Bet On It: Both Caesars and MGM victims of cyberattacks

Welcome to the latest edition of “Bet On It,” where The Fly looks at news and activity in the sports betting and iGaming space. 

SECTOR NEWS: In a regulatory filing, Caesars (CZR) said it recently identified suspicious activity in its information technology network resulting from a social engineering attack on an outsourced IT support vendor used by the company. “Our customer-facing operations, including our physical properties and our online and mobile gaming applications, have not been impacted by this incident and continue without disruption. After detecting the suspicious activity, we quickly activated our incident response protocols and implemented a series of containment and remediation measures to reinforce the security of our information technology network. We also launched an investigation, engaged leading cybersecurity firms to assist, and notified law enforcement and state gaming regulators. As a result of our investigation, on September 7, 2023, we determined that the unauthorized actor acquired a copy of, among other data, our loyalty program database, which includes driver’s license numbers and/or social security numbers for a significant number of members in the database. We are still investigating the extent of any additional personal or otherwise sensitive information contained in the files acquired by the unauthorized actor. We have no evidence to date that any member passwords/PINs, bank account information, or payment card information were acquired by the unauthorized actor. We have taken steps to ensure that the stolen data is deleted by the unauthorized actor, although we cannot guarantee this result. We are monitoring the web and have not seen any evidence that the data has been further shared, published, or otherwise misused… While no company can ever eliminate the risk of a cyberattack, we believe we have taken appropriate steps, working with industry-leading third-party IT advisors, to harden our systems to protect against future incidents. These efforts are ongoing. We have also taken steps to ensure that the specific outsourced IT support vendor involved in this matter has implemented corrective measures to protect against future attacks that could pose a threat to our systems.”

Days before MGM‘s (MGM) computer systems were taken down in a cyberattack, casino operator Caesars (CZR) paid out a ransom worth $15M to a cybercrime group that managed to infiltrate and disrupt its systems, CNBC’s Rohan Goswami and Contessa Brewer reported, citing sources. The same cybercrime group also made a ransom demand to MGM, the sources say. There have now been two attacks on the gaming industry in a matter of weeks. Caesars reported its incident in a SEC filing Thursday morning. The 8-K report, similar to one filed by MGM Resorts on Wednesday, acknowledged the impact of the event. The cybercrime group demanded a $30M ransom from Caesars, but the company ultimately agreed to pay about half that, sources said. The costs will be partially mitigated by Caesars’ cyber insurance policies.

ANALYSTS WEIGH IN ON FOOTBALL: BTIG noted that two out of the five underdogs won in Week 1 and the most popular player props missed on DraftKings (DKNG), a positive start for sportsbooks. Additionally, the firm stated that college football action was a headwind, but not a big one. The firm told investors that the Week 2 outlook is a bit less promising with many or all underdogs on the road against several of the presumed stronger teams in the league. Overall, 1.1M new player accounts were created throughout Week 1 of the NFL season up 40% with 242.3M according to data from Geocomply. BTIG said that market expansion and rising awareness is having a “positive” impact on both new player growth and betting frequency. Mix shifts toward lower parlay-type bets will put some downward pressure on per cap spend, though the win margin on those bets is also typically higher.

Jefferies contends that early signs are encouraging for the bookmakers: engagement is high, with “strong” betting activity and viewership, while promotional intensity appears “rational”. The 2023-24 season is projected to deliver $23.8B of handle and $2.3B of gross win, up 19% and 24% respectively vs the prior season, the firm noted, citing data from H2 Gambling Capital. Jefferies said that engagement was “exceptionally high,” with 4,200 transactions per second recorded right after the first touchdown of the season, the highest volume GeoComply has ever recorded during an opening weekend. BetMGM (MGM) has seen the most significant step-up in its Week One promotion, while Caesars has seen the largest decline. The firm also noted that BetMGM’s standout offer is not available in New York, where it has struggled to achieve share. The following offers were observed:

FanDuel (PDYPY): $200 bonus and $100 off NFL Sunday Ticket

DraftKings: $200 bonus

BetMGM: up to $1,500 bonus

Caesars: $250 bonus

Fanatics/PointsBet (PBTHF): $150 site credit for Fanatics apparel

Per NBC, viewership for the first game of the NFL season was up 24% compared to last season’s opener at 26.8M average viewers. The firm also reported key takeaways from its Jefferies NFL OSB Survey 4.0, such as:

More people are betting than prior, with 44% of respondents having wagered over the past 12 months

Brand stickiness is at an all-time high, with 89% likely/very likely to continue with their current accounts

Ease-of-use remains slightly more important than promotions, with 62% of respondents indicating the former as very important vs 58% for the latter

DraftKings and FanDuel remain leaders in interface popularity.

80% use ESPN as their primary sports source, but 53% would be inclined to try ESPN Bet (PENN) launching in November

Macquarie broke down the difference between the NFL and the college game, reporting that NFL represented about 70% of football betting with college representing approximately 30% of football betting this week, according to the firm’s proprietary hold model. The top 10 college games accounted for 52% of total college bets, according to Macquarie. The firm’s model suggests total sports betting market hold of 8% for the week of September 4-10, assuming a football hold of 8% and hold of 9% for all other sports. More broadly, North American online gaming stocks are up 23% year-to-date, but are down 8% over the past month as possible recession and discussions on consumer health have once again grabbed headlines, Macquarie told investors in a research note.

SPORTS BETTING HEATS UP IN THE SUNSHINE STATE AGAIN: In court documents filed Monday, a U.S. appeals court denied a request for a re-hearing of the case by Magic City Casino and Bonita Springs Poker Room challenging the compact legalizing sports betting in Florida, Kevin Accettulla of wfla.com reported. The two entities were the compact between the state and the Seminole tribe violated federal law. Gary Bitner, a spokesperson for the Seminole Tribe, said the tribe is “pleased with the denial of the request for an en banc hearing,” but declined to say whether or not they would resume accepting bets.

PUBLICLY TRADED COMPANIES IN THE SPACE INCLUDE: Accel Entertainment (ACEL), Bally’s (BALY), Boyd Gaming (BYD), Caesars (CZR), Churchill Downs (CHDN), DraftKings (DKNG), Flutter Entertainment (PDYPY), Gambling.com (GAMB), Gan Limited (GAN), Genius Sports (GENI), Las Vegas Sands (LVS), MGM Resorts (MGM), Penn Entertainment (PENN), Rush Street Interactive (RSI), Super Group (SGHC) and Wynn Resorts (WYNN).