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Churchill Downs Investing in Statewide iGaming

Churchill Downs Incorporated (CDI) is primarily known for its horse racing operations – including its eponymous racetrack and the Kentucky Derby – but the company is increasingly interested in online gambling.

During a fourth quarter earnings call convened last week chief executive officer Bill Carstanjen told investors that CDI would push forward with iGaming integration in regulated statewide markets:

“We will spend a modest amount on sports betting and iGaming markets in 2019 in New Jersey and Pennsylvania.

We like states that we believe may ultimately grant access to sports and online casino gaming to their brick-and-mortar casino license holders.

We have a deeply experienced online team, and an important objective for this team is to lead us beyond horse racing into sports betting and online casino wagering.”

Churchill Downs Incorporated currently operates six casino venues in six states – Florida, Louisiana, Maine, Maryland, Mississippi, and Ohio – with two pending acquisitions set to add Pennsylvania and Illinois to the list.

In an interview held last year with CNBC’s “Power Lunch,” Carstanjen revealed that CDI’s revenue figures had grown by 243 percent since 2013 on the strength of its casino properties and related iGaming:

“Day-to-day racing, that’s not the greatest business in the world.

“But it was our entry into casino gaming through our licenses for race tracks.

And also, it led us into entering the online space, which is also a wonderful growth engine for our company.”

The Q4 earnings report revealed CDI generated $219 in net revenue, good for a 22 percent quarter-on-quarter increase.

BetAmerica Skin Agreements Already in Place in New Jersey and Pennsylvania

The company doesn’t own any casinos in New Jersey, but thanks to a licensing agreement forged with Golden Nugget Atlantic City, CDI launched its BetAmerica online sportsbook and casino platform throughout the Garden State last month.

While data isn’t broken down by licensee, the Golden Nugget licensing group is the dominant market leader in terms of monthly revenue, with its $12.18 million haul in January nearly doubling its closest competitor.

During the earnings call, Carstanjen told investors that Churchill Downs Incorporated was pleased with the early returns on BetAmerica’s entrance into New Jersey:

“We’ve been surprised how well we started in New Jersey because we have not yet marketed in any material way.

We’re still awaiting approval from Apple to put our iOS app in the Apple Store.”

CDI debuted the BetAmerica online sportsbook in August of last year via its two casino venues in Mississippi.

Looking ahead to Pennsylvania’s imminent iGaming implementation, CDI expects to integrate BetAmerica’s sportsbook and casino components with its January acquisition of the Presque Isle Downs Casino.

The company also completed a transaction this week to assume management of Pennsylvania’s Lady Luck Casino Nemacolin, providing a second potential point of entry for BetAmerica.

Churchill Downs: Rivers Casino Acquisition Also Puts Illinois in Play

Last Friday, CDI received approval from the Illinois Gaming Board (IGB) to acquire a 50.1 percent majority stake in Rivers Casino, with the $407 million deal agreed upon last October allowing for an eventual 62 percent equity stake.

Newly elected Democratic Governor J.B. Pritzker has included $217 million in revenue related to regulated sports betting in his budget for the next fiscal year. Illinois has also considered iGaming legislation several years running, with many industry experts expecting sports betting momentum to push a bill over the finish line in 2019.

Carstanjen told investors that CDI’s purchase of Rivers Casino positions the company for prompt entrance into Illinois if and when that happens:

“If Illinois ultimately grants sports betting and iGaming rights to brick-and-mortar casino license holders. [Rivers] is in a casino market we have always valued.”