Richard Curran: Paddy Power leads charge in new US land rush
The starting gun has gone off in the United States' most lucrative race since the Oklahoma Land Rush of 1893. This time it isn't about land, it is about grabbing as much market share as possible in the opening up of America's gambling laws.
Remember the scene in that awful Stage-Irish 1992 film, 'Far and Away', starring Tom Cruise and Nicole Kidman?
Well, this is a race to influence the shape of sports betting and gambling legislation state-by-state across America in what will become a massive multibillion-dollar industry.
And in the lead row of wagons is Irish betting giant Paddy Power Betfair (PPB). A recent report by Davy Stockbrokers estimated the PPB American opportunity at around €530m in profits per year by around 2023.
Gambling and sports betting have been massively curtailed by law in the US since 1992. The legislation then had been an extension of previous sports betting bans that originated in the 1920s, when bookies fixed the baseball World Series.
However, a Supreme Court ruling in 2018 paved the way for individual states to legalise gambling on their own terms.
This has opened up a massive lobbying battle to match the financial opportunity.
Illegal gambling and sports betting is happening in the US anyway. It is estimated to be multiples of legal betting. Industry players argue that legalising it is a chance to have better consumer protection and control.
It is also an enormous financial prize.
Paddy Power gained a good early foothold in the US market, but accelerated its presence when it acquired a 61pc stake in FanDuel, a daily fantasy sports game business that had eight million users and revenues of nearly $300m (€266m) a year. FanDuel was set up by Tyrone man Nigel Eccles in 2009. He realised that while online fantasy sports games, where people picked a fantasy team and stuck with it for the whole season, were legal, they weren't all that lucrative.
He developed daily fantasy sports games online where you could pick your teams in basketball, American football and other sports.
Backed by aggressive advertising campaigns and mouth-watering temptations of making a million dollars, it took off. The problem was that while games of skill were legal, betting was not.
For many this looked like betting. Mr Eccles studied the Unlawful Internet Gambling Enforcement Act signed by then President George W Bush in 2006 and concluded that it provided a safe harbour for daily fantasy sports games. State authorities didn't always agree. FanDuel and its main rival DraftKings came very close to the boundaries of legality.
They spent tens of millions on lobbyists to have the law changed and fought numerous legal actions taken by various authorities. In 2015 New York's Attorney General ordered FanDuel and DraftKings to shut down operations in the state. A legal action followed.
The Attorney General said daily fantasy sports games were a "multibillion-dollar scheme intended to evade the law and fleece sports fans across the country".
Online fantasy sports games are huge with an estimated 50 million people playing them across North America.
Mr Eccles pushed hard, spending a fortune on ads, lobbyists and lawyers. Eventually, by late 2017, his company's valuation had halved and his big backers, including investment fund KKR, were not happy.
Having pioneered the phenomenon in the US, built up a business with eight million customers and helped secure legal victories in numerous states, Mr Eccles left the company.
At that stage he only held ordinary shares in the business he founded while the big institutions held almost all of the preference shares.
Just six months later the Supreme Court ruling in 2018 opened up the potential of the betting and gaming industry in the US.
Paddy Power swooped on the firm and merged it with its existing small US operations and it hasn't looked back since. Mr Eccles claims the board at his old firm did not properly value the business, which meant he and three other co-founders got nothing for their ordinary shares.
They are suing the company in Scotland, where FanDuel is registered, for $120m (€106m). The company is defending the case and dismisses the plaintiffs' claims.
Since the Paddy Power deal in mid-2018, a lot has happened. Vested interests in multiple states are lining up to help influence the shape of betting legislation.
Back in 2017, Paddy Power was included as a backer of an industry grouping called iDEA (iDevelopment and Economic Association). iDEA has an office on Pennsylvania Avenue near the White House and says it wants "to grow jobs and expand online interactive entertainment business in the United States through advocacy and education".
This group believes that the casino-dominated American Gaming Association (AGA) is trying to hinder, not help, the development of online gambling in America.
The casinos were unsure about whether to see online gambling as a big new market or something that would destroy their bricks and mortar businesses.
However, under the influence of one of its biggest donors, Sheldon Adelson, the AGA decided to back away from pushing for online gambling. Online sports betting is a different matter. That seems to be where Paddy Power has its focus.
Paddy Power Betfair joined the AGA last year and is not listed as a member of iDEA on its website.
Mr Adelson is a major donor to US president Donald Trump and he was behind the Sands Hotel and Casino in Las Vegas. He levelled that and built the Venetian and the Palazzo and he has casino interests in Macau and elsewhere.
Mr Adelson is said to be worth $33bn and his influence over Mr Trump was described by the 'Guardian' newspaper as shaping the president's Middle East policy.
The casino king says he is opposed to legalising online gambling based on personal and ethical considerations and did not reflect his corporation's stand.
He said that online gambling posed a social threat, and is dangerous for poor people, children and people who are vulnerable to exploitation.
The AGA website says it unites "the American casino industry to advance a pro-active policy agenda that ensures gaming thrives and contributes to local communities".
FanDuel is no longer skirting around the fringes of legal interpretation and Paddy Power took over the business at a time when the legalisation of sports betting is being considered and opening up in several states.
New Jersey was the first to legalise. Countless competing interests are in the game. The sports bodies themselves, like the NFL, used to be opposed to legalising sports betting but now want a slice of it. Even the players' unions want in on it.
The sports companies are seeking what they call "integrity payments" of between 0.25pc and 1pc of funds wagered, to help cover the costs of tackling match fixing and such like.
It is already a lobbying dogfight in Illinois. Just two weeks ago, during hearings on amendments to possible legislation, one casino company representative said "bad actors" guilty of "criminal conduct" in Illinois and Jersey in the past should not be allowed licences in any future legalised regime.
He name-checked FanDuel and DraftKings, even though they were never found to have committed criminal conduct. They argue the casino industry just wants to keep out competition.
In Louisiana in November, a referendum was held to legalise daily fantasy sports (DFS). FanDuel and DraftKings worked together on a campaign and spent $1m on advertising.
Virtually every metro area voted in favour in parishes representing 92pc of the population.
Ryan Berni, a consultant hired by DFS companies, said "adults should be able to spend their own money as they see fit setting their own budgets and accepting responsibility for their actions".
Louisiana has the second-highest poverty rate in the US, with about one in five people living below the poverty level in 2017.
The legislative dam has burst in America and the land rush is on. The lobbyists are having a field day.