Now that sports wagering is coming to Canada will draftkings rule?
A sports wagering bill that was put on the back burner during coronavirus lockdowns has finally seen its second hearing and is headed to a third, passing overwhelmingly with a vote of 303-15. With single-event wagering fast approaching, which operators should investors be watching for? If the sports betting market in the United States is any indicator, says analyst Benjamin Chaiken, signs point to DraftKings.
The Bill in Motion
An Investment Analyst for Tide Point Capital and Senior Analyst at Credit Suisse, Benjamin Chaiken wrote about the support for Bill C-218 in November of last year, advising clients to invest in DraftKings (NASDAQ:DKNG). He and his team wrote, “We think the Ontario opportunity is under appreciated (not in the ’21 guide or our estimates) and it sounds like there could be future momentum in other provinces as well. Assuming full legalization in Canada, we think this could be a $4 billion revenue opportunity, none of which is in our estimates or street expectations.”
Since then, sports wagering or betting Bill C-218 has passed a second hearing and moved on to a committee review phase. After that, the bill has even more steps to complete in the lawmaking process before it can be signed into law.
What Happens Next?
Before the third hearing, a bill will be examined by a committee for recommendations and amendments. Sports wagering Bill C-218 gets to undergo a review by The Standing Committee on Justice and Human Rights, who also heard testimony from witnesses and experts earlier this month about the bill to include in their evaluation. Representatives from the horse racing industry like Jim Lawson, CEO of Woodbine Entertainment, and Sue Leslie, President of the Horsemen’s Benevolent and Protective Association of Ontario, were just some of the witnesses that gave their insight at the committee hearing.
After the review is compiled, it will go back to parliament and the House of Commons will complete their third hearing vote on the bill. Then, the bill will go to the Senate where it will repeat a similar process of approval. Finally, the Governor General, a stand-in for the Canadian monarch and currently the Right Honourable Julie Payette, will sign the bill into law and officially repeal the ban on single-event wagers. The third hearing in each chamber is typically where a bill will face the most scrutiny, but odds seem favourable for sports wagering Bill C-218.
Strong Motivators
While similar bills have faced failure in parliament in the past, bipartisan support has never been stronger for expanding sports betting in Canada. The success following the overturning of the ban on states’ rights to regulate sports betting in the United States in 2018 could be to blame for the change in attitude. Revenue from the sports betting boom across America is expected to reach $2.5 billion in 2021 and more than triple by 2025. This benefit, as well as the potential competition from operators across the border, has moved some lawmakers in Canada to favor expanding sports betting.
Economic hardships from coronavirus lockdowns are another incentive for some, with the opportunity to recoup lost revenue tempering perspectives towards sports betting. The sponsor of Bill C-218, MP Kevin Waugh, cites missing out on billions of dollars lost to offshore operators that offer games like live blackjack, poker, and sports betting options to Canadians as one of the reasons passing the bill is imperative.
Opportunities for Operators
By the third financial quarter in the United States, around the time the Credit Suisse post was released, DraftKings revenue was reportedly up 98% from the year previous at $133 million. If Canada joins the fray, interest internationally in teams in the NBA, NFL, NHL, and MLB is more than enough to give the American sports betting operator a foot in the door.
With major league deals already established in the US and partnerships with casinos across the country growing, DraftKings has the reputation and the business foundation to start strong in the Great White North. There is another strong competitor poised to move on the opportunity, however, leading with a home advantage.
Canadian Contender
Score Media and Gaming, the digital media company responsible for theScore and the mobile sports betting app theScore Bet, has a large user base in the United States but is based out of Toronto and is publicly traded on the Toronto Stock Exchange. TheScore Founder, John Levy, has been a strong supporter of Bill C-218 as it has made its way through the legalization process, often releasing statements during the bill’s milestones. At the second hearing vote, Levy expressed enthusiasm on behalf of theScore, saying, “As Canada’s leading mobile sports media brand with a uniquely integrated sports betting platform, we look forward to collaborating with key stakeholders as the legislative process continues, to ensure that betting reform works for all Canadians and their communities.”
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