MGM CEO attacks “absurd” Wire Act reinterpretation
MGM Resorts International chief executive Jim Murren has attacked the Department of Justice’s revised stance on the Wire Act, dismissing it as "an absurdly, poorly-written and unenforceable opinion".
Speaking following the publication of the casino giant’s fourth quarter and full-year results for 2018, Murren (pictured) said that it would not deter MGM from continuing to pursue opportunities in the iGaming and sports betting sectors.
The revised opinion, issued by the DoJ’s Office of Legal Counsel in January, stated that the Wire Act applied to all forms of gambling, and not just sports betting, as a 2011 interpretation had ruled.
The language of the opinion, Murren said, would suggest that the interstate lottery game Powerball, which is live in 44 states, would effectively become illegal.
“And so it’s just, we think, an absurdly, poorly-written and unenforceable opinion,” he said. “And I don't think anyone in […] the gaming industry [or] the sports betting industry, feels any differently.”
MGM reported a 9% year-on-year rise in revenue to $11.8bn (£9.2bn/€10.5bn) for the 12 months ended December 31, 2018. It saw a 32% increase in net revenue from its MGM China subsidiary and an 8% rise from its regional properties across the US offset a 1% year-on-year decline from its Las Vegas strip resorts.
Expenses for the year grew to $10.4bn, leaving an operating profit of $1.5bn, and a post-tax profit of $466.8m after finance-related expenses and tax. This represented a significant drop from 2017, when the company recorded a post-tax profit of $2bn, though this was largely due to an income tax benefit of $1.1bn in the prior year.
For the fourth quarter of 2018, revenue was up 18% year-on-year to $3.1bn, with expenses of $2.8bn leaving an operating profit of $335.7m. After finance-related costs and expenses, MGM made a $23.3m loss for the period.
Murren also talked up the opportunity provided by legal sports betting in the US, which he said MGM viewed as a larger opportunity than simply wagering on sports.
“We look at it as a total interactive experience, which is why you will see us talking more about social games and digital ventures,” he said.
Sports betting and ancillary products and services for the vertical, Murren continued, would play a major part in the second phase of the operator’s MGM 2020 growth strategy. This plan, launched in January this year, will initially see the operator look to streamline operations to maximise profitability, then move into a second phase of investing in technology to drive revenue and profit growth. This is designed to boost the operator’s earnings before interest, tax, depreciation and amortisation by $200m by 2020.
This will also build on MGM’s early-stage partnerships with major US sports leagues, such as its deals with Major League Baseball and the National Hockey League, which Murren said would help “develop an extraordinarily robust trusted relationship with customers”.
MGM has also established a $200m joint venture with GVC Holdings, Roar Digital, which aims to provide partners with land-based and online sports betting services.
Picture credit: Themiragelv (Creative Commons)