Japan allowing three operators will create competitive 'horse race'

Jul 31, 2018 3:10 AM

As has been flooded in casino and general business news, Japan has approved laws permitting up to three integrated casino resorts. While this is not new news, I am wondering if the laws of mathematics have recently changed.

Based on articles, press releases and personal conversations, it seems there are more than three and closer to eight contenders for those three potentially highly lucrative licenses. Reading the articles is like listening to horse trainers who have entered their respective best horse into a race, each declaring they like their position, their horse is ready, they are familiar with the track, and they have the best jockey and race plan.

Here in Las Vegas alone, Las Vegas Sands, Wynn, Caesars and MGM have declared interest, and each has made efforts to various extents. When you add interest from operators in Macau, Australia, Korea, England, Europe and other U.S. based gaming companies there is a heck of a horse race brewing.

Handicapping this race though isn’t easy as there are a few curve balls in it. Not all operators are on the same legal footing. Some are highly regulated, like the U.S. operators, who are generally public, have multiple regulatory jurisdictions looking over their shoulder and must comply with the USA’s Foreign Corrupt Practices Act (FCPA), which basically bars bribing. And there are those that have materially less regulatory oversight and may not be burdened by an equivalent to the FCPA.

It is pretty much expected that the winners of the available prized licenses will have to have a partnership with a financially and politically powerful group of Japanese businesses or individuals, and those partners, for at least the USA gaming companies, are going to have to be willing to subject themselves to some level of scrutiny by various U.S. gaming regulators, which is not something everyone is willing to do.

As casino gaming has been of interest to various Japanese groups for some number of years it will be interesting to see who has the real inside track from years of anticipation vs. those more recent opportunists.

If the late Bob Faiss (the man probably most responsible for Nevada gaming laws and regulations) were alive today, he might be able to provide some insight, particularly as one of his Nevada gaming law books was translated into Japanese some number of years ago. It had to have been motivated by someone in Japan with the long vision toward the current day.

I am of the personal belief that Lawrence Ho’s and Sheldon Adleson’s separate organizations are probably the current front runners. That said there is a long way to go yet before defining requirements are issued and anything could happen along the way. Who knows? If the process is slow enough and Steve Wynn’s non-compete clause lapses in time, we might even see him pop up as a surprise entrant in the Japanese race for a license.

Smelling Blood

Sharks can smell blood in the ocean from about one and a half football fields away, which is impressive. But some of the sports betting sharks are starting to smell blood over two thousand miles away on the east coast of the United States.

Just like in the ocean where there are tiger sharks, hammerhead sharks, sand sharks and great white sharks, in the sports betting world there are data sharks, legal sharks, betting sharks, value sharks, line making sharks, software sharks, service provider sharks and even intellectual property sharks.

While some had already been circling around the east coast in anticipation of the Supreme Court’s reversal of the sports betting ban, even more have shown up like they just heard a dinner bell. Sadly, some of the experienced casino operators back east are now acting like innocent trusting swimmers, not realizing they are swimming with sharks willing to take advantage of the limited sportsbook experience of many operators.

Sounds a little harsh, maybe, but recently I have been called on by former colleagues and friends of friends still active in casino operations to review proposals and contracts they have received and the word “lopsided” is an understatement in what is being offered up to those interested in expanding into sports wagering.

Of those I reviewed my common advice has been, make certain there are patent and copyright indemnity clauses, make certain the casino operator owns all the rights to the sportsbook customer’s information, make certain there are liberal contract cancelation clauses on the casino operator’s side and make certain the casino operator’s compliance department has reviewed the background of the sportsbook service and operating companies and key employees.

After all, it is inevitable a number of sportsbooks will eventually merge and seek to exist purely online and offer additional wagering options that will look more like slot games than sports bets. And that agenda will likely conflict with the casino-based operations at some future point in time.

Additionally, I am guessing there is a coming war over patent infringements by new sportsbook service providers and operators over patents developed by some existing and long-standing sportsbook operators.

Casino operators should remember that for the time being they have the upper hand in these negotiations and protect themselves accordingly.