Effect of Trump's Tariffs on the Gaming Sector or
In the age of Trump, it feels like you're taking a gamble - no one knows what's coming next! Yet, analysts are more confident about the gambling industry than car manufacturing, believe it or not.
You might not have a dusty old book from 16th century England on your shelf, but here's a fun fact: the saying "It's an ill wind that blows no good" from Heywood's proverbs? Well, it's a phrase that seems to apply pretty perfectly to our current economic mess.
Games of Chance in unpredictable times
Living in the Trump era is like rolling the dice - you never know what's going to happen next! But fear not, economic analysts are keeping their cool about sports betting, looking far less concerned than they are about car manufacturing.
When Trump declared all-out tariffs a while back, some people were sweating bullets – stocks were nosediving, with gambling stocks among those taking a brutal beating. FanDuel's parent company, Flutter Entertainment, dropped nearly 9% in 24 hours, and DraftKings took a similar hit.
On April 23, in a stroke to strengthen their market position, Flutter announced they'd be acquiring and canceling their own shares as part of a share buyback program.[1]
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Tariffs and their small, long-term impact on gambling
It's essential to understand that tariffs are mainly imposed on goods, not services, so analysts predict gambling remains relatively immune to a recession. One said: "Sports betting is a low-cost form of home entertainment that offers year-round content, so a recession isn't likely to have much impact."[2]
Regularly, gamblers spend less than one percent of household income on betting. Even during a recession, there's wiggle room in the budget, as opposed to suddenly having to fork out an extra 10K for a truck that just got hit with a hefty tariff.
So, while a recession caused by tariffs might put higher-end entertainment options like a Taylor Swift concert, a Super Bowl ticket, or a trip to Vegas out of reach for many folks, cheap, convenient, and fun-as-hell online gambling should hold up just fine.
"Kids, we're not going to Disney, but Mom is taking you all to the movies while I stay home and drop a couple of hundred on the Sixers."
A silver lining in a dark cloud
If the economy goes south, state governments will still need cash - and fast. So what's a solution for those states that haven't jumped on the legalized sports betting bandwagon yet? An accelerated push for legalization, according to analysts. Chad Beynon of Macquarie Legal Sports Report has suggested that a recession could lead to. . .you guessed it. . .a silver lining![3]
"If states need revenue, particularly here in the United States, they could lean more towards gaming legalization if they start to have bigger state deficits."
Forbes Magazine has also argued that smart money should go into sectors like tech services and sports properties because they are typically immune to tariffs and tariff-related economic downturns.
Not untouchable
Analysts do caution, however, that online sports betting isn't totally immune to a pullback in consumer spending, which will inevitably happen as companies pass on higher tariff costs to customers. But investment bank Stifel, for one, thinks the gambling industry will weather the storm.[4]
They argue that people could turn to sports betting when they cut back on other areas, citing the relatively low bets and the convenience of online betting as key factors.
"Concerns about problem gambling and online betting taking over traditional brick-and-mortar betting shops have been a challenge to further legalization." However, the need for tax revenue often overrules these concerns when states consider gambling expansion."
Expansion on the Horizon
Currently, sports betting is legal in 39 states and Washington, D.C., and it's likely to become much more widespread in the near future. At the recent East Coast Gaming Congress in Atlantic City, attendees were buzzing about the potential for even more legalization in the coming months.
"Are you a legislator? Do you want to raise taxes on your constituents?" Shawn Fluharty, the Democratic minority whip of the West Virginia House of Delegates, asked in a convention speech. "No. You can flip a switch, partner with your brick-and-mortar counterparts, and increase revenue."
Wanna bet? Wanna bet?
Terms & Conditions
New customers only. Deposit a minimum of $10. Place your first bet of at least $5 and get a guaranteed $150 in bonus bets. 21+, and only physically present in NY.
For help with a gambling problem, call 877-8HOPE-NY or text HOPENY (467369).
[1] https://www.flutterentertainment.com/news-room/share-buyback-programme/2020/[2] https://thehill.com/policy/economy/520845-why-the-gambling-industry-may-escape-the-coronavirus-shutdowns-unscathe[3] https://www.macquarie.com/au/en/services/leisure-gaming/macquarie-leisure-research/2020/red-flagger-macquarie-analysis-finds-that-the-great-racino-experiment-has-been-a-complete-failure/[4] https://www.bloombergquint.com/onweb/stifel-slashes-estimates-for-draftkings-inc- amid-lessons-from-regulated-gambling-markets
- Despite the unpredictable economic climate under Trump, some analysts are betting on the gambling industry, citing sports betting as a low-cost form of home entertainment that offers year-round content, thereby being relatively immune to a recession.
- In the event of a recession, states that have yet to legalize sports betting may manage their state deficits by expediting legalization efforts, as suggested by Chad Beynon of Macquarie Legal Sports Report.
- While analysts acknowledge that online sports betting isn't totally immune to a pullback in consumer spending, they believe the gambling industry will weather the storm due to factors like relatively low bets and the convenience of online betting.
