DAN HAAR

Sportech eyes sports bet­ting for state

Connecticut Post (Sunday) - - Front Page - DAN HAAR

Tim Carey, pres­i­dent of the Hawthorne Race Course just out­side of Chicago, knows plenty about the horse rac­ing pari- mutuel busi­ness. His fam­ily has owned the track for 109 years.

Now he’s about to learn a lot more about sports bet­ting, with a trip to Stam­ford next week. His host: Sportech PLC, which owns the 16 off- track bet­ting lo­ca­tions in Con­necti­cut and de­liv­ers back­bone tech­nol­ogy, in­clud­ing bet­ting ter­mi­nals, to 90 race tracks and OTB oper- ators in 37 states.

Like Carey, its cus­tomer, Sportech — with its Amer­i­can head­quar­ters in New Haven — is look­ing to jump into sports bet­ting now that the U. S. Supreme Court has struck down a law pro­hibit­ing states from sanc­tion­ing wa­gers on ball­games.

Carey is among more than two dozen cus­tomers, reg­u­la­tors and law­mak­ers set to take part in a one- day crash course on sports bet­ting, fol­lowed by a night at Sportech’s mar­quee lo­ca­tion, Bobby V’s Sports Bar and Restau­rant. In Illi­nois, as in Con­necti­cut, leg­is­la­tors are still just talk­ing about it, but the gold rush is on, as states from coast to coast will adopt sports wa­ger­ing quickly.

“It is real and I think it has a good shot,” said Carey, whose race course of­fers both thor­ough­breds and trot­ters, at­tract­ing 22,000 fans and bet­ters a year. “We’re hold­ing our own, but cer­tainly we need gam­ing.”

Con­necti­cut as a state can say the same thing, more or less. In Sportech, the state has a com­pany with vast ex­pe­ri­ence in the Euro­pean sports book mar­ket — which is a long­time fea­ture of main­stream, le­gal cul­ture, many times big­ger than Las Ve­gas.

“I guess it points to the

DNA that we have at the board level,” said CEO Andrew Gaughan.

Gaughan, 52, is from Toronto, where Sportech is now based, but the com­pany was in Lon­don and is traded pub­licly there. He spent five years run­ning the pre­de­ces­sor com­pany’s Euro­pean op­er­a­tions, work­ing in a rich sports bet­ting land­scape.

The head of the Con­necti­cut venues, Ted Tay­lor, hails from the United King­dom. The com­pany chair­man, Richard McGuire, was a li­censed sports book­maker in Scot­land start­ing at age 18, and an­other board mem­ber was a top ex­ec­u­tive for a dif­fer­ent firm with deep roots in sports bet­ting tech­nol­ogy world­wide.

Does all that help? Cul­tur­ally, yes, as the in­dus­try looks to take Europe’s wide­spread bet­ting habits in soc­cer ( yeah, right, it’s called foot­ball) along with ten­nis, hockey, For­mula 1 and hand­ball — and ap­ply it to the ma­jor U. S. sports.

Who would have guessed that only a dumb gaffe by the Cleve­land Cava­liers’ J. R. Smith would keep the team from steal­ing Game 1 on the road in the NBA Fi­nals? I don’t know, but le­gal bet­ting would have tight­ened the ten­sion for a lot of peo­ple, for bet­ter or worse.

The choice isn’t sports bet­ting or not; it’s whether to bring the huge black mar­ket into the tax­able, above­ground world of state pol­icy, and en­large it. That mar­ket is es­ti­mated to be $ 150 bil­lion in the United States, with per­haps $ 20 bil­lion in il­le­gal gross prof­its for the un­der­ground and off­shore book­mak­ers.

In Con­necti­cut, Gaughan es­ti­mates the un­der­ground sports bet­ting mar­ket at

$ 600 mil­lion, trans­lat­ing to per­haps $ 70 mil­lion in il­le­gal prof­its. That num­ber could in­crease sharply if the bets go main­stream.

Sportech is one of sev­eral play­ers vy­ing for po­si­tion­ing in Con­necti­cut, in­clud­ing the Mashan­tucket Pe­quot and Mo­he­gan tribes, which op­er­ate the casi­nos; and the quasi- pub­lic Con­necti­cut Lot­tery Corp.

The tribes may claim they have exclusive right to run sports bet­ting in the state un­der their his­toric com­pact. At­tor­ney Gen­eral Ge­orge Jepsen doesn’t see it that way, but un­der fed­eral law the tribes do have a right to a place at the ta­ble and Jepsen, along with Gov. Dan­nel P. Mal­loy, is ne­go­ti­at­ing with the tribes.

Sportech has the phys­i­cal venues across the state, which is what the Gen­eral Assem­bly will prob­a­bly want to see. And in its parimutuel busi­ness, Sportech al­ready of­fers on­line bet­ting to Con­necti­cut res­i­dents.

The com­pany’s strat­egy is to in­stall a sports bet­ting plat­form in its own venues in Con­necti­cut, and of­fer that to its race track and OTB cus­tomers around the coun­try. Con­necti­cut OTB venues, branded as Win­ners, rep­re­sent about half of the com­pany’s $ 100 mil­lion in world­wide rev­enues.

“We love the fact that we have the abil­ity to de­ploy the prod­uct both re­tail and dig­i­tal, and get some feed­back, which we can con­vert to our B- to- B cus­tomers and say ‘ Look, we’re do­ing it in Con­necti­cut,’ ” Gaughan said. “It’s go­ing to give us a lot of cred­i­bil­ity.”

That, of course, de­pends on the Gen­eral Assem­bly pass­ing a bill that Mal­loy — or the next gover­nor — will sign. If that does hap­pen, Gaughan said, Sportech, which has zero debt, would be pre­pared to ex­pand to 24 lo­ca­tions, the num­ber of li­censes it now holds, and spend sig­nif­i­cantly in the venues it now has.

That means jobs in Con­necti­cut, where Sportech al­ready has 400 peo­ple, and while Gaughan can’t es­ti­mate the head­count, “There’s lots of em­ploy­ment op­por­tu­nity as a re­sult of sports wa­ger­ing,” he said, in­clud­ing mar­ket­ing.

The com­pany has soft­ware and au­to­ma­tion cen­ters in New Jer­sey and At­lanta, of­fices that Con­necti­cut might like to see lo­cated here.

But many hur­dles re­main, in­clud­ing de­ci­sions on whether the sports leagues should take a cut of the ac­tion. The leagues say yes, Sportech says no, be­cause the leagues will make money sell­ing data to the op­er­a­tors.

For cus­tomers such as Carey, at the Illi­nois race track, the state’s tax level will be crit­i­cal.

The event in Stam­ford is, in a sense, the start of the in­dus­try here. Na­tion­ally, Sportech will re­main “be­hind the cur­tain,” where it is now, in op­er­at­ing sys­tems. But in Con­necti­cut, the sports bet­ting brand would be pub­lic — some­thing new, not Sportech or Win­ners.

“It’s go­ing to res­onate with Con­necti­cut, it’s go­ing to have a Con­necti­cut twist to it,” he said.

Dan Haar / Hearst Con­necti­cut Me­dia

Andrew Gaughan, CEO of Sportech PLC, at the Win­ners OTB fa­cil­ity in New Haven.

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