October 2024 – OPINIAO-PUBLICA24-7

Caesars Unloading LINQ Promenade for $275 Million

Caesars Entertainment (NASDAQ: CZR) announced that it is selling the LINQ Promenade on the Las Vegas Strip for $275 million as part of the gaming company’s ongoing debt reduction efforts.

A joint partnership comprised of TPG Real Estate and Acadia Realty Trust investment management platform is acquiring the collection of retail and boutiques located near the Caesars-operated LINQ Hotel. That casino resort is not part of the transaction, which is slated to close in the current quarter.

The sale of the LINQ Promenade represents an accretive, non-core asset sale that will accelerate our debt reduction goals. I want to thank all the team members and the tenants of the LINQ Promenade for their partnership over the last 10 years and wish them continued success,” said Caesars CEO Tom Reeg in a statement.

LINQ Promenade occupants include O’Sheas Pub Las Vegas, I Love Sugar, Virgil’s Real BBQ, and the Tilted Kilt Pub, among others.

Caesars LINQ Sale Not Surprising

Last month, Casino.org was the first outlet to highlight an analyst report noting Caesars could opt to sell LINQ Promenade as part of its broader capital-raising efforts, indicating today’s news wasn’t surprising, particularly when accounting for the promenade’s status as a non-gaming asset.

The transaction also jibes with comments made earlier this year by Reeg who said the gaming company would explore the sale of “non-core” assets. At that time, the chief executive officer did not elaborate on how such transactions could unfold, but in the months since, Caesars has made good on that talk.

In August, Caesars announced the sale of the intellectual property rights associated with the World Series of Poker (WSOP) to investment firm NSUS Group Inc. for $500 million. That transaction is now finalized with the seller announcing today that it received the initial $250 million payment from the buyer. The remainder is due in five years.

“Caesars retains the right from NSUS to host the flagship WSOP live tournament series at its Las Vegas casinos for the next 20 years and will receive a license from NSUS to continue operating its recently upgraded WSOP Online real-money poker business in Nevada, New Jersey, Michigan, and Pennsylvania for the foreseeable future but will otherwise be restricted from operating online peer-to-peer real-money poker operations for a specified period of time and subject to certain exceptions,” said Caesars in a separate statement.

LINQ Sale Matters to Debt-Cutting Plan

The influx of $250 million from the WSOP sale and another $275 million via the LINQ Promenade deal that should arrive before the end of the year means Caesars is bringing in more than $500 million via those two transactions.

That’s important because while the casino giant has been diligent in its debt reduction efforts, its total outstanding liabilities stood at $12.69 billion at the end of the third quarter, up from $12.43 billion at the end of last year.

That’s likely the result of the operator’s capital spending cycle, which is now at its end. Caesars had $802 million in cash on hand and $124 million in restricted cash at the end of September.

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Oakland A’s Mulling Stake Sale at $2B Valuation

Ahead of the team’s move to Las Vegas, the soon-to-be former Oakland Athletics (A’s) are rumored to be considering the sale of a minority interest in the franchise.

Unidentified sources familiar with the matter told The New York Post that owner John Fisher is looking to sell as much as 25% of the team for $500 million, implying the Major League Baseball (MLB) club is worth $2 billion. That’s significantly higher than the $1.2 billion Forbes said the team was worth before the start of the current season. At $1 billion, only the Miami Marlins were worth less than the A’s.

The rumor surfaced a week after the team and Bally’s released renderings for a stadium and casino hotel project at the site formerly occupied by the Tropicana on the Las Vegas Strip. The $1.5 billion ballpark will occupy nine of the property’s 35 acres and construction is slated to start in the second quarter of 2025.

The A’s will play in Sacramento for the 2025 through 2027 seasons, with 2028 expected to be the club’s first in Las Vegas.

A’s Stake Sale Prices in Vegas Move

If the speculation that Fisher is trying to sell a 25% interest in the A’s at a $2 billion valuation proves accurate, he’s attempting to leverage the team’s move to Las Vegas. Essentially, he’s hoping potential investors will agree that the team’s value will increase upon moving to Sin City.

There is some precedent for the Oakland-to-Las Vegas move being a value creator for professional teams. In 2019 — the NFL team’s last in Oakland — the Raiders were valued at $2.9 billion, good for the 12^th spot among the league’s 32 teams. That valuation has since surged to $6.7 billion, placing the Raiders sixth in the NFL. Last year, the Raiders generated $780 million in revenue, the third-highest tally in the league.

Raiders owner Mark Davis has capitalized on the team’s soaring value, recently selling a 5% stake to legendary quarterback Tom Brady at an estimated price tag of $335 million.

As The Post reported, potential sales of the Chicago White Sox and the Minnesota Twins — both of which could command up to $2 billion — could affect Fisher’s efforts to monetize a portion of the A’s.

$500M an Interesting Figure

It’s not yet clear if the following factors are related, but the dots are easy to connect. Fisher is reportedly attempting to sell up to $500 million worth of his baseball team, and that is the amount the club needs to finalize its $1.1 billion Las Vegas stadium financing obligation.

Gaming and Leisure Properties, which owns the property on which the stadium will reside, has committed to providing some financing for the project.

From where Bally’s will obtain capital to build a new integrated resort next to the stadium isn’t yet clear. The regional casino operator is focusing on completing its permanent Chicago venue, but has been consistent in its messaging regarding a desire to maintain a long-term presence in Las Vegas.

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CFTC Promises Scrutiny of Election Wagering Sites

The Commodities and Futures Trading Commission (CFTC) is pledging to diligently monitor platforms offering financial contracts tied to political outcomes as Election Day nears.

CFTC political betting wagering election odds — The headquarters of the US Commodity Futures Trading Commission in Washington, DC. The commission is promising to police election betting markets. (Image: Shutterstock)

The commission, which is engaged in a lengthy legal spat with financial exchange and prediction platform Kalshi, views itself as the sheriff in a wagering arena it considers to be the Wild West. Speaking from the Bloomberg Global Regulatory Forum in New York on Tuesday, Chairman Rostin Behnam told Bloomberg Television he sees the CFTC as an “elections cop.”

We’ll pursue any action, as we do in any part of our markets,” he told the news outlet.

Behnam’s comments arrived a week after a federal appeals court in Washington DC fast-tracked a complaint by the commission seeking to block Kalshi from offering bets on US elections.

CFTC Already Polices Kalshi

Benham didn’t get into specifics regarding how the CFTC will step up its law enforcement-esque efforts pertaining to election markets, but the commission is already the regulator to which Kalshi and rival PredicIt answer.

The reason for the CFTC holding regulatory sway over those companies is simple. Unlike a traditional sportsbook operator that books bets based directly on an event, Kalshi and PredicIt allow clients to purchase what are akin to futures contracts. Futures are considered derivatives and the CFTC is the regulator for those assets.

Regulated US sportsbooks are prohibited from booking bets on elections. However, Kalshi and PredicIt aren’t flouting US laws. The use of derivatives helps, as does the fact these platforms and others like them aren’t election-only betting venues.

For example, Kalshi clients can currently use the site to “bet” on economic data, stock index moves, and even pop culture events such as award shows. The site even offers a slew of bets related to Taylor Swift.

CFTC Policing Efforts Could Be Difficult

The extent to which the CFTC can monitor election-related betting could hinge on a court ruling that may or may not be happening prior to Election Day on November 5. Additionally, activity on Kalshi and PredicIt is likely to increase as Election Day draws closer and could continue swelling if various results aren’t known on election night. Such a volume uptick would be a natural response by participants in those markets, not an implication of something nefarious.

In some circles, there are concerns about unregulated election wagering offerings, such as Polymarket. That crypto-based exchange has seen a surge in new account openings due to this being a presidential election year. Like its regulated rivals, Polymarket offers an expansive menu of wagering options, not just political bets.

Some critics speculate that foreign money piling into election betting markets could color US voters’ opinions of the presidential race. As of this writing, Kalshi shows former President Donald Trump (R) with a 60% chance of winning, or a 20-point lead over Vice President Kamala Harris (D).

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Golden Entertainment Could Mull Sale-Leaseback on Unidentified Casino

Golden Entertainment (NASDAQ: GDEN) could consider selling and leasing back one of its casinos as an avenue for raising cash.

Deutsche Bank analyst Carlo Santarelli put forth that theory in a new report to clients, noting there’s “rising probability” that Golden engages in a sale-leaseback on one of its casinos. The analyst did not speculate as to which gaming venue Golden could consider selling. Currently, the Las Vegas-based gaming company owns all of the real estate on which its eight casino hotels reside. Three of those venues are located in Las Vegas with another trio in Pahrump, Nevada and two more in Laughlin.

In terms of property value, The Strat is undoubtedly Golden venue that would fetch the highest price in a sale and likely be the one of most interest to a buyer. That casino resort isn’t officially on the Las Vegas Strip, but it’s close.

Santarelli didn’t speculate on a timeline for such a deal materializing nor did he hypothesize as to what company could be Golden’s real estate partner on a sale-leaseback. The operator reports third-quarter earnings on Nov. 7 and it’s possible the rumor is addressed at that time.

Selling Casino Could Boost Golden Shares

Amid investor concern that persistent inflation and high interest rates are weighing on the lower end of Golden’s casino customer base and its tavern business, the stock has struggled mightily this year, shedding nearly 23% while the Russell 2000 Index is higher by 12.43%.

Of late, analysts’ earnings and revenue revisions on Golden have been largely bearish, adding pressure on the stock and potentially fanning the flames of speculation regarding a transaction that could renew the bull case.

We believe our updated forecasts account for what we expect to be relatively stable trends in the key segments, adjusted for seasonality, which include a moderation of same-store top-line declines as we move into the fourth quarter,” Santarelli observed. “That said, we acknowledge that the Golden story of late has been one of predominantly negative estimate revisions, which in our view has likely led to more speculation around strategic action.”

The analyst lowered his earnings forecast on Golden, but reiterated a “buy” rating on the stock. He added that the depressed valuation on the shares could increase the probability of the operator seeking a transaction that creates value for investors.

How Casino Sale Could Affect Golden

Without knowing the property Golden would sell, cap rates and tax implications, modeling for the financial impact to the operator is difficult, but Santarelli gave it a go. He said in a sale-leaseback, Golden would absorb $87 million in annual rent costs and have $130 million in cash, including proceeds from the deal, by the end of next year.

It can be argued that $87 million in rent assumes either The Strat is the venue Golden will sell or that the operator could engage in sale-leasebacks on multiple properties.

Golden could also consider finally making a decision on the Colorado Belle in Laughlin, which has been closed since 2020. Rumors abound regarding the fate of that property, but the operator hasn’t made any public announcements about its plans for it.

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Sports Betting M&A to Be Driven by New Products, Tech, Says Expert

Mergers and acquisitions activity in the North American sports betting industry has been brisk this year with operators making buys to add technology and exposure to new arenas.

betting stocks — The famous charging bull on Wall Street. Investment bankers could be busy with sports betting mergers and acquisitions in 2025. (Image: *Reuters*)

At least one expert believes a similar cadence will play out in 2025 as online sportsbook companies look to bolster customer acquisition and retention tools and tech stacks while forging further into new growth frontiers, such as internet lottery. As one example of that theme, DraftKings (NASDAQ: DKNG) said in February it paid $750 million for lottery provider Jackpocket.

We expect betting operators to display a similar mix of M&A motivations in the next 12 months with interest in five key areas,” said Chris Grove, partner emeritus at Eilers & Krejcik Gaming (EKG), at the Global Gaming Expo (G2E) earlier this week. “We might see interest in customer relationship management tech and other back-office capabilities. Free-to-play games designed to feed acquisition funnels are another category to watch.”

He added that there’s unlikely to be much movement in 2025 in terms of sports betting/media combinations because prior deals haven’t delivered for buyers.

Parlays Could Drive Sports Betting M&A

The need for operators to deepen and improve their parlay offerings, particularly those of the same-game and in-game variety, could be another catalyst that drives 2025 consolidation.

“Anything that allows an operator to price better, especially for parlays, will be of interest. Despite the rash of recent acquisitions, there’s still plenty in the market (GiG, Huddle, Kambi, Kero, nVenue, Swish),” added Grove.

There’s been evidence of such moves this year, including DraftKings’ August announcement of its purchase of Simplbet. Other operators are seen as needing to strengthen parlay menus, indicating related deal-making could be at play in 2025.

Grove also pointed out that iGaming could be fertile territory for acquisitions next year, but buyers are more apt to consider adding technology providers rather than purchasing direct rivals in the name of adding market share.

Compliance, Payments Could Also Spark M&A

Compliance and regulatory issues, including cybersecurity and geolocation, are facts of life for online sportsbook operators and pricey ones at that. Reduction of those costs could compel gaming companies to pursue related acquisitions, but EKG’s Grove noted “economics can be tricky.”

As for payments, operators would undoubtedly like to realize cost savings on that front and they could use consolidation to accomplish that objective, but that theme is likely further out than 2025.

“It’s a massive cost center and a critical part of the user experience, but it’s also a logistical and liability nightmare in the US,” concluded Grove. “FanDuel, for instance, spends 6% of NGR on payment costs. We believe the in-housing of some part of the payments stack — maybe even most of it — is all but inevitable, but we are bearish about any of that happening in the short term.”

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IRS Cracks Down on $13B in Unreported Gambling Winnings

After an audit revealed that Uncle Sam may have let more than $1 billion in income tax on recent casino jackpots go uncollected, the IRS is cracking down on the oversight. And one of Las Vegas’ most recognizable casino gamblers finds himself in the crackdown’s crosshairs.

The IRS form W-2G is issued for every slot jackpot of $1,200 or more or every Keno win of $1,500 or more. (Image: *Casino.org*)

The news was delivered by this Sept. 30 report from the independent IRS watchdog group Treasury Inspector General for Tax Administration (TIGTA). It found that 148,908 Americans with gambling winnings exceeding $15,000 failed to file tax returns between 2018 and 2020.

Their winnings exceeded $13.2 billion dollars, making the unpaid taxes just north of $1.4 billion.

TIGTA analyzed the W-2G forms generated by casinos when gamblers hit slot jackpots of $1,200 or more or Keno wins of $1,500 or more. Its report noted that 103,000 of these delinquent winners were never issued notices or faced with efforts to bring them into compliance.

In a response to the report, the IRS wrote, “We agree with the recommendation,” vowing to begin enforcement actions.

The Internal Revenue Code states that gains from gambling are fully taxable and must be reported as income by individual taxpayers. Gambling losses may be deducted for filers itemizing up to the amount of their winnings.

Other Findings

Among the TIGTA report’s other concerns were hundreds of W-2Gs that were filed by casinos without the required taxpayer identification numbers. This makes it extremely difficult for the IRS to trace the winnings to its recipients.

Also, the watchdog group noted, the IRS has too few processes in place to identify noncompliance with excise taxes by gambling operators, particularly in the rapidly growing online sports-betting market.

The IRS also agreed with the latter recommendation. However, it disputed the significance of the W-2Gs without taxpayer IDs, since the number was small.

“While this population may not be large in absolute terms, we believe that the amount of backup withholding that should have been withheld is significant,” TIGTA responded.

Code Adjustments

Form W-2G’s Summary of Withholding Requirements doesn’t currently single out earnings from sports gambling or iGaming. Sports betting is among the fastest-growing sectors of the U.S. gaming industry, with retail and/or online sportsbooks regulated in 38 states and Washington, D.C.

Treasury IRS gambling sports betting — (Image: IRS.gov)

The IRS has obliged to specifically inform taxpayers of their filing requirements for sports betting and online casino gambling winnings.

“Form W-2G has not evolved with the growth of the gambling industry,” TIGTA’s report read. “For example, the wager codes on Form W-2G include only nine specific types of gambling activities, which do not include a wager code for sports betting. If there was a wager code specifically for sports betting, the IRS could use this information to identify potential non-filers and under-reporters.”

The Treasury estimates that U.S. taxpayers underpaid their federal taxes by $688 billion in 2021, with non-filers responsible for 11% of the unreceived funds. The IRS’ Failure to File penalty is 5% of the unpaid taxes for each month or part of a month that a tax return is late. The maximum penalty is 25% of the unpaid tax.

The IRS typically reserves criminal prosecution for exceptional cases where massive fraud and tax evasion evidence is rampant.

Vital Error

Scott Roeben, founder of Casino.org’s own *Vital Vegas* blog. (Image: Scott Roeben/*Vital Vegas*)

Last month, Scott Roeben, founder of Casino.org’s own Vital Vegas, received an IRS audit letter regarding taxes on $100,000 in unreported W-2G income in 2022.

The letter gave him 30 days to respond with specific four-year-old documentation or “further steps” would ensue.

The only problem, Roeben says, is that he filed his 2022 tax return on time, with all gambling income reported.

“I filed everything properly,” he said. “I just had a large number of jackpots, so that triggered the audit, presumably.”

Roeben called the IRS’s campaign “selective persecution of casino patrons because of the stigma attached to gambling,” adding that it demonstrates “how out of touch the IRS is with the reality of gambling.”

“This is making people jump through hoops, spend money on tax professionals to help with their audits and reconsider a pursuit they enjoy,” he says, adding that, even in the case of tax cheats, “jackpots are far from the entire picture when it comes to gambling.

“It’s like saying passengers of the Titanic had an absolute blast for 2,070 miles.”

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Wynn Resorts Lands UAE’s First Casino License

Wynn Resorts (NASDAQ: WYNN) confirmed it has been granted the first commercial casino license in the history of the United Arab Emirates (UAE) and the Middle East at large, paving the way for Wynn Al Marjan Island to include a gaming venue.

A rendering of Wynn’s UAE casino hotel. The gaming company said UAE regulators approved its casino license — the first in the region’s history. (Image: 11 Prop/YouTube)

The Las Vegas-based gaming company made the announcement late Friday, noting the General Commercial Gaming Regulatory Authority (GCGRA), the UAE’s first gaming regulatory agency, approved a commercial gaming facility operator permit. The GCGRA, which was formed last year, hasn’t issued a statement regarding the Wynn approval, but the casino operator said it won the license after a “diligent and extensive review” by the regulatory body.

Wynn Resorts thanks the GCGRA for the confidence and trust the license grant signifies and is proud to be the recipient of the first commercial gaming facility license in the UAE,”

Located in Ras Al Khaimah, the $3.9 billion Wynn Al Marjan Island has been under construction for several months and is expected to open in early 2027. Development of the property is a partnership between the gaming company and RAK Hospitality Holding.

Wynn UAE Casino Could Reshape Gaming Industry

For decades, regulated gaming has been off limits in the Middle East, but recent developments indicated the UAE could break that thaw. Those include the formation of the GCGRA in 2023 and the July approval of a lottery license for an Abu Dhabi-based company.

Though its financial obligations for the project are less than $1 billion, Wynn rolled the dice on the UAE development by not knowing whether or not a casino license would ultimately be granted. Taking that risk was validated.

Over the long-term, it could prove to be a prescient move by Wynn because some analysts believe, at maturity, the UAE casino market could generate as much as $5 billion in annual gross gaming revenue (GGR). The emirates are attractive to gaming companies due to vast amount of oil wealth, the soaring number of high-net-worth residents, and the UAE’s status as one of the region’s prime tourist spots.

Additionally, viable global growth outlets are hard to come by in the gaming industry. For example, Macau appears unlikely to add more licensees and the Singapore duopoly is locked up close to another 30 years.

Wynn Will Soon Provide UAE Casino Update

Investors could soon gain more insight about Wynn’s UAE casino project because the company is holding an event for analysts and institutional investors on Tuesday, Oct. 8 at its namesake integrated resort on the Las Vegas Strip.

“Craig Billings, Chief Executive Officer, along with other members of the Wynn Resorts global leadership team will deliver presentations, including on the resort’s expected financial performance. The Analyst & Investor Update Meeting will commence at 11:30 a.m. Pacific Time and conclude at approximately 2:30 p.m. Pacific Time,” according to a statement from the gaming company.

When that invitation-only event was announced, analysts speculated it was a sign Wynn would be approved for a casino license in the UAE.

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Florida Gaming Regulators Seek Vendor to Help Develop Responsible Gaming Program

The Florida Gaming Control Commission (FGCC) is looking for a partner to help develop a program to prevent compulsive and addictive gambling in the Sunshine State.

Florida responsible gambling Seminole casino — Seminole Hard Rock Hotel & Casino in Hollywood, Fl. The Florida Gaming Control Commission is seeking a partner to develop a program to combat problem gambling in the Sunshine State. (Image: Seminole Hard Rock Hotel & Casino)

On Wednesday, the FGCC issued an Invitation to Negotiate (ITN), a competitive solicitation process that asks vendors to offer recommendations to the gaming regulatory as to how it might best achieve limiting gambling harms.

The gaming agency is seeking input on how to go about crafting responsible gaming protocols that companies engaged in the state’s gaming industry will need to include in their advertising materials. The FGCC additionally wants to create an educational and awareness campaign enlightening Floridians about their legal gambling options, the possible drawbacks of participating, and how to determine what is and isn’t legal gambling.

As the landscape of legal gaming and sports betting evolves in Florida, as well as illegal gambling facilities and sites, we recognize the need to have adaptable solutions and expansive options as part of our Compulsive or Addictive Gambling Prevention Program,” said Lou Trombetta, executive director of the Florida Gaming Control Commission. “This process will ensure that Floridians can benefit from innovative and comprehensive options, and that the selected vendor is able to help FGCC provide resources that reach all demographics.”

The FGCC is a five-member regulatory body that governs parimutuel wagering, cardrooms, and racino and jai alai slot facilities in Miami-Dade and Broward counties. The agency is additionally responsible for the oversight of tribal compacts. The FGCC does not regulate the Florida Lottery.

Expanded Gambling

The Seminole Tribe maintains a monopoly on slot machines and most house-banked table games outside the two counties mentioned where slots are allowed. The tribe, through its revised 2021 Class III gaming compact negotiated with Gov. Ron DeSantis (R), added the exclusive rights to sports betting, both in-person and online.

Along with sports betting, the 2021 compact authorized roulette and craps at the Seminoles’ six brick-and-mortar tribal casinos. As a result, gambling is more widespread in Florida than ever before.

“While many Floridians and visitors enjoy legal gaming and sports betting, offering robust resources and valuable services to those who may find themselves impulsively participating in these activities is highly important,” added Julie Brown, vice chair of the FGCC. “My fellow commissioners and I look forward to the results of this process and to provide progressive resources and scalable services in Florida that will have a clear impact.”

Safeguard Shortcomings

The FGCC initiative to establish a program to fight compulsive and addictive gambling comes after a prominent study found Florida to be lacking in responsible gaming standards.

Last month, the National Council on Problem Gambling (NCPG) and Vixio Regulatory Intelligence released a summary of findings on how legal sports betting states are living up to the NCPG’s Internet Responsible Gambling Standards. The study ranked Florida as among the least-compliant sports gambling states.

Vixio researchers found that the Seminole’s 2021 compact does not include a policy commitment to responsible gaming. The revenue-sharing agreement also does not mandate the tribe to train staff to promote responsible play.

The compact does require the tribe to make an annual donation of at least $250K to the research, education, and treatment of gambling-related harm.

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