Gaming Giants MGM and Caesars Brush Aside Tariff Anxieties
CEOs Play Down Tariff Worries in State of the Union; Sporttrade Seeks CFTC Approval, Among Other Matters
In the wake of US President Donald Trump's groundbreaking tariffs, top gaming CEOs offered reassurances to Wall Street analysts. Global markets took a hit last month with Trump's double-digit tariffs on major trading partners, causing a sell-off on the major indices. The gambling industry felt the ripple effect on April 3 as leading names fell up to 15%.
Some investors have raised concerns that trade policies could trigger a recession, diminishing consumer spending and curtailing tourism in Las Vegas, potentially hindering foot traffic at sportsbooks on the Strip.
During its Q1 2025 earnings call on April 29, Caesars Entertainment CEO Tom Reeg fielded numerous inquiries on tariffs. Reeg appears to have a contingency plan in place to handle intensifying macroeconomic pressures. He explained, "If we were to start to see softness, we have levers that we can pull that you saw as we came out of the pandemic, where we were able to outperform peers in the market by tapping into our database." Reeg also expressed confidence that they "do not see any of the consumer softness investors seem to be worried about."
The following day, MGM Resorts CEO Bill Hornbuckle also dismissed concerns regarding the global trade environment. As for tariffs, MGM is concentrating on near-term sales and operational considerations, according to CFO Jonathan Halkyard. So far, he indicated that the impact has been minimal.
Both companies are thriving in their digital sports betting operations. Caesars Digital reported a 19% increase in net revenue ($335 million), while adjusted EBITDA skyrocketed to $45 million. BetMGM generated net revenue of $443 million, up 34% from the previous year, with online sports betting revenue increasing by 68%. For the quarter, BetMGM's active player days increased 20%, while handle per active customer surged 37%. The venture aims to achieve full-year profitability in 2025 and long-term annual profitability of $500+ million.
Bullish Signs in the Digital Space
While the global trade environment is causing some apprehension, both companies are flourishing in their digital sides of the business. Sporttrade recently requested approval from the Commodity Futures Trading Commission (CFTC) to offer a federally-regulated sports prediction market. The CFTC serves as the US derivatives market regulator, managing futures, swaps, and options. The agency is currently reviewing a balanced approach to the regulation of designated contract markets involving sports-event contracts.
At the moment, exchanges like Kalshi and Robinhood are not explicitly prohibited from listing and trading sports event contracts on a federal level. However, the CFTC does not expressly allow the contracts either. The agency made the letter public on April 30.
Kalshi secured a victory in New Jersey earlier this week when a US District Judge granted an injunction that would permit the exchange to continue operations in the Garden State. In a 16-page opinion, Judge Edward Kiel wrote that he was persuaded that Kalshi's sports-related event contracts fall within the CFTC's exclusive jurisdiction.
Meanwhile, Sporttrade, which is live in five states, is in a unique position because it launched state operations before Kalshi's sports contracts debuted. The exchange aims to be the catalyst toward the "financialisation" of sports betting, offering a platform where participants can trade in and out of positions, similar to financial trading with securities.
An astute trader during the final round of The Masters could have bought Justin Rose at a low price when he had a 2% probability of winning the opening major, before Rory McIlroy bogeyed on the 13th hole. They could then sell the contract near 45 cents on a dollar to lock in a substantial profit.
A Hopeful, Competitive Landscape
According to Sporttrade CEO Adam Kane, a CFTC-led regulatory approach for exchanges could foster a competitive market landscape, free from the "monopolistic forces" that dominate state-level sports betting markets. Given its track record as a "compliant event contract exchange" under various state regulatory agencies, Sporttrade is seeking relief from the CFTC.
In Louisiana, a proposed HB 639 measure would more than double the sports betting tax from the current rate of 15% to 32.5%. Approximately 25% of the tax proceeds will fund a pool benefiting student-athletes at the state's Division I public universities. The pool is projected to receive approximately $31 million in funding annually, aiding small Division I schools such as the University of Louisiana-Monroe and Southern University.
Industry lobbyists have expressed concerns regarding the high tax rate, which is already above the nationwide average of 14%. The Louisiana Senate unanimously approved a bill prohibiting sweepstakes casinos on Monday, expanding digital crime laws to include sweepstakes sportsbooks employing a dual-currency model.
Meanwhile, IC360 signed a technical cooperation agreement with Brazil's gambling ministry to assist the government in identifying patterns of suspicious sports betting activity. The company will provide specialized knowledge in identifying anomalous betting activity, helping to detect and contain efforts to manipulate outcomes.
The Brazilian market is still recovering from a widespread match fixing scandal in 2023, which led to charges against 16 individuals, including seven professional soccer players. IC360 co-CEO Scott Sadin stated that their mission is to cultivate a culture of responsibility and provide a detection alert system for all stakeholders, ensuring integrity is upheld and sustainable for the Brazilian community.
Sources: 1. State of the American Gaming Industry 2025, American Gaming Association; 2. MGM Resorts International Q1 2025 Earnings Call Transcript, Seeking Alpha; 3. Caesars Entertainment Corporation Q1 2025 Earnings Call Transcript, Seeking Alpha; 4. "HB 639: Proposed Measure Would More than Double Louisiana’s Sports Betting Tax," PlayUSA; 5. "IC360 Signs Agreement with Brazil’s Gaming Ministry," Yahoo Finance; 6. "Sports Betting Integrity Monitor IC360 to Partner With Brazilian Regulatory Body," Gaming Intelligence; 7. "Brazil Facing Match-Fixing Scandal Amid World Cup Qualifiers," The Guardian; 8. "Social Casino Chain ChargePoint Agrees Sweepstakes Sales Ban in California," Gaming Intelligence
In 2024, Caesars Entertainment holds a plan to address potential economic pressures, potentially enabling the company to outperform rivals in the market, despite fluctuations caused by tariffs. As the United States derivatives market regulator, the Commodity Futures Trading Commission (CFTC) is currently reviewing a balanced approach to the regulation of sports-event contracts, which could help establish a competitive market landscape in the digital sports betting sector. Meanwhile, MGM Resorts has indicated minimal impact from tariffs, focusing instead on near-term sales and operational considerations in their digital sports betting operations.
