MGM Resorts International Buys Bankrupt AAF Sports Betting App in Court-Approved Sale
Posted on: August 21, 2019, 06:02h.
Last updated on: August 21, 2019, 06:31h.
A judge earlier this week approved the sale of a now-defunct professional football league’s sports betting application to MGM Resorts International.
On Monday, US Bankruptcy Judge Craig A. Gargotta in Texas ruled in favor of the Las Vegas gaming company’s acquisition of intellectual property (IP) owned by Legendary Field Exhibitions LLC, the New York-based owner of the Alliance of American Football (AAF).
As part of the agreement, which was filed nearly two months ago, MGM agreed to pay $125,000 to the debtors for the property.
The AAF kicked off its inaugural season in February, the weekend after the NFL’s Super Bowl, to some acclaim. However, the young league quickly hemorrhaged money. Just nine days after its first games, Tom Dundon, owner of the National Hockey League’s Carolina Hurricanes, agreed to invest up to $250 million into the league for a majority stake in it.
On April 2, with just two weeks left in the regular season, AAF officials suspended operations. The day before, according to court documents, the league and MGM entered into an agreement granting MGM “a perpetual, irrevocable, and fully paid-up license” for the IP.
While the AAF’s trustee said he knew other creditors would claim ownership of the intellectual property, he urged Gargotta to approve the sale for several reasons, which included that any court case over the IP would take time and money.
Approval of the Settlement Agreement is expected to expedite the liquidation of one of the Debtor’s assets, avoid disputes, and maximize estate recoveries under the circumstances,” the agreement stated.
In addition to the payment, MGM further agreed to reduce its claim against the bankrupt league from $7 million to $5 million.
More Work Needed on App
According to a statement made to the court by Scott Butera, MGM’s president of interactive gaming, MGM loaned the start-up league $7 million for IP development. The property was a mobile application that would, once finished, offer in-game betting options and provide bettors “biomechanical data” they could consider when making wagers.
That data would be transmitted in less than a half-second.
As of April, when the AAF filed for liquidation, the app was not operational, according to Butera’s statement
In order for the app to become operational, Butera said MGM expects it will need to invest millions of dollars into the project. Then, once operational, Butera added that the technology will need league partners to generate revenue, and that the company would need to market the technology in order to acquire enough users to make a profit.
Other companies are working on similar applications, and Butera admitted that he was uncertain if MGM could make the AAF’s app competitive.
However, “if the IP is not developed going forward, its value will diminish, and it may become obsolete and unusable,” he concluded in his statement.
An MGM spokesperson told Casino.org the company would not comment Wednesday on the acquisition.
Former Players Objected
On Friday, a lawyer for Colton Schmidt and Reggie Northrup, both of whom played in the AAF, filed an objection to the admissibility of Butera’s statement in advance of Monday’s hearing over the sale.
The players’ objected primarily because they believe the IP was the league’s only “asset of value” in liquidation, and the $125,000 sale price was harmful because they “subjected themselves to serious risk of physical harm” in playing for the league.
The players also argued that MGM believes the IP to be worth far more than what they offered, noting a USA Today article that quoted league co-founder Charlie Ebersole saying the AAF planned to spend at least $500 million over a five-year period to develop it.
Related News Articles
Related News Articles
- May 20, 2021 — 19 Comments—