August 1, 2018

S&P: Expanding casinos, sports betting unlikely long-term revenue driver

PHOTO | HBJ File
PHOTO | HBJ File
An outdoor shot of the Winners off-track betting parlor in Hartford, owned by Sportech.
HBJ File Photo
Gov. Dannel P. Malloy has said he is open to legalizing sports betting.

Developing new casinos and expanding sports betting in New England may provide a short-term revenue boost to states, but it's doubtful those economic gains will improve their long-term financial outlook, according to a major debt-rating agency.

In a report released Tuesday, S&P Global Ratings said new commercial casinos and expanded gaming in New England and the Mid-Atlantic may boost state gaming tax revenue, but those gains are unlikely to be sustained. One-time profits on new gaming licenses offer only a short-term revenue boost, while the added competition will drain market share from existing casinos.

"In the Northeast's saturated casino market, offering new gaming options may provide a comparative advantage to competition in neighboring states, but it's unlikely to have a significant effect on state tax revenues derived from gaming," S&P Credit Analyst Timothy Little said.

S&P's negative outlook on the prospect of expanding casinos and sports wagering in New England comes after the National Basketball Association (NBA) on Tuesday struck a gaming partnership with MGM Resorts International. The deal marks the first between a casino and a professional sports league.

The partnership was promoted by a U.S. Supreme Court ruling in May that paved the way for states other than Nevada to legalize sports betting, although it remains illegal in most states.

MGM, meantime, is set to open a new $960 million casino and entertainment complex in Springfield, Mass. on Aug. 24, but sports betting is still illegal there.

In May, Connecticut lawmakers ended their regular session without voting on a proposal that would have legalized sports betting in the state. Gov. Dannel P. Malloy has said he is open to legalizing sports betting.

Even if Connecticut lifts the prohibition on sports betting, S&P said it would likely require the state to negotiate terms with tribal casino operatorsFoxwoods Resort Casino and Mohegan Sun, which currently have a legal monopoly on gambling in the state.

Connecticut earned $623.4 million off gamblers in 2017, including $349.4 million from the Connecticut Lottery Corp. The state, meantime, recorded $270.7 million last year from its 25-percent cut of slot revenues at Foxwoods and Mohegan Sun.

Rhode Island became New England's first state to legalize sports betting at casinos, taxing bets at 51 percent, S&P said. The state expects tax revenue of $23.5 million in 2019, they said.

A CNN report contributed to this story

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