The Coyotes Are Now Inactive. Their Sports Betting License Is Not

Alex Meruelo isn’t just keeping the Arizona Coyotes name, IP and minor league affiliate in Arizona. He’s also keeping the team’s sports betting license—at least for now.

In 2022, Arizona granted licenses to each of its top-tier pro sports teams, valuable concessions that they could then sell to operators looking to do business in the state. The Meruelo-owned Coyotes partnered with Meruelo’s gambling company to launch SaharaBets, which uses it to do business in the state.

That license is still active, according to a representative for the Arizona Department of Gaming, who declined to comment about whether that might change now that the team’s roster and hockey operations have been sold to a new ownership group in Utah. Should Meruelo need an argument for keeping it, he might have two claims: First, the Coyotes are still technically an NHL team, albeit an “inactive” one; and second, Meruelo still owns the AHL’s Roadrunners in Tucson, which might be enough by the letter of the state’s gaming laws.

A representative for Meruelo declined to comment.

The recent Coyotes relocation was not a typical team sale. Ryan and Ashley Smith agreed to pay $1.2 billion for just those Coyotes assets, leaving Meruelo with the team IP, its records and the AHL franchise. More importantly, Meruelo also has an option for the Coyotes to rejoin the NHL within the next five years if certain stipulations are met, specifically in the team’s quest for a new arena. The league’s official announcement called the Coyotes “inactive.”

Meruelo, who has publicly said he plans to bring the team back within that five-year window, could argue that the Coyotes are still an NHL franchise even while dormant. The Arizona state gaming laws and revised statutes don’t appear to include any language for what happens if a team leaves the state, or ceases to exist.

The law also defines the professional sports teams as those competing “at the highest level league or organizational play for its respective sport.” If the Coyotes no longer count, Meruelo could possibly argue that the Roadrunners are now the highest level of professional hockey in the state, and therefore eligible to retain the license. This nuance was specifically raised in public comments two years ago by a representative of the Phoenix Rising, a soccer team in the USL, who argued that USL could be seen as the “highest level” of soccer possible in the state because MLS didn’t have a franchise there. The Rising don’t have a license—the team reportedly determined the $100,000 application fee was too steep without a guarantee that it would be eligible.

Sports teams in Arizona have used these licenses as the backbone to wider sponsorship deals, which often include upfront cash and a revenue share. The Arizona Cardinals, for example, partnered with BetMGM; the Arizona Diamondbacks with Caesars. The Phoenix Suns and Mercury, both owned by Mat Ishbia’s Player 15 Group, signed with FanDuel and Bally Bet. TPC Scottsdale (DraftKings) and Phoenix Speedway (Penn Entertainment) also received licenses that they sold to operators.

The Coyotes went a slightly different route. The NHL team partnered with Meruelo Gaming, a unit of Meruelo’s wider gambling portfolio, to launch SaharaBets. In short, Meruelo secured market access for his gaming company via his NHL team. The sportsbook operates only in Arizona, according to its website, and has less than 1% market share, per March numbers from gaming research firm Eilers & Krejcik.

The market value of that license has likely diminished the last two years. There are 20 total Arizona licenses, and the sports betting landscape is less crowded now than it was back in 2022. There aren’t many sportsbooks that can generate large volume on the revenue share, and almost all of them already have Arizona access. The consolidation has also led to a drop in the upfront cash required in the deals.

“Market access in Arizona is probably worth more in the single millions, as opposed to the fives of millions or tens of millions,” Chris Grove, partner emeritus at Eilers & Krejcik and co-founding partner of Acies Investments, said in an interview.

That said, there are geographic benefits specific to SaharaBets and Meruelo, who owns the Grand Sierra Resort in Reno and the Sahara hotel and casino in Las Vegas. Arizona is the only state that borders the southern half of Nevada that has legal sports betting, and many Arizona residents make trips up to Las Vegas for gambling or entertainment purposes. That could let Meruelo offer specific rewards opportunities to those users.

“Anything [Meruelo] can do to improve incremental visitation and consumer loyalty from a feeder market like Arizona is probably meaningful,” Grove said.

In addition to the $100,000 application fee, the Arizona law stipulates an initial $750,000 license cost and a $150,000 annual fee. The law set aside 20 licenses total for sports teams and local Native American tribes, and 17 are currently held. Earlier this year the state gaming agency opened the process for the other three to be sold.

The Roadrunners averaged about 4,000 fans per game this season. Sportico doesn’t do valuations of AHL franchises, but for reference, the Chicago Blackhawks paid $11.8 million for their affiliate in 2021, and the minimum value for teams right now is believed to be around $15 million. On the other end of the spectrum, the Henderson Silver Knights, the affiliate of the Vegas Golden Knights, generated roughly $11 million in revenue for the 2022-23 season, with two-thirds of the total from tickets.

With assistance from Kurt Badenhausen, Barry Bloom and Scott Soshnick.