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Casino Stocks Hit Jackpot as Sports Gambling Becomes Legal

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The U.S. Supreme Court on Monday struck down a 1992 federal law that had so long barred gambling on individual sporting events. The recent ruling now frees states to legalize gambling on individual sports, thus opening a whole new line of business for casinos and betting-technology developers that promise to attract billions of dollars in wagers.

This saw shares of gaming and casino companies rallying on Monday. However, this also increases competition for casinos in Nevada, which until now enjoyed the monopoly of being the only state where sports gambling was allowed.

Supreme Court Turns the Table

The Supreme Court announced that it will allow states to regulate their own sports gambling, overturning the 1992 Professional and Amateur Sports Protection Act (PASPA) that prohibits sports gambling across the United States barring Nevada, where it is legal for decades. That said, the United States now joins the likes of the U.K., Australia, Canada and France where sports betting is legal.

Now, the ruling doesn’t mean that sports gambling will become legal across the country immediately. Instead, it will allow states to formulate their own regulatory structures. However, New Jersey is expected to be the first state to start legal gambling on individual sports, given that the state instigated the legal fight by doing away with its gambling prohibition.

Other states like Mississippi, New York, Delaware, West Virginia and Pennsylvania are likely to follow suit. Interestingly, NFL, NBA, NHL, NCAA and Major League Baseball had strongly opposed this legalization.

Competition for Nevada Casinos

While the ruling is being cheered by casino operators and technology providers, it will also increase competition for Nevada-based gaming companies. While the other states bite into Nevada’s share, the picture is not that gloomy for the monopoly state.

This is because many casino operators feel that footfall will not decrease in Nevada resorts, as obviously gaming isn’t their only attraction.

High Roller for Casino Operators 

The new ruling will allow a new line of business for casinos and betting technology providers, opening a potential $4 billion market for the industry. Casinos and racetracks will soon be able to take bets on sports and seem to be the clear winners from the new ruling. Understandably, the decision was cheered by casino operators. Conseuquently, shares of Caesars Entertainment Corporation (CZR - Free Report) , Boyd Gaming Corporation (BYD - Free Report) and MGM Resorts International (MGM - Free Report) surged 5.5%, 3.1% and 1.6%, respectively. 

That said, a few gaming stocks worth buying are Las Vegas Sands Corp. (LVS - Free Report) , Penn National Gaming, Inc. (PENN - Free Report) and Melco Resorts & Entertainment Limited (MLCO - Free Report) . Each of these stocks flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Las Vegas Sands Corp. is a hotel, gaming and retail mall company headquartered in Las Vegas, NV. The company has expected earnings growth of 8.2% for the current quarter. The Zacks Consensus Estimate for the current year has improved by 13% over the past 30 days.

Melco Resorts & Entertainment is a developer, owner and operator of casino gaming and entertainment casino resort facilities primarily in Asia.  The company has expected earnings growth of 62.50% for the current quarter. The Zacks Consensus Estimate for the current year has improved by 16.1% over the past 30 days.

Penn National Gaming owns, operates or has ownership interests in gaming and racing facilities and video gaming terminal operations with a focus on slot machine entertainment. The company has expected earnings growth of 172.2% for the ongoing quarter. The Zacks Consensus Estimate for the current year has improved by 4.8% over the past 30 days.

Summing Up

The Supreme Court’s new ruling certainly is to be cheered by casino operators, many of which had to start operations in the Macau Cotai Strip, as betting on sports wasn’t legal in the United States. The recent development will now help them add sports gambling to their properties in the United States, which definitely is going to push up their profitability. Moreover, a new line of business will also help betting technology providers with increased demand for their products. 

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