Month: June 2023

“The market is a racetrack too. But I was not developing elaborate theories in those days. I was just a little kid.” – Warren Buffett (Neckar Substack)

World-renowned investor Warren Buffett (chairman and CEO of Berkshire Hathaway) and numerous other famous investors were initially influenced by betting and bookmaking (particularly horse racing) before transitioning to financial markets.

The new wave of professional bettors is now finding success in financial markets as well, with significant crossover in the statistical analysis and thought processes applied across the two domains. For example, one prominent framework utilised by both investment firms and professional betting syndicates is the Kelly Criterion. Furthermore, in both betting and investing, the impact of decision-making biases and human psychology is critically important.

Warren Buffett

“You could get old racing forms… I would go through them using my handicapping techniques to handicap one day and see the next day how it worked out. I ran tests of my handicapping ability – day after day.” – Warren Buffett (Neckar Substack)

One may expect these to be the words of a professional bettor but they are in fact from Buffett. Few people know that much of Buffett’s formative years were significantly influenced by horse racing. He fervently assessed the Daily Racing Form and, having figured out the probability of each horse winning a race, he even did some of his own bookmaking at the Preakness Stakes in Baltimore. Through betting, Buffett learned several important investing lessons, including:

“You’re not supposed to bet every race” (Maiden King). When applied to investing, this could be interpreted as there being no need to always actively invest and that it is sometimes best to do nothing.“You don’t have to make it back the way you lost it” (Maiden King). When applied to investing, this could be interpreted as the need to pivot investment strategies according to market conditions.

Jeff Yaas

“If you’re the sixth-best poker player in the world and you play with the five best players, you’re going to lose… If your skills are only average, but you play against weak opponents, you’re going to win.” – Jeff Yass (ProPublica)

Jeff Yass (co-founder of trading firm Susquehanna International Group) said the above when asked to describe Susquehanna’s trading strategy. In 1985, Yass and a couple of friends bet at a track outside Chicago using analysis from a Compaq computer. With the assistance of a statistician who had worked for NASA on the moon landing, they bet $160,000 across tens of thousands of wagers to get the exact order of seven horses in three races. This won them $760,000, which was then the largest win in American racing history (ProPublica). The win was never honoured although Yass went on to make $28.5bn through Susquehanna (Forbes). 

Similarly to Susquehanna, the world’s largest betting syndicates have turned their attention to financial markets, trading equities, FX and derivatives. For example, one of the world’s largest betting syndicates is now trading $40bn a week on FX.

On the flip side, prominent international investment firms like Susquehanna are also applying their expertise to professional betting. In 2017, Susquehanna launched Nellie Analytics, based in Dublin, with a specific focus on sports betting. In 2022, Susquehanna acquired a 12.8% equity stake in PointsBet, creating an opportunity for Nellie Analytics to explore a partnership in delivering sports analytics and quantitative modelling services to PointsBet.

Mohnish Pabrai

“Investing is just like gambling. It’s all about the odds. Looking out for mispriced betting opportunities and betting heavily when the odds are overwhelmingly in your favour is the ticket to wealth.” – Mohnish Pabrai (The Dhandho Investor)

Mohnish Pabrai (founder of Pabrai Funds) is a fervent follower of Warren Buffett and Charlie Munger. He published a thorough framework for value investing called The Dhandho Investor (Dhandho is a Gujarati word that translates as “endeavours that create wealth”). There are numerous key ideas explained through betting analogies in Pabrai’s book. For example, he believes that the best way to increase returns and reduce risk is by making “Few bets, big bets (and) infrequent bets” (The Dhandho Investor). He often relates betting analogies to the Kelly Criterion (below), which is regularly applied to both professional betting and investing.

The Kelly Criterion

The Kelly Criterion was originally developed by John Kelly in 1956 to assess long-distance telephone signal noise. It now assists investors and bettors in determining the optimal diversification of a portfolio/bankroll by calculating the proportion of money that should be allocated to every individual investment or bet. This proportion is the “K%” in the above formula.

For example, in investing, if the K% is 0.125, then a portfolio should be 12.5% invested in each stock in the portfolio, effectively telling the investor how many positions to take. Of course, if you have a negative winning probability, “W”, there is no optimal Kelly percentage.

As shown below, position sizing is incredibly important in both betting and investing. If you have a bet with a 51% probability of winning and invest 5% of your money/bankroll each time, you will achieve a very different outcome to if you invest 10%. Minor changes to the percentage invested will ultimately make the difference between success and “gambler’s ruin”.

The Kelly Criterion is the solution to gambler’s ruin, whereby bets/investments are determined as a proportion of bankroll rather than as fixed dollar amounts, such that a person bets/invests less as their bankroll falls and bets/invests more as their bankroll rises.

The Kelly Criterion has been used by some of the world’s most famous investors, including Warren Buffett and Mohnish Pabrai. Bill Miller outperformed the market for 15 years at Legg Mason and has been a vocal proponent of Kelly. Ed Thorp, who returned 20% per annum for 30 years, said of the Kelly Criterion, “Success leaves clues” (ValueWalk).

Thorp also pointed out that Warren Buffett’s investing is consistent with the Kelly Criterion:

“He (Buffett) and his associate Charlie Munger, when managing $200m, put most of it into just five or so positions. Sometimes he was willing to bet 75% of his fortune on a single investment. Investing heavily in extremely favourable situations is characteristic of a Kelly bettor.” – Ed Thorp (A Man for All Markets: From Las Vegas to Wall Street, How I Beat the Dealer and the Market)

Betting on tennis betting

As mentioned in our April newsletter, on 1 July, Waterhouse VC will make an investment in Tom Dry’s professional betting syndicate. With a little help from the Kelly Criterion, Tom’s operational metrics are very impressive. Tom has developed a unique specialisation in tennis, which is much easier to leverage than multiple sports. We believe that his edge in tennis betting would be difficult to replicate due to the quantity of proprietary historical data he possesses and the factors that he applies to his model.

For wholesale investors interested in following wagering and gaming industry news and trends, please follow our updates on Twitter (@waterhousevc) or through our website at WaterhouseVC.com.

(main image: wilhei/Pixabay)

Up front, I have to say I am a Guardian reader, and have been for many years. I do read other news sources as well, but I think their investigative reporting is world-class. But as I’ve previously noted, when it comes to gambling, they’ve lost the plot.

So it came as little surprise when the Guardian Group announced it was banning all gambling ads in its pages from that point on. The announcement was made on 15 June and I believe it was with immediate effect. This impacts the group by around £500,000 a year, so I’m sure it’s not a decision that was taken lightly.

I’ve got a few issues with it though. 

Over the years I feel like I’ve slipped through the net a bit with the newspaper, snuck in and read it through the back door. I’m not their target market and I read quite specifically what I want in it. Why? Because so much of the paper is for the middle-classes. Columnists with no connection to reality for most of us, talking about things I will never experience.

The decision about gambling advertising reeks of the newspaper’s ingrained snobbery. Why? That’s a great question… Because it’s not about gambling. 

The gambling ad blackout that wasn’t

Guardian Media Group CEO Anna Bateson said of the decision, “Guardian journalists have reported on the devastating impact of the gambling industry in the UK and Australia, helping to shift the dial and ensure the issue remains high on the public agenda. Studies highlight a clear correlation between exposure to gambling advertising and increased intentions to engage in regular gambling.”

The paper’s own story said: “The ban covers all forms of gambling advertising, including promotions for sports betting, online casinos and scratchcards. It will apply worldwide to all of the company’s online and print outlets, including the Guardian, Observer, and Guardian Weekly.” Great, a blanket ban! Except it’s not. 

Lottery is excluded. 

Now, their wording definitely, very specifically says scratchcards. The ones you can play on most lottery websites and buy in newsagents everywhere in the world, pretty much.  And a form of gambling almost impossible to police. I’d bet real cash money – no pun intended – that no Guardian journalists have been standing outside newsagents in the rougher parts of the UK or Australia and documenting the demographic that is coming out with arms full of scratchies. 

Lottery is the acceptable, normalised face of gambling but, as I have said many times, if it’s a problem, treat it like it’s actually a problem. Picking and choosing like this makes zero sense and suggests pretty strongly that they do not fully understand what they’re protesting.

Picturing the problem

There are other issues, of course. I mean, we have a few seasons left of football shirts with gambling sponsors, for example. 

Are they going to lean on their photo desks to make sure they pick images that don’t show the shirt front clearly? Or give more column inches to those without a gambling sponsor? I’ve worked a photo desk and it’s a thankless job that really doesn’t need to be made more difficult. But hey, if you’re banning it, ban it. 

My main gripe with it though, comes as a sober man. I’ve not had any alcohol in coming up to six years. I had a great and very easy relationship with alcohol and that was the problem. We got on great. But in terms of social ills, there is very little that is even on the same continent as alcohol. 

The problem is normalisation; it’s sold everywhere, everyone drinks, it’s part of the world’s social lubrication. I’m an outsider in that respect. Well, not just that respect, but you get my meaning.

I venture onto the Guardian website to look up the story about the ban and on the home page what’s the advert for? A beer-related father’s day gift. 

If you’re worried about kids seeing gambling ads, I’m worried about them seeing an ad like that and thinking that’s what dads want, and that’s what they should aspire to get them. If you’re worried about harm and your readers, look no further than your own homepage. Hell, the paper has a regular wine column. But that’s fine, because everyone does it and what’s the harm?

Lazy and nonsensical

I’m not saying “YEAH BUT THIS IS WORSE” when it comes to gambling ads. That is a dreadful argument and ignores the real-life plight of people who are affected by disordered gambling. 

I’m absolutely not making light of that – in fact, it’s a good time to recognise that substance abuse is a frequent comorbidity of gambling and alcohol is by some distance the most common form of substance abuse in society worldwide. But let’s not get that in the way of you enjoying your middle-class glass of wine, eh Guardian readers? Because it’s not you drinkers, it’s them other ones.

What I’m really saying is, the paper has missed a huge opportunity to foment actual change. The “ban” is lazy, to say the least, and nonsensical in that lottery is considered acceptable. 

A swing and a miss

Bateson’s comment piece said: “Our concern lies with the pervasive nature of retargeted digital advertisements that trap a portion of sports fans in an addictive cycle.” 

OK, ban those then. Work with your advertisers and say “look, this isn’t what we want in the newspaper and here’s why”. Don’t take the money of people that won’t comply. Start a conversation, have a dialogue. Let’s be grownups about the conversation.

Except the next paragraphs starts “By taking a stand against gambling advertising”. Hang on, I can fix that. “By taking a selective stand against gambling advertising”. There you go. Invoice in the post. 

It continues: “The Guardian is committed to responsible advertising practices that will have a positive impact on society.” And they could so easily have actually done something with this. They could have held the industry to higher standards. They could have created change.

Another wasted opportunity thanks to a narrow field of vision, dressed up as a platform taking some moral high ground when it’s doing nothing of the sort. 

The LFP’s disciplinary committee announced the sanctions after the players were ruled to have violated LFP and French Football Federation (FFF) regulations during the 2021-22 season.

Both the LFP and FFF have in place a blanket ban on professional players betting on football. The ban applies to French players and footballers from overseas playing their club football in France.

This was the fourteenth occasion sanctions were issued since the LFP began working with national gambling regulator l’Autorité Nationale des Jeux (ANJ) in the 2013-14 season. LFP did not disclose each individual breach of regulations.

Suspensions and fines 

Among the highest profile names on the list of sanctioned footballers was Wahbi Khazri, a Tunisian international who players for Montpellier in Ligue 1. Khazri was ordered to pay a fine of €3,000 (£2,562/$3,262) for his breach of regulations.

Nantes midfielder Ludovic Blas was also among the sanctioned players. Blas, who has made more than 235 appearances playing across Ligue 1 and Ligue 2, was handed a €2,000 fine.

Mathis Ansar of Chamois Niortais, which in the 2022-23 season was relegated from Ligue 2, was handed the toughest sanction. Ansar will serve a three-game suspension, with a further three-game ban suspended, as well as pay a fine.

Souleymane Cisse, Antoine Dana and Evan Huriez will be suspended for two games, with further four-game bans suspended. Each player will also pay a €500 fine.

Two-game suspensions, plus a suspended two-game ban and €1,000 suspended fine, were issued to another seven players. These included Kevin Boma, Djibril Lamego, Eliot Pasture and Alexandre Moliner.

All sanctions will be effective from 27 June.

Ivan Toney ban

The sanctions come after the English Football Association recently handed a length ban to Premier League player Toney.

The striker, who plays for Brentford, was initially banned for 11 months after he admitted 232 breaches of FA rule E8. This rule prohibits players, coaches and club employees from placing bets on football matches around the world.

However, this was rounded down to an eight-month ban after he was officially diagnosed with a gambling addiction.

Revealing details about the case, the FA’s Regulatory Commission said 50 of the breaches were “the most serious” of the total offences. These included 16 bets on his own team to win and 13 bets on his own team to lose.

A total of 15 bets for Toney to score and six bets for others to score were also among the most serious.

Under the terms of the new deal, Genius extends its official partnership with the data rights organisation to 2025. It also expands the agreement to cover new areas such as Genius’ data tracking product.

Genius’ 2019 deal with Football DataCo

The previous partnership – first established in 2019 – granted Genius the exclusive rights to collect, license and distribute official live betting data from the EPL to its sportsbook clients.

It also covers the English Football League (EFL) and Scottish Professional Football League (SPFL), to its sportsbook operator clients.   

The new deal, which is set to expire at the conclusion of the 2024-25 season, will see the business distribute data from over 4,000 UK football fixtures per season.

As the official tracking data and analytics partner to the EPL, Genius Sports also expanded its partnership to include the EFL Championship and Championship Play-Off matches through its AI-powered Second Spectrum solution.

Genius’ tracking systems are to be installed at all remaining Championship grounds as a result.

“Most popular league in world sport”

“The Premier League is the most popular league in world sport and Genius Sports has created the fastest, most accurate and secure feed on UK football to power first-class products for sportsbooks around the world,” Genius CEO Mark Locke said.

“We are delighted to extend our partnership to continue to power innovation and now to expand it to include our suite of AI-powered Second Spectrum Tracking Data technology for the EFL Championship as well as the Premier League.”

Football DataCo general manager Adrian Ford hailed Genius and Second Spectrum for providing “first class data” and innovative solutions for its stakeholders.

“The technology is improving all the time, extending the creative use of data to improve the presentation of English and Scottish football,” Ford added.

Data rights battle

Football DataCo’s decision to grant exclusive access to its data rights to Genius has in the past been criticised by the supplier’s competitors as being anti-competitive.

In 2020, sports data and technology business Sportradar initiated legal proceedings against Genius and the data rights business. It argued the partnership amounted to a violation of UK and European Union Competition Law.

The parties resolved the dispute in 2022. An out of court settlement saw Genius grant Sportradar a sublicence granting access to a delayed secondary feed.

During nearly three years closed to the world beyond mainland China, Macau casinos had little business but were incredibly busy.

The China Special Administrative Region’s six casino operators competed successfully for new 10-year gaming concessions carrying obligations to invest a collective US$14.7bn. That’s beyond their billions spent on additions and alterations to their properties despite the Covid cash crunch. Now Cotai is not just (again) the world’s most lucrative casino hub, but likely its most spectacular cluster of 25,000 guest rooms.

SJM Holdings honours founder Stanley Ho’s vision of Macau as Asia’s Monte Carlo with Grand Lisboa Palace, SJM’s first Cotai property. The HK$38bn (US$4.9bn), 1,872-room integrated resort melds a classic European grand hotel with Macau history that Ho helped write as casino monopoly kingpin from 1962 through Sands Macao’s opening in 2004.

Grand Lisboa Palace’s three hotel towers surround the elegant Jardim Secreto (Secret Garden), with Cantonese fine dining amid Suzhou silk paintings at Palace Garden and shopping at Cotai’s first supermarket. Grand Lisboa Hotel carries the east-meets-west theme with Macau heritage and Chinese artworks adorning contemporary comfort. Karl Lagerfeld and newly opened Palazzo Versace hotels place those fashion houses’ styles in a Chinese context. 

Sands China transformed Sands Cotai Central into Londoner, facing Venetian and Parisian with a replica Big Ben, multiple Winston Churchill statues and two new all-suite hotels. Londoner Hotel replaces the four-star Holiday Inn with updated classic British style, including invitation-only David Beckham suites, designed with the legendary English footballer. 

Rooms at the top

Londoner Court, plus Four Seasons Grand Suites across the street, are ultra high-end residential style products crafted from Sands’ abandoned ambition of selling Cotai condominiums. “Who would have ever thought that Sands China would one day be dominant in the VIP segment?” Intelligence Macau managing director Anthony Lawrance asks.

Historically, the Las Vegas Sands subsidiary focused on mass market. Large scale junket eradication with the arrests and convictions of Suncity head Alvin Chau then Tak Chun boss Levo Chan has erased Macau’s high roller paradigm, stripping operators’ high end security blanket. Junkets provided credit to mainland high rollers, even though gambling debts are not legally enforceable in China.

“The demise of junkets has affected the way the concessionaires do their business,” University of Macau business professor Desmond Lam says. “I feel it is a necessary step to build a healthy Macau gaming industry, which is not always seen as a socially positive livelihood by many in the mainland and internationally.”

High-end appeal

MGM Cotai extends its high-end appeal with Emerald Villas. On the mass side, its revamped, brighter gaming floor drives a 50%-plus market share boost.

MGM China’s first quarter mass revenue topped 2019 – market-wide mass revenue reached 65% of Q1 2019 – and MGM Cotai posted record EBITDA. “MGM was able to take 15% market shares on a group level in Q1 2023 (both total GGR and mass GGR), significantly ahead of the 9-10% shares it used to have in 2019,” JP Morgan head of Asia gaming research DS Kim writes, with share gains holding steady.

In April, Melco Entertainment added the 338-room Epic Tower at Studio City, the Cotai property closest to the border gate from Hengqin island. A new indoor water park expands the movie-themed resort’s non-gaming credits.

Galaxy Entertainment soft opened its convention centre and 16,000-seat arena, Macau’s largest. On the lodging side, Galaxy will soon debut MICE-focused Andaz plus Raffles in a stunning golden tower. 

Premium mass mantra

“We have the hardware and ability to bring in world class events which will be welcomed by overseas customers,” Galaxy writes to iGaming Business. “Many of these new visitors are premium mass tourists who, from our experience, are more likely to spend and consume a wider array of products and lifestyle experiences.”

That’s just what authorities in Macau and Beijing want. The new gaming law and concession agreements specify that Macau operators must expand non-gaming revenue and seek more customers from beyond mainland China. Those official intentions gain bite amid the junket crackdown and moves to curb outbound money transfers from China they often facilitated.

“If IRs do not make concrete, tangible actions to diversify, there may be serious implications, such as reduction in table games, electronic games and potential risk to their gaming licence,” Murray International chairman, Niall Murray, says.

Morgan Stanley analyst, Praveen Choudhary, in Hong Kong estimates first quarter VIP revenue at 16% of 2019 levels, with overall gross gaming revenue at 46%. After a Labor Day holiday week that beat expectations, JP Morgan estimates May VIP improved to 25% of 2019, with mass at 85% and overall at 60%.

Noting Macau’s recovery lags that of Las Vegas and Singapore, Choudhary and colleagues write, “[W]e expect Macau to catch up over the next few quarters.” However, the shortfall may persist amid Beijing’s anti-gaming policies, greater scrutiny on remaining small junket agents, plus lingering Covid fears.

“The big impact has been on money flow for very large scale players,” Hong Kong based gaming analyst Vitaly Umansky says. “Without the kind of the tools that existed at junkets’ disposal, a lot of that business is just not going to be replicable.”

Young hip trippers

Current mainland visitors to Macau seemingly skew younger with more family groups. Lawrance sees “better spending tourists. Xiaohongshu [China’s Instagram equivalent] influencers drive this traffic. It is a big change. They spend on non-gaming and gaming.”

First quarter numbers don’t reflect that yet. Gaming revenue ran 46% of 2019 totals, as did concessionaires’ property EBITDA. Through May, GGR totalled US$8.05bn, 52% of 2019, well short of post-Covid booms elsewhere.

“We think that China is using the permit process to change the demographics of the mainland visitors coming to Macau,” iGamiX Management and Consulting managing partner Ben Lee says. “We’re getting more families, more young people and fewer hardcore gamblers. Soon, if they haven’t already, the authorities will be using AI to do it automatically.”

“If you have a family that doesn’t spend any money, because they’re sitting in a tour bus, that’s not a good customer,” Umansky says. “If you have a family that stays at the Sheraton for two nights, and they spend money on food, and they do retail, and they do entertainment and gamble a little bit for fun, that can be a very high value customer for operators and for Macau. Those are both families but they’re very different families.”

The chicken and the egg 

Umansky adds: “There’s a misconception around the profitability of non-gaming; non-gaming can absolutely make money.” He notes two-thirds of Las Vegas revenue is non-gaming and hotels around the world are profitable without casinos.

“It’s the chicken and the egg problem,” Umansky says. “People come to Macau and spend a relatively short amount of time, partly because there’s much less to do.” And because stays are shorter, operators don’t invest in entertainment.

Scarcity of rooms – pre-Covid occupancy rates ran 90% – keeps hotel prices high, stays short and sabotages convention efforts. Umansky estimates Macau needs “thousands” of additional rooms to support a convention segment sufficient to create a virtuous circle of higher spending business travellers, longer stays and more demand for non-gaming products.

Two per cent milk

On the leisure side, China Outbound Tourism Research Institute CEO, Wolfgang Arlt, estimates mainland Chinese that can afford to spend a few hundred dollars daily for lodging and other activities for a multi-night Macau stay at 2% of the population. That’s 30 million people – half the size of France or the UK. So the emphasis on attracting visitors from beyond mainland China makes economic sense, along with being a political imperative.

The authorities’ carrot is a 5% reduction in Macau’s 40% gaming tax. Operators will likely use the tax discount to expand player rewards, not profits, Umansky says. Even then, Macau can’t match incentives from lower tax destinations such as Singapore, the Philippines, Korea and Cambodia. “The operators’ incentive to bring in foreigners is to check a box,” he concludes.

“Since 2002-03, Macau has been making efforts to bring in more international visitors. This is a tall order,” Lam, master of Lui Che Woo College, named for Galaxy’s chairman, says. “But our product package is much more comprehensive now compared to 2002.”

“Right now Macau is a very Chinese-oriented product relative to other gaming entertainment leisure markets around Asia,” Umansky says. “So if you are not ethnically Chinese, if you do not speak Chinese and you have an option to go to Singapore, to go to Vietnam, to go to Thailand, it may just be more conducive for you to go to those places.”

Weaning Macau

To advance official ambitions for Macau as a world centre of tourism and leisure concessionaires “must align their development and evolution with the overall aim of diversifying visitor source markets for the territory” according to Tourism Research Centre director Leonardo (Don) Dioko of Macau Institute for Tourism Studies (known by its Portuguese acronym IFTM).

“So much more needs doing, especially in manpower development, protecting labour rights and benefits, ensuring social justice and safety nets, and better treatment of human resources in hospitality, tourism, gaming and workers in the numerous supporting sectors.”

Dioko points out that Macau’s expulsion of foreign labour laid off during the pandemic, including many English speakers from the Philippines (gradually being replaced with mainland Chinese workers), sets back the “long-play game” to “wean Macau and its key industry actors off its current source market portfolio.” 

“Macau does not need to be an English-speaking friendly city in order to attract visitors from other countries,” Lam argues, citing Japan and Korea as popular destinations with limited English skills.

Direct approach

“MGTO’s priority markets to drive more visitation to the city are those with direct flights to the destination, such as Thailand, Malaysia, Singapore or Korea, as well as international visitors arriving in Hong Kong,” Macau’s government tourism office tells iGB, pitting Macau against Southeast Asia destinations. 

Macau International Airport and neighbouring Taipa ferry terminal are a short ride to Cotai resorts, but that’s where arrival joy ends. “The old ferry terminal on the peninsula [still a major entry point] is a disgrace,” Lawrance says. “The arrival experience at the Hong Kong-Zhuhai-Macau Bridge is a joke.”

The bridge connection to Macau from Hong Kong airport currently entails four separate buses and three passport checks.

Mainland, Macau and Hong Kong authorities had nearly three years of pandemic travel shutdown to smooth that path – and to enable multiple Macau entry for Chinese visitors from Hengqin, a stone’s throw from Cotai – but didn’t.

Officials also didn’t end Air Macau’s monopoly that hampers full-service international carriers preferred by business travellers, increase Macau’s paltry taxi count or lift the ban on Uber-type online ride services.

Accounting exercise

Concessionaires’ mandated US$14.7bn investment could present another chance to address these key issues. “The Macau SAR government set a clear direction for the sustainable long-term development of the industry, with eleven key focus areas to attract a broader range of international visitors,” Wynn Macau responds to an iGB inquiry about its specific steps to accommodate overseas guests.

Eleven priorities are as good as none. The investment mandate appears destined to devolve into an accounting exercise with few measurable of outcomes. Meanwhile, Macau lacks comprehensive efforts involving the gaming sector, public authorities and other stakeholders to address key issues including connectivity, workforce skills and headline attractions highlighting Macau as the world’s longest running laboratory of East meets West.

“The Macau government has no specialists or consultants with the experience or expertise necessary to guide concessionaires on investment or specific projects,” Murray says. “IRs are professional businesses. They will carefully research and develop appropriate non-gaming investment projects with the greatest potential for success and return on investment.”

“While key areas of needed infrastructure may appear to go unaddressed, the potential for unforeseeable innovations and improvements to Macau outweigh the negatives,” longtime Macau gaming executive Andy Choy says. “Besides, the government can always decide to address these needed large projects directly out of public funds.”

Don’t bet on it.

We’re missing Brandt Iden this week, but Brendan Bussmann is joined by iGB’s Robin Harrison for the conversation with the member of parliament for Shipley on the Gambling Act review.

The former chair of the All Party Parliamentary Group on Betting and Gaming dissects the white paper, its implications for the industry and for the punters.

Affordability under the spotlight

Davies delves into affordability checks, one of the most hotly debated elements of the Gambling Act white paper.

The MP warns of the potential impact on punters, a group he feels is being left out in the reform debate. 

He questions the practicality and potential consequences of new checks, including the potential impact on credit records and an individual’s finances. 

Questions for the Gambling Commission

Davies also shines a spotlight on the role of the Gambling Commission. He raises concerns about the regulator’s understanding of the industry. There’s a need for more education and better engagement between industry and regulators. 

But what does all this mean for GB gambling? Is the sector on a path to becoming a pariah industry?

Listen to the World Series of Politics on Apple Podcasts!

Tsars, Zen Casino, Zen Betting, Cleopatra Casino, Goodman Casino, Zoome Casino, Yabby Casino, Neon54, Rabona, 5Gringos, AlfCasino and 1RED were all deemed to be operating in the country illegally.

Each brand was ruled to have breached the Interactive Gambling Act 2001 by not having the relevant licences and approvals. As such, ACMA requested Australian internet service providers to block access to all the sites. 

The blocking orders mean 785 illegal gambling and affiliate websites have been blocked since ACMA made its first blocking request in November 2019.

In addition, more than 200 illegal services have pulled out of Australia since ACMA began enforcing new illegal offshore gambling rules in 2017.

Blockings and warnings

The latest series of blocking requests come after ACMA last month also ordered the blocking of Vave, Highway Casino and Online Casinos Australia.

The three sites were also found in breach of the Interactive Gambling Act 2001.

Also last month, ACMA issued a formal warning to Feral Holdings Limited after ruling the operator had been running its CS:GO Roll website in Australia illegally.

ACMA found CS:GO Roll was providing casino-style online games, which are illegal under the Interactive Gambling Act 2001 if games are played for money or anything else of value.

Players could deposit “skins” from video game Counter Strike: Global Offensive in exchange for in-game coins that could be used to gamble on casino-style games. Winnings were paid out in skins, which could be converted into real money using third-party platforms.

Feral Holdings’ CS:GO Roll website was withdrawn from Australia shortly after receiving the warning.

For the 12 months to 31 December, Better Collective now expects to post revenue between €315-€325m. This would imply year-on-year growth of between 17% and 21%.

This is an increase from the range of €305m-€315m set in April, which itself was upgraded from €290m-€300m following the acquisition of advertising company Skycon Limited.

The group also elected to raise earnings before interest, tax, depreciation and amortisation (EBITDA) before special items guidance to a range of €105m-€115m. This would mean a year-on-year jump of between 24% and 35%.

This was up from the €95m-€105m range set in April after the Skycon acquisition, with the initial guidance having been set at €90m-€100m.

Record breaking performance

Better Collective said it made the adjustments in the wake of a record first quarter, during which revenue reached an all-time high of €88m. This was 30% higher than in the same period in 2022.

EBITDA before special items was also up 44% year-on-year at €33m, while a trading update on April indicated growth of 40% heading into Q2.

Following a strong start to the year, the group said it carried momentum into Q2, highlighting better-than-expected performance from the Americas, media partnerships and sports win margin.

Long-term targets

Earlier this year, Better Collective also set out long-term financial targets for the four years to 2027, in line with its growth strategy.

Targets include revenue compound annual growth rate of greater than 20%, EBITDA margin before special items of 30%-40% and net debt to EBITDA below 3%.

The group also revealed that these targets would be based on the assumption that mergers and acquisitions would be solely financed by its own cash flow and debt.

Malta-based MKC had been operating the Betworld247 sports betting and casino site under its B2C gaming service licence. However, the regulatory decision means that it is no longer authorised to offer online gambling via this licence.

Setting out its decision, the MGA said MKC breached regulations 9(1)(c), (d), (i), (l) and 10(1)(a) of the Gaming Compliance and Enforcement Regulations.

Specific breaches included not making required licensing payments to the MGA and failure to meet other financial commitments related to its operations.

The regulator also flagged how MKC failed to meet commitments to customers in a timely manner but did not go into further detail.

“One of the grounds for suspension envisaged in regulation 9 arises and the Authority, in its sole discretion, determines that cancellation of the authorisation is the most appropriate measure,” the MGA said.

“[MKC] is thus no longer authorised to carry out any gaming operations and shall remove, with immediate effect, any reference to the authority and authorisation.”

Dutch cease and desist order

The licence cancellation comes after MKC was handed a cease and desist order by Dutch regulator Kansspelautoriteit (KSA) in September last year.

KSA authorised the penalty order following an investigation in which the site was shown to be available to Dutch consumers without the operator holding licences. KSA warned if MKC did not cease offering games of chance, it could face a penalty of €28,000 per week, up to a maximum of €84,000.

The order came after a KSA supervisor accessed the site on several occasions. The individual was able to create an account, make a deposit and gamble, with no technical measures to block Dutch consumers.

A player could set their location to Netherlands, with the site including a Dutch language option, but made no reference to Dutch addiction care specialists.

For the period from June 2021 to May 2022, the site drew 376,595 unique visits from Dutch consumers.

Liquor & Gaming NSW handed out the penalty notices after conducting 875 inspections of pubs and clubs in the state. The regulator also commenced three prosecutions.

The inspections – which were conducted in the first phase of Liquor & Gaming NSW’s “targeted compliance programme” – checked that venues were engaging in certain gambling harm minimisation measures.

Liquor & Gaming NSW’s executive director regulatory operations & enforcement, Jane Lin, said that, while the majority of venues were in compliance, inspectors are still finding “serious issues”.

Serious issues remaining

Pubs and clubs were often found to be in fact primarily gaming venues, for example only operating gambling areas, or putting the bar in the gaming room. Inspectors have also found that venues are placing ATMs in areas where gaming machines are located. This is in violation of the rules.

In some establishments, patrons needed to pass through a gaming room to access other parts of the venue.  

“Gaming harm-minimisation measures are designed to ensure a safe gaming industry and limit the harm that can be associated with gambling,” said Lin. “Failure to comply with these requirements carries penalties up to $5,500 and is grounds for disciplinary action.

“Our compliance programme is all about promoting a culture of safer gambling and protecting patrons and the wider community from problems associated with excessive gambling.”

The second phase of the programme will see a further 500 inspections take place at pubs and clubs throughout NSW. The regulator says that it will take a “zero-tolerance” approach to any breaches of the state’s responsible gaming rules.

 “Our inspectors will also be observing any gaming signage during the course of these inspections and will be happy to provide information and answer any questions venue operators may have about the signage ban which comes into force on 1 September,” said Lin.

Liquor & Gaming NSW warns venues on ATM practices

In the wake of the inspections, Liquor & Gaming NSW issued a warning to all venues in the state to ensure that they do not have any ATMs with credit access. This is in line with the Gaming Machines Act 2001 and followed the detection of two such machines at two separate Sydney locations.

The regulator ordered the Wentworth Hotel at Homebush to remove the credit card withdrawal function from an ATM on the premises. This followed a complaint from a customer who withdrew approximately AU$2,000 from a credit account for their gaming activities.

Liquor & Gaming NSW also issued a direction to the Earlwood Hotel to remove the credit card access from its machines. It also asked the venue to remove material on the ATM screen which promoted hotel gambling facilities.

Lin said that the regulator has been in contact with the gambling sector to ensure that venues are complying with its responsible gambling rules.

“These requirements are about limiting the harm that can be associated with gambling. Credit card restrictions are a fundamental measure that exists to stop people getting in over their head,” Lin said.

“We have escalated our enforcement approach to these requirements, including by prosecuting offences and issuing statutory directions or using other administrative remedies to address instances of non-compliance to keep our community safe. Inspectors are out and actively testing credit withdrawal functions at licensed premises.”

Research warns of late night pokies play

Earlier in the month, a NSW government-funded study was released which found a link between late-night play on electronic gaming machines and problem gambling.

The report concluded that people with gambling problems represented the majority of late-night poker machines players. The study also flagged that two-thirds of people using the machines between 2am and 8am experienced “significant” negative effects.