Mar 18, 2022 - Economy

State regulators eye Barstool-Penn deal

Barstool Sports founder Dave Portnoy visits Faction Talk at SiriusXM Studios on November 14, 2017 in New York City.

Photo: Slaven Vlasic/Getty Images

Gambling regulators in two states are investigating Penn National Gaming over concerns with Barstool Sports and its founder Dave Portnoy, the Wall Street Journal reported.

Why it matters: Penn's acquisition of Barstool always had brand risk, but now it also has business risk that could result in losing gambling licenses.

Driving the news: WSJ reported Thursday that gambling regulators in Nevada and Indiana are looking into Penn.

  • At a December hearing for Penn CFO Felicia Hendrix, Nevada Gaming Control board chairman Brin Gibson expressed concern and asked for information about Barstool and Portnoy, The Nevada Independent reported.
  • A spokesperson for the gaming board tells Kerry its investigation of Penn and Portnoy is ongoing but declined to comment on specifics.
  • Via email, Gibson says the board's obligation "is to protect the reputation of the state and the reputation of the state's gaming industry."
  • The Indiana Gaming Commission tells Kerry it "is conducting a review of this matter as it pertains to Penn's responsibilities as a licensee. Penn is aware of the IGC's ongoing concerns and we will continue to evaluate any new information that emerges."
  • Penn's Barstool Sports app operates in Indiana but not Nevada. However, Penn has casinos in Nevada.

Context: Penn acquired a 36% share in Barstool in January 2020 and plans to buy the rest in early 2023, according to Penn's latest earnings call.

  • With Barstool, Penn can grow its reach through the media brand's built-in audience, but Barstool is rife with controversy.
  • The site has long been accused of publishing sexist content and promoting a culture of cyberbullying and harassment.
  • Portnoy's list of offenses include threatening to fire employees who sought to unionize and using racist language, including the N-word, and then defending it.
  • Insider has published two articles detailing sexual misconduct allegations against Portnoy, which he has denied and filed a defamation suit.

The other side: Portnoy told the Action Network that the regulators "wouldn't be doing their job" if they did not investigate the allegations in the Insider articles.

  • But Portnoy continued to deny them. "After being presented with all the facts surrounding the story and not just a one sided smear campaign by Business Insider everybody associated with me both personally and professionally have stuck with me because I proved the allegations have zero merit," he said.
  • Barstool CEO Erika Nardini told Axios she found Insider's stories to be "shoddy journalism" for not correcting claims of inaccuracies presented by Portnoy.
  • Penn CEO Jay Snowden has also stood by, telling WSJ he finds Portnoy "to be very honest." He said the allegations were about Portnoy's personal life and that he is not a Penn employee.

What's next: Snowden told WSJ that Portnoy will remain involved in Penn, but there's no set organizational structure yet. He may announce those details in the third quarter.

The bottom line: Companies must consider far more than financials when dealmaking.

Kerry Flynn co-authors the Axios Pro Media deals newsletter. Sign up now.

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