Good morning, and welcome to the Indy Gaming newsletter, a weekly look at gaming matters nationally and internationally and how the events tie back to Nevada.

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Note: It's not Wednesday. We're just coming to you a day early. Indy Gaming will stick to its regular Wednesday schedule next week.

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ANAHEIM, California – Cody Martinez, chairman of the San Diego-area Sycuan Band of the Kumeyaay Nation, didn’t hide his frustration over the possibility that California voters might have a choice between three different sports betting ballot questions in November.

Two of the initiatives – retail sportsbooks only versus mobile sports betting – pit tribes against tribes.

“It’s disappointing. It’s confusing to voters,” Martinez said during a session discussing the California sports betting landscape at the Indian Gaming Association Conference last week at the Anaheim Convention Center.

However, Martinez and the other two panelists were united on one front – defeating a ballot question backed by seven sports betting operators, including DraftKings, FanDuel and BetMGM – that would allow those companies to operate mobile sports betting in the state.

“We're not a corporation. We have tribal members, not stockholders,” Martinez said.

James Siva, vice chairman of the Morongo Band of Mission Indians in Riverside County, who also serves as chairman of the California Nations Indian Gaming Association (CNIGA), said the statewide group backs both the retail sportsbook and mobile sports betting tribal measures.

“It does confuse things and it makes things complicated, don't get me wrong,” Siva said. “But again, from the CNIGA’s position, we are supportive of the tribes’ efforts moving forward. Not all tribes are going to agree on the major tenets of these initiatives. But again, we affirm each tribe’s right to enact their sovereignty as they seek the best path forward.”

The panelists also agreed on a potential outcome: If all three questions are on the November ballot, all three will be defeated by voters.

“I think it’s a small, small possibility they all pass,” Siva said. “I think it’s much more likely that all three ultimately fail because of voter confusion.”

So far, the initiative allowing Indian casinos and four racetracks to add retail sportsbooks is the only measure that has qualified for November’s ballot. It is backed by a coalition of nearly two dozen tribal casino operators, which announced the effort in December 2019.

But late last year, three tribes – San Manuel Band of Mission Indians, Wilton Rancheria and Rincon Band of Luiseño Indians – split from the original coalition to push for a separate online and mobile sports betting measure that would be managed by the Indian casinos. It’s unclear where the coalition’s initiative sits in the signature-gathering process.

Meanwhile, the mobile sports betting question backed by the seven sports betting operators announced it reached 25 percent of its required signatures in January, but hasn’t provided any updates since then. It was unclear if sports betting company representatives attended the session.

DraftKings was listed as a platinum sponsor of the Indian gaming conference.

What was clear from the 50-minute discussion moderated by Victor Rocha, chairman of the Indian Gaming Association conference and a member of the Pechanga Band of Luiseño Mission Indians in Riverside County, was that California’s tribes want to control their own destiny when it comes to sports betting.

“The tribes have exclusivity in California and this is very rare to have that level of control over this particular industry, as compared to the rest of the states,” Rocha said.

California is already home to 70 tribal casinos, which produce an estimated $9 billion in annual gaming revenue – roughly one-fourth of the nationwide Indian gaming revenue. 

With a population of nearly 40 million, California is the largest of the 17 states still without legal sports betting.

Polling favors the tribes

Ahead of the conference, the two tribal coalitions released separate polling results that both showed California voters opposed to the effort sought by the non-tribal sports betting operators.

The three-tribe group (backing their own online and mobile sports betting ballot question), said a survey conducted by Washington D.C.-based The Mellman Group showed 54 percent of California voters were opposed to the out-of-state operators. Over the past month, the group has been running an advertising campaign critical of the operators.

“A plurality of voters are now reacting negatively to the measure’s title and summary,” Mellman Group CEO Mark Mellman said in a statement. “This is a difficult burden for them to overcome, especially when one considers the intensity of the no vote eclipses their committed base vote.”

Similarly, California-based FM3 Research, working for the tribal coalition backing the retail sportsbook question, found that 53 percent of Californians would oppose the corporate-backed mobile initiative. The figure was as high as 64 percent when voters were presented with positive and negative messaging about the legislation.

Several tribal leaders, speaking on background to the Independent, suggested adding retail sports betting to Indian casinos could eventually lead to adding mobile wagering, but in a timeframe dictated by the tribal governments.

Martinez said any fracture among the California tribes brought on the sports betting referendums wouldn’t be a long-term division.

“I look forward to working with Chairman Siva and CNIGA to build the tribes back together regardless of sports betting,” he said.

Siva said the split might seem confusing, but differences can be smoothed over.

“We understand it's a complicated issue, and not all tribes are going to agree on the major tenets in these initiatives,” Siva said. “But again, we affirm each tribe's right to enact their sovereignty as they see is the best path forward.”

Arizona provides a roadmap

California tribes have watched and learned from Arizona’s eight-month-old sports betting market.

Four companies – DraftKings, FanDuel, BetMGM and Caesars Sportsbook – account for more than 90 percent of the state’s monthly sports betting revenues and wagers. The four operators are tied to either professional sports teams or sports venues, and none are tied to the tribes.

Phoenix attorney Charline Jackson said there is a reason for the large disparity in the market: Tribal sports betting operators got a late start in the process.

Speaking on a conference panel ahead of the California discussion, Jackson said 10 Arizona sports teams and their partners “had a running head start” because it was clear they would be approved. Tribal entities, however, had to wait for the conclusion of the legislative process before finding out which 10 tribes would be granted sports betting licenses.

The sports teams and their partners launched mobile wagering in conjunction with the NFL’s regular season-opening weekend in September.

“The focus was on regulation and drafting the regulations,” Jackson said. “The tribes weren’t willing to invest all the money into sports betting without knowing whether they would have a license. That was one of the challenges in the way things rolled out in Arizona. The tribes were at a competitive disadvantage because they were late to the market.”

Jackson said at the outset of the panel she was speaking personally and not on behalf of any clients. She represents the Hualapai Tribe in Northern Arizona, which operates the Skywalk at Grand Canyon West. The tribe, which doesn’t have a casino but leases its slot machine allocation to tribal casinos in the Phoenix area, did receive a sports betting license.

“All of a sudden, (sports betting operators) were knocking on their doors,” Jackson said. “It became, unfortunately, a competitive environment.”

The Hualapai Tribe ultimately signed a deal with Golden Nugget Online Gaming for mobile sports betting.

Jackson said the tribe’s sports betting app through Golden Nugget is available throughout the state except on its reservation because the Hualapai does not operate a casino.

Coincidentally, at the same time the agreement was reached, DraftKings agreed to purchase Golden Nugget Online Gaming for $1.56 billion. The transaction is expected to close next month. DraftKings is partnered in Arizona with the PGA Tour and the association’s TPC Scottsdale golf course.

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Las Vegas Sands invests in sports betting technology company U.S. Integrity

Las Vegas Sands executives have discussed entering the digital gaming market for more than a year. Last week, the company made a “strategic investment” into U.S. Integrity, a technology company that monitors sports wagering trends and data to detect any game manipulation and other unethical or illegal sports betting-related activity.

U.S. Integrity, which announced the investment, provides its service to legal sports betting operators, professional sports leagues and gaming regulators.

The amount and terms of the donation were not disclosed and Las Vegas Sands did not comment on the investment. It’s expected that analysts will question the company about its relationship with U.S. Integrity when the gaming operator announces first-quarter earnings on Wednesday.

In a brief statement, U.S. Integrity said the Sands’ investment allows the company to expand its development of a new platform designed to identify potentially problematic bets closer to real-time. U.S. Integrity CEO Matthew Holt said the platform will be provided to teams, leagues, bookmakers and regulators to enable proactive intervention.

“The strategic investment from Sands will help us expand our capabilities and develop new innovative products and services to bring transparency and peace of mind to our growing list of clients,” Holt said in a statement.

Las Vegas Sands initially teased its interest in online gaming and sports betting in January 2021, just weeks after the death of the company’s billionaire founder Sheldon Adelson. Prior to his passing, Adelson spent millions of dollars over the years to quash online gaming expansion efforts in the U.S. The company leased out its sportsbook operations at the Venetian.

Rob Goldstein, in his first quarterly conference call as the Las Vegas Sands’ chairman and CEO, said 16 months ago the company was evaluating entering the sports betting, digital and online gaming marketplace.

Las Vegas Sands hired veteran investment executive Davis Catlin as a senior managing director last July to head up the company’s efforts to break into the digital gaming technologies market.

The company said at the time it was looking to become a “strategic investor” primarily focused on the business-to-business space.

More than 30 U.S. states and Washington D.C. have legalized sports betting, the majority of which offer mobile and online sports betting alternatives. Internet casino gaming is legal and available in six states.

Las Vegas Sands completed its $6.25 billion sale of the Venetian, Palazzo and Venetian Expo to private equity firm Apollo Global Management and real estate investment trust VICI Properties in February.

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VICI expects MGM Growth purchase, $5B debt deal to close Friday

Real estate investment trust VICI Properties expects to close its $17.2 billion purchase of rival REIT MGM Growth Properties on Friday. On the same day, VICI expects to close on $5 billion of new debt that will help fund the transaction.

In a filing with the Securities and Exchange Commission last week, New York-based VICI said it priced the $5 billion in five tranches, a term used to describe structured financing. The maturity dates of the debt range from 2025 to 2052.

CBRE gaming analyst John DeCree called the 30-year notes “a remarkable feat” given that the Federal Reserve increased interest rates “10 times” in the past year and the current economic backdrop.

“This highlights the credit community's high level of confidence in the VICI management team, generational nature of its real estate, and the durability of its rental income,” DeCree wrote in a research note.

VICI said in the SEC filing that $4.4 billion of the debt will be used for the MGM Growth purchase.

The remaining $600 million would be used to repay the company’s credit agreement that was used as part of the acquisition of Las Vegas Sands’s Strip holdings, which closed in February. VICI paid $4 billion for more than 80 acres that included the Venetian, Palazzo, Sands Expo and the under-construction MSG Sphere. Apollo Global Management paid $2.25 billion for the operations.

With the closing of the MGM Growth transaction, VICI will become the Strip’s largest landowner, controlling roughly 660 acres that house 12 of Las Vegas’ iconic resorts and entertainment venues. Finalizing the deal will also give VICI ownership of 45 properties in 15 states, with its rent revenue expected to double from $1.3 billion in 2021 to $2.6 billion in 2022.

VICI will also have eight different gaming tenants – Caesars Entertainment, Hard Rock Entertainment, Penn National, Century Casinos, Jack Entertainment, The Eastern Band of Cherokee Indians, MGM Resorts and Apollo – managing the casinos.

DeCree told investors that he expects VICI “to redirect its full focus back to the growth pipeline.” The company, which has a right of first refusal on properties owned and operated by Caesars, is expected to bid on one of the casino operator’s Strip resorts that is currently on the market. Caesars has not said which of its eight Strip properties it wants to sell.

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Future of Reno-based Monarch tied to Colorado casino

The corporate parent of Reno’s Atlantis Casino Resort said hotel room remodeling efforts at the property reduced the property’s first-quarter results.

But commentary from analysts indicated the company’s immediate financial future is tied to its resort in Black Hawk, Colorado.

Reno-based Monarch Casino Resort doesn’t separate financial figures from its two casinos during quarterly earnings, but management said the recently remodeled Monarch Black Hawk is expanding the operator’s stake in Colorado’s largest casino market.

In the quarter that ended March 31, Monarch said revenue grew 44.5 percent to more than $108.3 million. Net income was up 122.2 percent to $18.1 million, with cash flow increasing 50.4 percent to $34.3 million.

Truist Securities gaming analyst Barry Jonas, who recently toured the Black Hawk resort with investors, said the casino benefitted from the recent passage of a Colorado ballot referendum removing $100 wagering limits on table games.

“Monarch’s market share has continued to grow with the $480 million expansion now complete,” Jonas wrote in a research note following the company’s first-quarter earnings announcement. “Monarch noted early success in attracting VIPs to the property as the table game revenue mix continues to grow.”

Jonas said Monarch’s management as it relates to Black Hawk is still “in the early innings of growth” with long-term prospects still playing out.

As for Reno, the company didn’t provide much commentary on Atlantis.

Monarch co-Chairman and CEO John Farahi said in a statement Reno’s underlying market trends “remain competitive.” He said the company would “continue to invest in the property to ensure that our Atlantis resort remains at the pinnacle of Reno casino resort offerings.”

Atlantis saw approximately 20 percent of its rooms disrupted by construction work on a redesign and upgrades. Farahi expects the project to be completed by the end of June.

Reno and Black Hawk are similar markets in terms of revenue, but have vastly different customer bases and roles in their state’s gaming ecosystem.

According to the Colorado Department of Revenue, Black Hawk is the state’s largest gaming jurisdiction with 15 casinos that produced $53.8 million of revenue in February – more than 70 percent of the state’s $76.6 million revenue total during the month.

Reno has 20 casinos, but 13 that produce more than $1 million in monthly revenues, according to the Nevada Gaming Control Board. In February, Reno casinos accounted for $60.9 million of the state’s more than $1.11 billion in gaming revenue – or 5.5 percent.

Black Hawk, which is roughly 40 miles west of Denver, draws business primarily from the state’s largest metropolitan area. Reno, which draws business from the San Francisco Bay area, also benefits from its proximity to Lake Tahoe.

In February, Colorado-based Century Casinos said it would spend $195 million to acquire the Nugget Casino Resort in Sparks.

“The broader Reno-Sparks market has meaningfully outperformed most regional markets throughout the pandemic,” Stifel Financial gaming analyst Jeffrey Stantial wrote in a research note after Monarch’s earnings.

Jefferies gaming analyst David Katz also pointed out Farahi’s “continued optimism” that Atlantis would benefit from the hotel room renovations once the construction is finished.

He did note that management suggested both the Black Hawk and Reno properties could see some headwinds from rising gasoline prices and inflation, both of which could reduce the company’s profit margin.

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Other items of interest

Circa Sports, the sports betting operation owned by downtown Las Vegas casino developer Derek Stevens, has extended its presence both in Nevada and nationally.

The company signed an agreement with Olympia Gaming to bring a retail sportsbook to Legends Bay Casino in Sparks, which is expected to open this summer. The site will be Circa’s first location in Northern Nevada. Financial terms weren’t disclosed by the two privately held companies.

The deal also will include access for Legends’ customers to Circa Sports’ mobile betting app.

Circa Sports has sports betting facilities at Stevens’ three downtown Las Vegas casinos – Circa Casino Resort, D Las Vegas and Golden Gate – and operates sportsbooks at the off-Strip Tuscany and The Pass Casino in Henderson. The Circa Sports mobile app is also available in Colorado and Iowa.

Also, Circa Sports and the NHL’s Vegas Golden Knights announced a licensing agreement for the sports betting company’s logo to appear on the team’s jerseys worn during home games played at T-Mobile Arena.

The home jersey patch will begin being worn at the start of the 2022-23 NHL season and signify the Knights' first-official jersey entitlement partnership. The terms of the five-year agreement were not announced.

"Anyone who's walked through Circa's doors knows we're passionate about sports, and I take great pride in connecting the Circa Sports brand with the first Vegas Born team in the ever-growing sports city of Las Vegas,” Stevens said in a statement.

The gaming industry’s CEOs are an optimistic bunch, according to the American Gaming Association.

The trade group, in partnership with Fitch Ratings, surveyed CEOs for the AGA’s Gaming Industry Outlook. The CEOs had a more positive view of the industry than they did six months ago, according to the findings.

Some 67 percent of the survey respondents rate the current business situation as “good,” an increase from 54 percent when the same question was asked six months ago.

Forty percent of the CEOs expect the gaming industry’s business climate to improve over the next two quarters compared to 13 percent that expects business conditions to worsen.

“Gaming executives are signaling confidence in our continued recovery that is in line with record-setting consumer demand for gaming,” AGA CEO Bill Miller said in a statement. “I’m optimistic that 2022 will see the return of a true sense of normalcy for gaming.”

Gaming CEOs did have concerns that other areas could slow the industry’s economic recovery following the pandemic, including supply chain issues (75 percent), inflationary and interest rate concerns (67 percent) and labor shortages (54 percent).

COVID-19 and demand for meetings and events, however, were no longer among the top five concerns for gaming CEOs.

(Disclosure: The Mellman Group has done a variety of polling for The Nevada Independent)