The brutal truth

There can be ‘no sugarcoating’ Penn’s failure with ESPN Bet

Jun 25, 2025

Penn could soon signal intention to halt ESPN Bet partnership, suggest analysts.
New Jersey tax increase will cause at least $170m of extra costs for top operators.
Betr contests PointsBet Mixi vote outcome.
In +More: Hacksaw Gaming floats today.
Venture playground: Wager Games in focus.

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Epic fail

The bitterest pill: Penn Entertainment’s ESPN Bet experiment has “fallen short of expectations” and there is “no sugarcoating” the failure in terms of market share, according to JP Morgan.

The team noted ESPN Bet has seen its market share fall from ~5% in Q325 to ~3% currently.
They added that in that time the operation has racked up losses of ~$922m.

Wave the white flag: Such is the extent of the failure JP Morgan argued that, instead of being aggressive with its marketing efforts during the start to the NFL season in just two months, Penn should instead “start signaling intent to wind down the ESPN partnership over the next few months.”

Recall, at the time of Penn’s Q1 earnings, CEO Jay Snowden admitted ESPN Bet was “not on course.”
This led to speculation that the company might invoke the break clause open to each partner on the three-year anniversary of the deal being signed in August 2023.

#awks: The analyst commentary comes at an awkward time for Penn Entertainment given the recency of the proxy fight with activist investor HG Vora over board seats, where the final outcome at this point remains inconclusive.

Two of HG Vora’s original nominees, Johnny Hartnett and Carlos Ruisanchez, were duly voted onto the board but the fate of the third, William Clifford, remains unclear.

Isn’t it ironic: The irony of the JP Morgan initiation note is that the team are actually recommending Penn, arguing its $1bn pipeline of new B&M projects slated to open over the next two years could provide an upside catalyst.

The team also noted that in terms of online Penn can still fall back on a “lucrative” stream of fees.
They added that the multiple shareholder activists involved with Penn should also be viewed as a positive.

Taxing times

Game of risk: Overall, JP Morgan sees the gaming sector as being one that is, appropriately enough, “rife with risks” but that has the potential for high rewards.

They suggested B&M gaming faces macro uncertainty, while digital is navigating regulatory threats – particularly from higher taxes – and the appetite for China-exposed stocks in Macau is “tepid.”

Let’s meet in the middle: The note came out a day before the news that New Jersey Governor Phil Murphy and the state legislature had agreed a compromise tax hike to just below 20% for both OSB and iCasino.

This compares with the original proposal of 25% advanced by the governor and the current rate of 13% for OSB and 15% for iCasino.

Let’s not go overboard: Truist made some quick back of the envelope calculations to suggest the increase was “manageable” compared to the recent news from Illinois where a new 50% top rate will come into force in July.

The team said mitigation would be possible through “promo reductions alone.”
“We don’t see the need for any mitigation strategies beyond promos,” they added.

By the numbers: By the reckoning of the analysts, based on the LTM figures, FanDuel would have been the worst hit with $67m of increased costs. DraftKings would have faced a $56m increase in costs, while BetMGM would have been hit by $27m of extra tax expense.

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PointsBet vote

Contested outcome: The bitter fight for PointsBet has yet to be resolved despite PointsBet announcing the Mixi bid had been accepted. In spite of PointsBet saying the vote to accept the scheme of arrangement was “carried by the requisite majorities" of shareholders, Betr has counter-claimed that PointsBet “impermissibly excluded” its own vote against.

Recall, Betr owns 20% of PointsBet shares. A majority of 50.1% of all shareholder votes was needed for the Mixi offer to be accepted.
Betr said it expects a recount to be conducted immediately and for its vote to be included.

Hill to climb: Earlier this week, PointsBet appeared to indicate it was facing an uphill battle to gain the acceptances needed, saying the early indications were that the requisite majority would not be achieved based on the proxies received.

He said, she said: See Monday’s Earnings Extra edition (PRO subscribers only) for a summary of the tit-fot-tat exchanges.

Betr said today that it would challenge the vote in court tomorrow if its votes are not included in the count. The company added that in the interim it would prepare to put its unconditional all-share offer to PointsBet shareholders.

Investors were not convinced, however, and sent Betr shares down nearly 9% in trading in Sydney today.

+More

HACK and forth: Today, Wednesday, is games and RGS supplier Hacksaw Gaming’s first day of trading on the Nasdaq Stockholm, as shareholders successfully sold 17% of the stock at SEK77 a pop, worth ~SEK3.85bn or €352m and leaving the business valued at ~SEK22bn or €2bn. The company will trade under the symbol HACK.
Crypto exposure: See the Earnings Extra from June 17 on what was in the Hacksaw IPO prospectus.
Opening of a fridge: FanDuel has cut the ribbon on its new HQ in the Flatiron District in Manhattan, with New York state Senator Joe Addabbo in attendance alongside FanDuel CEO Amy Howe.

Earnings extra – FDJ United

The premier crew: FDJ United unveiled its strategic plan at yesterday’s Capital Markets Day, which highlighted its ambition to become the leading sustainable lottery, betting and gaming operator in Europe by 2028.
See yesterday’s Earnings Extra edition (PRO subscribers only).

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Venture playground

In focus – Wager Games

Who are you? Wager Games is a Silicon Valley-based B2B sports-betting software provider that provides short-form content, which co-founder Kelson Quan says can provide a plug-in that can help “transform the front end of sports betting into a social, content experience.”

What’s the big idea? Wager Games is attempting to cut through what the company sees as the tax-heavy, spreadsheet-like presentation of current sportsbook offerings, which Quan says can be intimidating to newer users as well as static and bland for existing players.

“Long-time and new users have complained about the front end of sports betting looking like an Excel spreadsheet,” says Quan.
“It is an experience that hasn’t really changed in 20 years.”

He says Wager Games’ vision is to change that and “transform it into a modern experience that millennials and Gen Z expect.”

“Something that is communal, social, content-driven and interactive. Our service is an all encompassing plugin that transforms the front-end experience with social and content.”

To this end, the company says it intends to build the largest network in the world of media, affiliate and content creator content. “Wager Games will be the distribution hub to bring it inside the platform where the transactions are taking place,” Quan adds.

Funding backgrounder: Wager Games has raised “small angel rounds” and is semi-bootstrapped.

Growth company news

Betty is now an official partner of the Toronto Maple Leafs and Toronto Raptors, in a deal the company said “reflects a shared commitment to elevating the fan experience through safe, responsible and entertaining digital engagement.”

Sports-betting and iGaming developer The Unit has been chosen by the developer of a new amateur golf app called ParUp to work on providing social-betting features and gamifying the group golf UX in future iterations of its rollout.

F2P games provider Incentive Games has announced the launch of a RMG division called Incentive Studios. Founder and CEO John Gordon said the company would be bringing a “fresh spin on popular game variants like Crash, Tower and Arcade.” The first raft of games will launch in Q3.

Xanada Investments has announced via LinkedIn that it has invested an undisclosed sum in B2B sweepstakes platform provider and games aggregator Sweepium. Xanada said the company supports over 80 games providers and it has a white-label payments arrangement with a US bank.

Tark attack: An Estonian-based provider of AI-driven customer service for online casino operators called Tugi Tark has emerged from stealth mode with its official market launch. The company said its offering can streamline the player experience and free up human staff to focus on higher-value tasks.

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