Akin to a fresh graduate applying for a job they are not qualified for, Aussie bookmaker BlueBet (ASX: BBT) has withdrawn its sportsbetting licence application in the State of Virginia as recommended by the State citing a lack of experience operating in the United States.
By withdrawing their application rather than having it rejected by regulator Virginia Lottery, BlueBet will be able to re-apply in the future. The rationale behind Virginia’s recommendation, however, may raise questions in other US States about the viability of BlueBet and their sportsbetting operations as a new player in the US market.
“During the process the BlueBet Board received advice from the regulator that licenses would, at this stage, be granted to operators which had experience in other states and have equity interest owned by Minority individuals or Minority-owned businesses,” said BlueBet in a statement.
Entry into the US market was the main reason behind their IPO in June 2021 when successfully raising $80 million at an Offer Price of $1.14 per share.
The strategy followed in the footsteps of rival PointsBet (ASX: PBH) which listed in 2019 and has emerged as a market darling.
While there is still substantial ground for BlueBet to make up given their later entry into the lucrative US market following deregulation of sportsbetting in 2018, they are on their way despite the Virginia hiccup which tumbled BBT shares 19% to $2.00 in early morning trade.
At present, BlueBet has secured just one US State where it is now licenced to operate in Iowa with Colorado, Tennessee and Maryland their next targets having withdrawn their application for Virginia.
While it’s going to be a slower burn for BlueBet compared to its more established rivals that have already established goodwill and experience in the market, the Company remains confident there is plenty of opportunity despite their lagging entry.
Due to the US State legislature, there are currently only 21 US States that sportsbetting is live and operational, but BlueBet expects that figure to reach 40 by 2023.
In comparison, PointsBet is already licenced in 7 US States and has market access partners in 9 other States.
For FY21, BlueBet was an outlier in the listed sportsbetting sector having delivered a profit for FY21 when reporting $32.3 million revenue and $3.0 million net profit after tax, when others reported losses due to major investments in their technology and customer acquisition.
Unlike said rivals, BlueBet’s strategy is geared towards business customers where they will offer their experience in bookmaking and technology to enable others to sub-licence from them for their own smaller operations. This will be particularly attractive for operators that simply don’t have the funds to secure their own licences.
“Our B2C business is intended to be followed by launching a ‘Sportsbook-as-a-Solution’ offering through partnerships with US companies such as casino groups, sporting and media organisations,” said Chairman, Michael Sullivan in his letter to shareholders.
“Our ‘Sportsbook-as-a-Solution’ B2B strategy will allow BlueBet to access the broader US market via a full end to end solution whilst minimising customer acquisition cost. We expect it to be attractive to US partners who seek to rapidly grow a sportsbook business and benefit from BlueBet’s expertise and technical prowess.
“This ‘capital lite’ approach is underpinned by the BlueBet wagering platform, which is scalable, cloud-based and designed for automated on-boarding, optimised customer engagement and streamlined compliance.”
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