In 1999, a congressional commission estimated that Americans illegally bet from $80 billion to $380 billion annually. Eilers puts that at $50 billion to $60 billion, not counting wagers between friends. For William Hill to conquer America, it must persuade some of these gamblers to leave the black market. It won’t be easy. Street bookies don’t ask for ID, talk to the IRS, or demand money upfront. They offer generous odds and sometimes cut breaks to loyal customers.
Over the past decade, a cottage industry known as “pay-per-head” has sprung up on the internet, making it easy for small-time bookies to offer state-of-the-art online betting. Pay-per-head shops sell software to bookies so customers can bet via app. The companies charge bookies about $10 per week for every active bettor—hence the name. Eilers estimates that 35 percent of illegal bets in the U.S. are made on these services. (Others employ more traditional bookies or bet via offshore sites such as Bet Online or Bovada.) Pay-per-head software lets bookies offer up-to-the-minute odds, a customer service call center, instant accounting, and, most important, “in-play” betting. During NFL games, bettors can place wagers on whether a drive will end in a touchdown. The pay-per-head companies, meanwhile, have at least a fig leaf of legal cover: They don’t take bets themselves.
“It’s changed the whole business,” says A., manager of a company called Premier Per Head, who asked to go by his first initial. “No waking in the middle of the night to take calls.” All bookies have to do is find customers and collect and pay out bets. In another world, A. could be pitching his business to Silicon Valley venture capitalists. Instead, he’s in a Dunkin’ Donuts in Manhattan on a cold March morning. A New York native, A. spends most of the year in Costa Rica, where he and handful of others oversee a full-service call center and other staff. He wears a baseball cap and a gray, Jordan-brand hoodie and seems nervous, repeatedly checking two phones.
A. pulls up Premier Per Head’s app. It looks like William Hill’s, with a scrolling menu of dozens of sports and thousands of bets. He says he has more than 100 bookies on the service, many of whom have at least a dozen customers. A. doesn’t want New Jersey to win its case, but he says he isn’t worried about losing business if it does. He estimates that, given the option, about 10 percent of bettors using local bookies would switch to legal providers. “If you have a solid guy,” he says, “you trust him, and there has never been a problem, why change it?” At Monmouth, the man in the Giants jersey says he has no plans to leave his bookie if the law changes: “I’m not a degenerate. He’s not coming after my family.”
The larger opportunity for William Hill is to bring in new bettors. “The black market is about 20 percent of the size that a properly regulated market would be,” says Chris Grove, a managing director at Eilers. “There is a lot of money on the sidelines right now.” To put it in play, William Hill must find new ways to lure customers. The dream goes like this: A fan watches a Golden State Warriors game on her mobile phone. A window pops up with a yes-no question: Will Stephen Curry score at least 40 points? The fan isn’t a gambler, but she likes Curry and wants to add some excitement to the game, so she taps yes. A bookmaker offers a small wager at odds tilted in its favor.
William Hill needs casual bets like these to make the U.S. market profitable. In Europe, the internet has lowered margins for sportsbooks, as online bettors tend to be more sophisticated than those who bet in person. They place larger wagers, win more often, and shop around for odds. In the U.K., William Hill sees 18 percent margins in its shops and less than 8 percent online.
Betting shops in the U.K. are utilitarian spaces, usually a single room with a bet taker sitting behind Plexiglas. As a sop to Brits who saw gambling as a vice, U.K. lawmakers forced the locales to be unwelcoming when they were legalized in 1961. Windows were covered, and there were no seats, drinks, or televisions. Laws have loosened since then—there are TVs and bettors can sit—but the shops still aren’t places to linger. In Las Vegas, sportsbooks are designed to drive casino foot traffic. Bettors scan huge boards with the day’s odds, fill out paper slips, and hand them to a cashier.
William Hill is updating this old-fashioned model in Nevada. Mobile bettors still must go to one of its sportsbooks to open an account and cash out, but after that, they can bet anywhere in the state with a few clicks. At the company’s book, which doubles as a burger bar, in the SLS Las Vegas Hotel & Casino on the northern end of the Strip, new users can prove their identity by scanning a photo ID and taking a selfie to show that they’re really there.
By January, 60 percent of money wagered with William Hill in Nevada was via mobile, and about 30 percent of that was on in-play bets. In every inning of every baseball game, bettors can wager on whether a run will score. “We’ve got guys who will bet $1,000 an inning,” says Asher. The company has started offering custom bets on Twitter. People can send in “prop” bets—a yes-or-no proposition about, say, whether the home NBA team will score more than 100 points—using the hashtag #myodds. The oddsmakers will set a line.
During the Knights hockey game in February, William Hill’s director of trading, Nick Bogdanovich, has a prop of his own. Two fans are getting married at intermission after the groom proposed during the first period. The team has provided an Elvis impersonator to officiate. “This is bad decision-making right here,” says Bogdanovich, who’s watching with Asher from the suite and decides to set the “over-under” on years the marriage will last at 1.5. “I am going under,” he says.
“Come on, be a romantic,” says Asher. “I’m taking the over.” —With Greg Stohr
To contact the authors of this story: Ira Boudway in New York at iboudway@bloomberg.net, Eben Novy-Williams in New York at enovywilliam@bloomberg.net.
To contact the editor responsible for this story: Bret Begun at bbegun@bloomberg.net.
©2018 Bloomberg L.P.
