Seminole CEO Jim Allen Undeterred By Legal Challenges As Florida Betting Launch Nears – Sports Handle

Speaking on stage last week at a closely watched panel at the 2021 Global Gaming Expo in Las Vegas, Seminole Gaming CEO Jim Allen openly described how his life is dominated by work, not play.

On the panel at the Venetian Expo on Wednesday, Allen told a packed audience that his workaholic tendencies have contributed to several health scares, including two heart attacks and two strokes over his four-decade-plus career in the gaming industry. To underscore his work ethic, Allen shared an anecdote of interviewing a candidate for a position on the company’s executive team hours after he was himself discharged from a hospital for open-heart surgery.

“That’s what I do and that’s what I love,” Allen said on a panel alongside MGM Resorts CEO Bill Hornbuckle and Wynn Resorts CEO Matt Maddox. “My life is my job. Do I think that’s healthy, would I recommend for people to do that? Absolutely not.”

Over the next few weeks, Allen will be tested by a multi-front battle staged by several challengers, as Hard Rock International and the Seminole Indian Tribe attempt to launch a legal sports betting platform in Florida. Two gaming entities, the Magic City Casino and the Bonita Springs Poker Room, filed a lawsuit in federal court in July against Florida Gov. Ron DeSantis, contending that the tribe’s Class III gaming compact with the state violates the Indian Gaming Regulatory Act (IGRA). Last month, a federal judge set a Nov. 5 date for oral arguments in the Magic City case.

DC federal judge declines to consolidate West Flagler and No Casinos lawsuits challenging online sports betting provisions of Florida gaming compact. But it looks like they will divide the allotted oral argument time on Nov. 5th. pic.twitter.com/3v6xIWycvQ

— Daniel Wallach (@WALLACHLEGAL) October 11, 2021

Separately, two South Florida businessmen filed a suit in U.S. District Court Sept. 27, claiming that the U.S. Department of the Interior allowed the state of Florida to bypass the state constitution when it approved the historic compact in July. Two months earlier, the House of Representatives ratified the state’s gaming compact with the Seminoles, which calls for a minimum payment of $2.5 billion from the tribe to the state through 2025.

“Obviously, we’d like to win a few lawsuits,” Allen said, drawing laughter from panel moderator Contessa Brewer of CNBC.

Launch timeline still cloudy Addressing reporters at a press conference following the panel, Allen indicated that Seminole Gaming has yet to set a date on the 2021 calendar for launching legal sports betting at the company’s Florida casinos. Under the compact, the Seminoles apparently received legal authority to begin offering sports betting in Florida beginning on Oct. 15. But according to a footnote in the Magic City lawsuit, the tribe indicated that it likely won’t go live until Nov. 15, at the earliest.

Allen clarified some loose ends last week when he explained that the tentative October deadline was an agreed upon date between the tribe and House Speaker Chris Sprowls during the compact negotiation process.

Nevertheless, Seminole Gaming has not determined an exact launch date, Allen said. At the same time, Seminole Gaming has not determined if it will launch retail and mobile sports betting simultaneously next month if it overcomes the legal challenges. The two businessmen, real estate developer Armando Codina and billionaire auto retailer Norman Braman, filed an injunction seeking to push back the debut of legal sports betting statewide.

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FLORIDA:

The Seminole Indian Tribe’s gaming compact became operational Wednesday. Legal wagering could launch this fall.

Jill Dorson on the timeline and the lawsuits and ballot initiatives still in progress. https://t.co/1TZJOZvqN8

— Sports Handle (@sports_handle) August 12, 2021

Despite the uncertainty surrounding the lawsuits, Seminole Gaming continues to ramp up its sports betting infrastructure. Last December, Hard Rock International announced the launch of Hard Rock Digital, a joint venture that will serve as a vehicle for Seminole Gaming and Hard Rock International’s sports betting and interactive gaming operations. The vehicle will be managed by several longtime gaming veterans, including Rafi Ashkenazi, former CEO at The Stars Group, and Matt Primeaux, who formerly served as president of FOX Bet.

Allen was quick to shower praise for Ashkenazi, whose business acumen impressed him when the two first met about eight years ago. Consequently, Allen is extremely confident that the Seminoles’ tech platform for sports betting will be able to compete on a global basis. Seminole Gaming has hired about 300 employees on its digital gaming side to facilitate the sports betting launch.

“If you look at our team and look at the Stars Group and their success, specifically Rafi, that team and that platform is as good as we’ve seen in the industry,” Allen said.

While Seminole Gaming cannot legally accept sports bets in Florida until Oct. 15, the platform is currently in beta testing, Allen noted. An internal team is testing the product, which has bred excitement, he added.

“We would never enter a relationship with some of these companies without having a world class team,” Allen said last week. “That’s what we did, we know what the product is. It’s done — I can play today if I wanted.”

Explaining the hub-and-spoke model Under the compact, every sports wager placed across the state must go through the Seminoles. The compact allows the Seminoles to partner with a minimum of three parimutuel facilities, which in turn have the ability to subcontract with a private commercial operator.

The language enables a major sportsbook such as DraftKings, FanDuel, or BetMGM to partner with a Florida racetrack to power the back-end sports betting technology at the venue. All wagers placed on a mobile device, however, must travel through a server located on Seminole tribal lands. The tribe, under the compact, would receive a cut from any mobile and retail sports wagers placed at a parimutuel facility via the commercial operators.

Allen characterized discussions with parimutuel facilities as amicable, with 27 companies responding to the Seminoles’ Request for information (RFI). A bevy of companies expressed genuine interest, not in just an “ad hoc” way, he emphasized. Presumably, one is The Stronach Group, the owner of Gulfstream Park, located in Hallandale Beach. Allen noted that he has a good business relationship with TSG Chairman, CEO, and President Belinda Stronach, but he did not indicate if Seminole Gaming plans to strike a mobile skin deal with the South Florida racetrack.

If the Seminoles overcome the legal challenges, language in the compact will create a hub-and-spoke model for statewide sports betting, a distribution model that symbolically represents a bicycle wheel for the delivery of revenue. Based on the model, the Seminoles’ server will serve as a centralized hub, with the outer facilities that accept sports wagers representing the spokes. The model has been met with criticism by detractors who contend that the compact in effect grants the Seminoles a monopoly on legal sports betting across Florida.

Super interesting thread from Daniel….We are less than a month from the supposed “go live” date for the Seminoles to offer mobile sports betting in Florida. Will be interesting to see if that ever happens. https://t.co/BvHUAuvBVi

— Dan Back (@dan_back) September 22, 2021

In addressing the Seminoles’ negotiations with private sportsbooks, Allen said there are a few companies which maintain strong relationships with the tribe. Those companies, he explained, “understand the roadmap” in partnering with the parimutuels to potentially offer sports betting in the Sunshine State.

Other topics Allen addressed at last week’s conference in Las Vegas:

Without naming names, Allen said a few others are “100% opposed” to the Seminoles’ plans for operating sports betting in the state. Those companies, he emphasized, are spending “tens upon tens of millions of dollars to derail” the tribe’s efforts. In July, a prominent Florida political action committee announced that it received a contribution of $20 million from FanDuel and DraftKings as the companies look to garner signatures for a potential 2022 ballot initiative. Allen did not begrudge their efforts, saying: “We respect that, they have to protect their businesses and we are obviously protecting ours.” Speaking of DraftKings, Allen had high praise for the company’s continued marketing blitz, while remarking that the Boston-based DFS-turned-sportsbook operator has done an “amazing job at building their brand.” In recent months, DraftKings has announced definitive business agreements to acquire Golden Nugget Online Gaming and Las Vegas-based sports betting media network Vegas Stats and Information Network (VSiN). DraftKings reported sales and marketing expenses of $171 million in the second quarter, marking the fourth straight quarterly period that the company spent at least $170 million on marketing. When asked about the possibility that ESPN could license its sports betting brand in the coming months, Allen remarked that he is impressed with the conglomerate’s brand recognition heft. Since ESPN’s brand is universally known, a sportsbook operator could benefit from the value proposition of the network’s name, he indicated. Still, Allen noted that a company could have the right brand, but if it doesn’t have the right “management or technology platform,” there are no guarantees that the sportsbook will flourish. Contingency plans While Allen declined to address the pending litigation, he spent some time trying to clarify some misconceptions with the dual lawsuits. The legal challenges have been filed against the state of Florida and the U.S. Department of the Interior, he noted, not the tribe. In the event that the hub-and-spoke model is struck down, the possibility exists that the compact could be declared no longer valid. Some opponents argue that the rollout of online sports betting represents an expansion of gaming in violation of Amendment 3. The amendment, passed by a referendum in November 2018, requires voter approval for any gaming expansion statewide.

“We would discontinue our revenue share to the state,” Allen responded, when asked about the possibility that the compact could be struck down. “Then, we would certainly look at other options both from the constitutional and referendum process.”

Allen also took issue with the customer acquisition model being utilized by top commercial sportsbooks, which he believes is unsustainable on a long-term basis. The acquisition costs per customer typically range from $500-750 and in some cases may go even higher, he explained.

“I fundamentally believe that this is a wonderful opportunity for our industry. However, I feel that the short-term growing pains of profitability is something of concern,” Allen said. “However, if you play the hand out, no pun intended, we all know it’s going to be a profitable space.”

Though recognizing that the Florida gaming industry is approaching a crossroads, Allen does not appear stressed about the upcoming court battles.

“If we prevail there, that really creates the magnificent foundation for sports betting in Florida, which then takes our digital business to a new level,” he said.