Churchill Downs Warming Up For Online Gambling In New Jersey, Pennsylvania

Churchill Downs is betting big on New Jersey and Pennsylvania to bolster its gaming empire.

Discussing the two neighboring markets to investors last week, CEO Bill Carstanjen expressed his eagerness to expand.

“We will spend a modest amount on sports betting and iGaming markets in 2019 in New Jersey and Pennsylvania,” Carstanjen said during the company’s Q4 earnings call. He continued:

“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.”

The launch of PA online gambling is still months away, but that hasn’t stopped Carstanjen and company from jockeying for position to capitalize on the opportunity.

Churchill Downs investing in the future

Carstanjen indicated that the extent of Churchill Downs’ investment hinges on a few factors.

• Final regulatory approvals
• Sports seasonality
• Return on spend

The company does not have a casino in New Jersey, of course. But it has entered into a “skin” agreement with Golden Nugget to gain access into the NJ online gambling market.

“We’ve been surprised how well we started in New Jersey because we have not yet marketed in any material way,” Carstanjen said. “We’re still awaiting approval from Apple to put our iOS app in the Apple Store.”

Churchill Downs has partnered with BetAmerica for its sports betting and online casino operations.

Roadmap into active (and prospective) markets

Looking into the Pennsylvania market, Churchill Downs plans to open a BetAmerica sportsbook at Presque Isle Downs in Q2.

The company recently purchased the casino from Eldorado Resorts for $178.9 million. According to Carstanjen, the 1,275 square-foot sportsbook will feature 50 self-service betting kiosks and 50 televisions.

Churchill Down additionally views Illinois as a state with significant potential for expansion.

Midwest expansion in the cards, too

On Friday, the Illinois Gaming Board approved Churchill Downs to acquire 50.1 percent of Rivers Casino in Des Plaines. The company signed a $407 million agreement in October that could potentially increase its share of equity to 62 percent.

Carstanjen said that the Rivers acquisition was notable for two reasons:

• Future upside if gaming expansion is passed
• Investment in a premier gaming property in a premier location

Illinois has been flirting with a gaming expansion bill for years without much to show for it. But with new Democratic Gov. J.B. Pritzker and Democrats controlling both chambers, lawmakers might finally be able to get something passed.

The governor has included $217 million in sports betting revenue as part of his budget for the next fiscal year.

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

Churchill Downs generated net revenue of $219 million in Q4, up 22 percent from the prior quarter.