Although the Federal government prohibits online gambling, states are making a play to fill budget gaps with new revenues from gambling taxes. The big question is whether top casinos such as MGM (NYSE:MGM) and Las Vegas Sands (NYSE:LVS) will get crushed by legal online gambling websites.
Although the simple analysis would indicate a loss in revenues for casinos, here are three contrarian reasons why online gambling could become a huge opportunity for well-established casinos:
1) Rabid gamblers already gamble online
Do you know anyone who bets on sports or plays poker online? Do they go to a casino? Case in point. Online gambling is already prolific. To pretend otherwise is like grasping onto old school blue laws which pretend people don’t need access to alcoholic beverages on Sundays. So, blessing online gambling as “legal” will most likely add only a marginal expansion in market opportunity.
2) Casinos with great brands could expand their businesses online
Although plenty of new companies and competitors will battle for territory in the lucrative online gambling industry, top casinos have the best opportunity to enter and dominate the space. I don’t know about you, but I feel a lot safer giving my credit card information to the Las Vegas Sands (NYSE:LVS) rather than some sketchy website. Moreover, top casinos should be able to offer a wider variety of games, bets, and better priced books.
3) Going to the casino is half the fun
What happens in Vegas, stays in Vegas. Right? We all know that cultural proverb is not simply referring to what happens while gambling at the casino. Thus, casinos will always offer a much more dynamic experience than sitting at home in our pajamas in front of a computer screen. If the top casinos are smart, they will also find creative ways to integrate casino promotions and packages into the online gambling experience.
So, before you get short casino stocks on the online gambling thesis, take a moment to consider the consensus bet.