Churchill Downs Inc.’s long road to New Jersey for online gaming and sports betting

Day Three of the new world order in the sports betting and online gambling world saw an analysis of Churchill Downs Inc.’s possibilities by this blog become dated before anyone else read it. The pace of this race set in motion by Monday’s U.S. Supreme Court ruling will be fast.

Louisville-based Churchill announced in an early morning news release that it is partnering with the Golden Nugget Atlantic City using that casino’s license to provide real money online gambling and sports betting subject to regulatory approvals. Churchill also said it would partner with SBTech to use its platform for sports betting and Internet gambling. Besides New Jersey, that announcement mentioned — as predicted by the earlier post — plans for Pennsylvania and Mississippi.

Churchill, which already has the TwinSpires.com online horse betting platform, saw its stock close at a record $306.40 on Wednesday after an intraday peak of $314.60

On the same day, after talk of an agreement between Paddy Power Betfair and the sports fantasy gaming site FanDuel, Paddy Power Betfair — already a player in New Jersey — confirmed that it actually is in talks to acquire FanDuel. Paddy Power Betfair already owns Churchill’s chief competitor in online horse betting, TVG.

The anticipated start of New Jersey operations for CDI is first quarter 2019. It has been a long road to New Jersey for Churchill — at least six years. The known previous effort resulted in a salacious lawsuit — more about that later.

Churchill and Golden Nugget

“We are looking forward to offering integrated iGaming and sports betting products in New Jersey,” Churchill CEO Bill Carstanjen said in the release. “We have the unique opportunity to leverage our knowledge and experience operating the largest legal online horse racing wagering business in the U.S. as we enter the iGaming and sports betting markets.”

Golden Nugget casinos are owned by Landry’s Inc., which is owned by Tilman J. Fertitta, the company’s president, chairman and CEO.

“We welcome Churchill Downs, a respected U.S. gaming operator with online wagering experience, to New Jersey,” said Thomas Winter, senior vice president and general manager of online gaming for Landry’s Golden Nugget. “The addition of their offering will allow Golden Nugget Atlantic City to cater to an even larger demographic of New Jersey online players.”

According to the release, GoldenNuggetCasino.com launched in November 2013 and “is the No. 1 U.S. online casino” with a 35 percent share of New Jersey online gaming market.

So, rather than wait for an approval of sports betting or online gambling for one of its own bricks-and-mortar casinos, Churchill apparently will proceed first in Jersey, where it has sought an online presence for some time.

Churchill’s Jersey history

At the time that Jersey first allowed online casino gambling, Churchill tried to enter the market. A lawsuit stemming from a failed partnership provided the first public glimpse that Churchill was developing an online casino platform.

As detailed in the lawsuit, Churchill made a deal in August 2013 with Nicholas Ribis’ NLR Entertainment where it paid him $2.5 million on the condition that he bought the now-closed Showboat casino in Atlantic City from Caesars Entertainment Corp. so that Churchill could operate Showboat’s Internet gambling platform. NLR was to make the deal by that October — at which time Churchill would pay an additional $7.5 million in rights fees — and close by January 2014. Churchill was to launch the online gaming system by April 2014.

In the lawsuit in U.S. District Court in New Jersey, Churchill said Ribis failed to live up to his end of the bargain and owed Churchill the $2.5 million. Ribs accused Carstanjen and Churchill of slandering him. Churchill also claimed fraud.

Last year, the lawsuit finally ended when District Judge Kevin McNulty ruled in Churchill’s favor on virtually every aspect of the case. McNulty ruled that NLR did breach the agreement, that Churchill hadn’t acted in bad faith and that no concrete evidence supported the slander claim. McNulty ruled against Churchill on its fraud claim only because he said the company couldn’t prove damages as a result of any misrepresentation by Ribis.

McNulty’s ruling provides a few nuggets (no pun intended) that still seem to be true as Churchill makes its deal with Golden Nugget.

Specifically, the ruling quotes Carstanjen saying that each time Ribis tried to change the deal by having Churchill front more money, “I would immediately shut it down. … ‘We are not financing on this. We don’t want a brick-and-mortar presence in New Jersey. … It’s not a market we want to invest in.’ That’s why we were looking for a partner who had the brick-and-mortar asset.”With Golden Nugget, the bricks-and-mortar destination at the end of Churchill’s road to New Jersey has been reached.
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