Calling bull
‘Sensationalist’ crypto GGR numbers called into question
On-chain analysis casts doubt on the $81.4bn crypto market estimate.
Penn appoints two of three new directors put forward by activist.
In +More: CFTC roundtable shocker, Genius ties up NCAA betting data deal.
The teardown: Caesars the subject of a new note from a new analyst.
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Numbers games
Over-estimation: Claims made in a Financial Times article last week that the crypto market is worth over $80bn in GGR have been called out by analysis which suggests the actual total is less than an eighth of that figure.
The FT article featured an estimate of $81.4bn in crypto-based GGR, which came from intelligence platform Yield Sec.
“It’s explosive growth everywhere,” Yield Sec CEO Ismail Vali was quoted as saying.
Stake in the ground: In response, on-chain analysis from crypto-native gambling sector analysts Tanzanite argued this was a wild over-estimation.
The only data point cited in the FT article was the $4.7bn of GGR reported by largely crypto-adjacent site Stake for 2024.
Yet, according to Tanzanite, Stake’s share of on-chain casino deposits is nearly 55%.
Chain of evidence: Looking at the data from 20 major crypto operators across the Ethereum, Solana, Tron and Binance networks, the Tanzanite team estimated the crypto gambling market is worth ~$10bn-$11bn.
This includes data for such well-known crypto-led sites as Roobet, the somewhat controversial BC.Game, Rollbit, Shuffle and the Yolo-owned offerings.
Using Stake’s publicly verifiable GGR-to-deposit ratio, Tanzanite estimated GGR across these names to be ~$8bn.
“Given Stake’s continued prominence and growth since 2022, Yield Sec’s $81.4bn GGR figure while Stake sits at $4.7bn seems increasingly implausible,” concluded the Tanzanite report.
Hit and myth: On LinkedIn, Alexis Zamboglou, now a crypto consultant and previously the CEO at Blockasset, said that unlike with fiat gambling it’s “relatively easy” to extract wallet data and deposit value/volume for the top crypto brands.
He accused Yield Sec of “using sensationalism to sell their platform."
All-seeing eye: In the FT he claimed the company’s tech allows it to “monitor all of the audience, all of their activity, all of the time across all forms of legal and illegal online gambling.”
In the air tonight: Well-placed crypto sector sources spoken to by E+M claimed the Yield Sec numbers were “plucked out of the air” and that their own estimation of crypto-adjacent GGR was upwards of $20bn. But much of this will in reality be fiat transactions.
That chimes with the view of Paul Leyland from Regulus, who suggested over the weekend that the market was worth $16bn-$20bn in GGR.
But he told E+M that estimates were tricky due to the opacity of the market. “Defining what is a crypto-gambling market is extremely complicated,” he said.
“For example, how do you treat someone who pays in fiat, but wins crypto. That would mean crypto would have a negative value footprint.”
The crypto sector source noted there was some confusion around the extent to which agents and sub-agents might be conducting business in crypto.
They added that the money is “still coming in via cash” in territories such as China and India.
The Tanzanite article noted it was harder to estimate revenues from hybrid operations, such as 1xBet, Dafabet, Bovada and Pinnacle, which are primarily fiat-focused but accept crypto deposits.
Fair use: Notably, Yield Sec ‘data’ has been cited by anti-gambling groups in recent lobbying efforts and in particular appears to have close ties with the Campaign for Fairer Gambling (CFG).
In February, the CFG cited Yield Sec data for its claim that three-quarters of all betting on the Super Bowl or $4.8bn would be done offshore.
In April, the CFG issued another press release claiming once again that the illegal online market was worth $66.6bn in GGR.
CFG strategic advisor Matt Zarb-Cousin is also a senior advisor for government and regulatory affairs for Yield Sec.
Call me, Ismail: E+M attempted to contact CEO Ismail Vali to answer questions about how his company comes to its data findings but did not receive a response.
Related reading: Why cashing out won’t be easy for Australia’s gambling billionaires.
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Penn’s partial cave
Two out of three ain’t bad: Late on Friday, Penn Entertainment announced it intends to nominate Johnny Hartnett and Carlos Ruisanchez to its board after discussions with activist investor HG Vora.
At the same time, Ron Naples has retired from the board with immediate effect while Barbara Shattuck Kohn and Saul Reibstein will not stand for reelection this year.
I think you forgot something: In January HG Vora put forward three nominations for the board as part of its attempt to influence strategy at the company. They included Hartnett, Ruisanchez and William Clifford, who was previously CFO at Gaming & Leisure Properties.
Hartnett is currently non-executive director at Superbet and previously was CEO.
Ruisanchez is co-founder of Sorelle Capital and previously CFO at Pinnacle Entertainment.
This ain’t over: However, the Penn statement would suggest HG Vora, which owns ~5% of the firm, is still willing to put its third candidate to a vote in the upcoming AGM in June.
“While we were unable to reach an agreement with HG Vora, we thank them for their input and look forward to continued engagement with all of our shareholders,” the Penn statement read.
Casting aspersions: The activist investor has been publicly critical of Penn’s management team and its strategy, particularly with regard to its online missteps. These include the Barstool Sportsbook misadventure and now the faltering progress with ESPN Bet.
Parag Vora, founder at the eponymous firm, said previously that Penn’s online strategy had been an “abject failure due to a pattern of overpaying, overpromising and not delivering.”
New position: In the statement accompanying the news, Penn said it looked forward to “benefitting” from Hartnett and Ruisanchez’s “fresh perspectives as we enter into a critical phase for the business.”
It added that the board “continues to believe there is significant opportunity for value creation,” particularly within the interactive business.
It noted that both Hartnett and Ruisanchez bring “critical expertise and experience” across both digital and retail.
Counting down: Penn will report its Q1 earnings on May 8 when it will be under pressure to show signs of progress with ESPN Bet.
Following comments during the Q4 earnings call that hinted at the potential exit strategy, analysts suggested the company might be willing to “walk away” when the three-year break clause comes into operation in 2026.
Earnings edit
Gaming & Leisure Properties
Backhanded compliment: Talking on the Gaming & Leisure Properties call on Friday, CEO Peter Carlino, previously CEO at Penn, said the “digital element aside, [Penn] is in a very strong position. They’ve got great properties.”
Last week, Penn also announced plans to replace its riverboat casino in Council Bluffs, Iowa with a new Hollywood-branded land-based property.
“I’m gratified, frankly, to see that they’re actually highly focused now on bricks and mortar again,” Carlino noted.
Chief development officer Steve Ladany added that operators GLP deals with were “starting to focus on the brick-and-mortar assets, and we think that’s a positive thing for our properties and our assets.”
Picking up on Boyd Gaming’s positive comments last week, Ladany said GLP’s tenants “continue to see a resilient customer base, they continue to see assets performing.”
Of more immediate concern to analysts is the troubled construction progress of Bally’s permanent facility in Chicago.
+More
Take private: The Ainsworth board has recommended investors accept an A$337m ($216m) offer from majority shareholder Novomatic to buy the remaining 47% of the company’s shares it doesn’t already own. The price is a 35% uplift on the previous prevailing share price and is ~7x multiple of Ainsworth’s 2024 EBITDA of A$48.2m.
Ball of confusion: The decision of the Commodity Futures Trading Commission to cancel at short notice its planned prediction markets roundtable has added an extra layer of uncertainty to an already complicated picture. See tomorrow’s Compliance+More.
Genius Sports has announced an extended deal with the NCAA, which now encompasses the sale of betting data to operators. Under the terms of the agreement, Genius will manage a new Authorized Gaming Licensee program that will provide sportsbooks with access to official NCAA data and NCAA marks.
Bragg Gaming said it will pay down $5m of the $7m of its outstanding debt as part of a refinancing agreement with its lenders, which includes its own MD Doug Fallon. The remaining stub is now due in June. The company said it will also seek to agree a revolving credit facility to replace the refinanced debt.
Marathon men: The London Marathon was run yesterday, but the pain is just the beginning for industry luminaries Rob Dowling and Simon Pilkington. The pair are running a further 180 miles this week all the way to Bristol in aid of Oliver’s Wish, the charity set up by Dowling in memory of his son. Those wishing to donate, click this JustGiving link. Please give generously.
The week ahead
BetMGM kicks off the week on Monday, the first of the big online operators to report on what has been another tumultuous quarter for hold. In February, when it published its 2024 figures, the company announced its guidance for 2025 with revenue estimated at $2.4bn-$2.5bn and adj. EBITDA at breakeven.
The prospects for Las Vegas will be front and center on Tuesday and Wednesday as Caesars Entertainment and MGM Resorts respectively report. Analysts will be seeking color on whether either company is seeing any adverse reaction among their consumers to the current macro uncertainties, with international travel likely to be a particular focus.
Truth and consequences: Whether Robinhood will feel it necessary to add much by way of comment on its prediction market offering when it reports on Wednesday is questionable, given recent developments and despite the launch of March Madness markets via a deal with Kalshi.
Technically rudderless, Entain reports on Tuesday but the suggestion is that Stella David, after once again stepping into the breach as interim CEO following the abrupt departure of Gavin Isaacs, could well be confirmed as the permanent replacement.
Also reporting this week: Betsson (Tues), Kambi, Rush Street, Evolution (Weds), VICI Properties, NorthStar Gaming (Thurs).
Shares watch
Shout from the top: Penn’s new board members will at least be joining a company whose share price isn’t completely bombed out after it enjoyed a 14% uplift for the week. However, the company is by no means out of the woods, down nearly 6% over the past month.
Penn led the mild renaissance of B&M related stocks as the worst of the tariff-induced recession fears faded.
The sector will also have been boosted by the ‘nothing to see here’ (paywall) comments on the consumer from Boyd Gaming this week, which itself enjoyed a 7% boost.
Ahead of earnings this week, Caesars Entertainment (helped by a Buy note – see below) and MGM Resorts were both up double-digits.
Race to the bottom: Less reassuring was the commentary from Churchill Downs’ Q1 earnings call last week when CEO Bill Carstanjen liberally used the word ‘hesitancy’ to describe its consumer behavior ahead of next weekend’s running of the Kentucky Derby.
It managed to pare back losses for the week to 12% after a 16% fall on Thursday.
Venture capital firm Yolo Investments manages in excess of €500m in capital across 100 exciting fintech, gaming and blockchain companies. The Yolo Investments' Gaming fund, regulated by the Guernsey Financial Services Commission, has taken positions in fast-growth suppliers and operators, including Dabble and Enteractive. Yolo Investments (yolo.io) wants to hear from readers of this newsletter. Get in touch with your pitch, or for a chat about innovative products which can plug into our investment ecosystem.
The teardown
Too negative: A sectoral debut from Texas Capital Securities saw the analysts start out with a Buy note on Caesars, suggesting that recent selling pressure is “overcompensating downside macro risks” and disregarding a variety of upside catalysts.
Since the pandemic, Caesars has been “handcuffed to recession fears,” the team wrote.
This despite accelerating free cash flow generation and rapid debt paydown.
Either/Or: Still, the team argued, the extent to which investors are shunning the stock may “force” a focus on Caesars’ unlocked digital value with two potential routes:
Either Caesars could pursue the sale of a minority position to “put a line in the sand,” showing value.
Or it could pursue a spin-off of a majority position with contractual obligations between both the land-based and digital to “continue to find/grow higher-value customers.”
Digital display: In terms of valuation, the Texas Capital team suggested Caesars’ long-term digital guidance of $500m of adj. EBITDA would equate to a valuation of ~$5.2bn, depending on the discount applied to the sector average digital sector multiple of 14.5x.
The analysts noted this is just shy of the current market cap for the whole company of $6.03bn.
The social dumpster
Back of a cigarette packet: Nigel Eccles weighs in on the Yield Sec/crypto debate. Explaining cricket: “No, if the ball pitches outside leg, it can not be LBW.” Pizza the action: There are two types of bettor on papacy prediction markets. ‘Horrible board’: Heartfelt thanks for enabling change at Penn.
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Upcoming earnings
Apr 28: BetMGM
Apr 29: Betsson, Caesars Entertainment, Entain
Apr 30: Kambi, MGM Resorts, Rush Street, Robinhood, Evolution
May 1: VICI Properties, NorthStar Gaming
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