Tom Reeg, CEO of Caesars Entertainment, told CNBC on Monday that the continued legalization of sports betting represents one of the greatest growth opportunities for the gaming industry in perhaps more than two decades.
"This is a tremendous opportunity. I would liken it to when states outside of Nevada and New Jersey started legalizing riverboat casinos in the 1990s," he said.
Reeg's comments came shortly after Disney-owned ESPN announced it had reached an agreement that would make Caesars a co-exclusive partner for ESPN's gambling link-outs through its sports betting partner William Hill. Caesars' shares, hurt in 2020 as a result of the coronavirus pandemic, closed more than 10% on Monday to $ 55.39 each.
"We believe there is a lot of money to be made here over time and we are seeing a lot of interest from non-gaming operators," Reeg said of legalized sports betting. "This ESPN deal is the latest proof of that."
As part of Monday's multi-year deal, William Hill's Caesars Sportsbook will also sponsor ESPN's fantasy sports products. Caesars is also the exclusive odds provider for ESPN. The two companies have worked together in the past. For example, last month ESPN opened a studio at Caesar's The LINQ Hotel.
Wall Street has also become increasingly interested in sports betting. Penn National Gaming's investment in Barstool Sports and the associated sports betting opportunities have generated a number of positive ratings from analysts in the past few weeks. Penn National shares are up 156.42% this year, trading at a new 52-week high of $ 65.54 apiece on Monday.
DraftKings, which also became an exclusive partner of ESPN for gambling link-outs on Monday, is up more than 170% since going public in April. In addition, DraftKings will now be ESPN's exclusive provider of daily fantasy sports.
Reeg said the fact that sports betting is still relatively new to legalization in more states could make rating the gaming industry difficult at the moment. "We haven't seen any growth opportunity in this area in a while, so it's an adjustment for analysts to look at a high-growth slice of a mature company," he said.
In May 2018, the Supreme Court passed federal law effectively making sports betting illegal in most states. According to the American Gaming Association, there are now 22 states as well as Washington D.C. that have legalized sports betting. Another seven have active legislation taking this into account as of August 17.
Given that states are facing significant revenue losses due to the Covid-19 pandemic, Reeg believes that sports betting could be viewed by U.S. lawmakers as a way to close some tax loopholes. In May, Penn National CEO Jay Snowden offered a similar review to CNBC.
"We are in the very early stages of legalizing sports betting," Reeg said on Monday. "I would expect states with budget problems related to the post-Covid era to view sports and online as a means of increasing tax revenue."