Legalization of sports gambling would help Dover

Dover Downs Gaming & Entertainment could recoup gaming revenue it will lose to Maryland slots sites if Delaware legalizes sports gambling, said a Wall Street analyst Sunday.

In an analysis of Dover stock, Lawrence Klatzkin of Jefferies & Co. said the stock price will not move upward "until the prospect of sportsbetting becomes more viable."

Although it would be "be at least another two years before anything substantial could be operational, Maryland gaming being legalized will likely have an extremely negative impact" on Dover, the analysis added.

Klatzkin did upgrade his rating on Dover stock from underperforming to hold because "the Maryland threat has been priced in."

Maryland voters passed a ballot referendum that would legalize slot machines earlier this month. And Delaware, which legalized slot machines in 1994, draws from a significant Maryland player base. Klatzkin's analysis said roughly 50% of Dover's players alone come from Maryland.

Delaware, Nevada, Oregon and Montana are the only states allowed by federal law to offer sports gambling. The four were "grandfathered in" when Congress passed the Professional and Amateur Sports Protection Act in 1992, which outlawed sports betting in the rest of the U.S.

Klatzkin also said that the only thing stopping the legalization has been the Gov. Ruth Ann Minner's opposition. This might change in 2009 after Jack Markell takes office.

Another factor that suggests legislation legalizing sports gambling would pass is the "$200m-plus state deficit and the hit Delaware will take due to the Maryland legalization," according to the analysis.

A study cited by the analysis says legalized sports betting in Delaware would generate $26.3 million in tax revenue annually for the state.