Regulated online sports betting in the United States is essentially a duopoly. If the companies at the forefront of that situation want to expand that circumstance to the market for legal online casino play, buying out the competition is one way to do it.
Rumors continue to swirl toward that end. Those rumors present an opportunity for the dominant players in a race toward the top or a chance for another party to deny the extension of the duopoly.
However, rumors about Rush Street Interactive (RSI) again being an acquisition target might be nothing more than those rumors.
Rush Street Interactive subject of chatter once more
About a quarter of a year has passed since the last time there were rumors swirling about RSI being acquisition or merger fodder, so it seems that the seasonality of such murmurings is again ripe. This time, the unconfirmed reports1 go as far as to say that a sale of RSI will take place before the 2024-25 college American football/NFL seasons begin.
Those rumors build on a March 2024 Bloomberg story2 that RSI was shopping itself, approaching several parties including DraftKings to gauge interest. In the months since, there has been no confirmed movement on such a deal from any parties that may have been involved.
There are things to like about RSI for a competitor eyeing its assets. RSI has found a way to move toward profitability while similar brands have struggled.
What makes RSI attractive for potential partners
In the first quarter of 2024, RSI saw a 34% year-over-year increase in revenue and cut its net losses by nearly 90% in the same comparison. RSI operates an online casino product in all four of the most lucrative US states for that gaming: Michigan, New Jersey, Pennsylvania and West Virginia.
Furthermore, RSI is the sole licensed operator in Delaware for real-money online casino play. Its operations outside the US include Mexico, Ontario, and multiple countries in South America.
Those international expansion opportunities merit an analysis of their own. Staying focused on the US, though, RSI’s strength in Pennsylvania increases the appeal.
Data suggest that RSI is among the top brands for online casino play in Pennsylvania, arguably the most lucrative market for such gaming in the US. Awareness of the brand is high there thanks to partnerships with local sports teams and the presence of multiple brick-and-mortar gaming properties sharing the Rivers branding.
Therefore, RSI presents a “fast-track” way to either shore up dominance or reinforce efforts to turn over the apple cart when it comes to Pennsylvania online casinos. It could be simply a matter of coming to an agreeable price right now.
It is difficult to decipher who might be involved in negotiations if they are indeed taking place. Currently, it’s difficult to rule out any possibilities.
Making cases for a number of hypotheticals
At least on a remedial basis, it’s possible to weave a rationale for just about any other current US online casino operator to have an interest in RSI. In some cases, though, making that case depends on how other events play out.
For example, Flutter Entertainment might be a long shot right now because of its rumored interest in acquiring Penn Entertainment’s interactive division3. At the same time, if Flutter gets an appetite for acquiring a current competitor and the Penn deal evaporates, RSI could make a suitable consolation prize.
Another possibility involves a dominoes-falling sequence scenario. If Flutter does pull the trigger on Penn’s online gambling division, DraftKings might feel compelled to make a similar move to keep pace. In that instance, RSI probably looks appetizing.
On the other hand, DraftKings has already been aggressive when it comes to acquisitions, paying out for Golden Nugget online gaming and Jackpocket. That might cool the jets at DraftKings for a while.
DraftKings taking a back seat and Flutter sizing up Penn could also open the door for another buyer to step in. MGM has been somewhat active in this regard, buying LeoVegas.
Another possibility is bet365, which is preparing to take its online casino live in Pennsylvania. It has the resources to acquire RSI and that acquisition could make it a serious contender for market share in the US.
Caesars has been quiet on this front for a while, with its last significant online casino action being introducing standalone Caesars Palace and Tropicana products. Buying RSI would reassert the company’s intention to occupy a top spot in online casino play.
This entire discussion is pure conjecture currently. At the same time, now might be the time to act for any interested party.
Time could be on RSI’s side
When it comes to negotiating a price for a potential sale, RSI is coming to the table from somewhat of a position of strength. The improving financials and growing customer base enable RSI to ask for a better deal than a company that is stagnant or moving backward in those regards.
At the same time, there is no guarantee that such growth will continue, much less at the same pace. That creates a choice for a prospective buyer.
A potential buyer must try to forecast whether the metrics will continue to escalate for RSI or if a climax has already occurred. If data suggest the former, then time is of the essence to avoid further increases in the price for RSI.
If the latter is the result, then it’s a waiting game until RSI becomes amenable to a buyer’s comfort level. Even if RSI has already reached its zenith, there is still value for a buyer at the right price.
RSI being acquired by or merging with another online gambling company has a feeling of inevitability to it. The time might not still be right, though, for a number of reasons.