PENN Entertainment, Inc.PENN
PENN Entertainment, Inc. Commitments Disclosure
Note 12—Commitments and Contingencies
ESPN Sportsbook and Investment Agreements
On August 8, 2023, PENN entered into the Sportsbook Agreement (the “Sportsbook Agreement”) with ESPN relating to OSB in the U.S. Pursuant to the Sportsbook Agreement, PENN received the exclusive right to use the ESPN BET trademark for OSB in the U.S.
The Sportsbook Agreement had an initial 10-year term, with the right for either party to terminate the agreement after the third year if specific market share performance thresholds were not met. In consideration for the media marketing services and brand and other rights provided by ESPN, PENN agreed to pay $150.0 million per year in cash pursuant to the Sportsbook Agreement.
In connection with the Sportsbook Agreement, PENN and ESPN also entered into an Investment Agreement (the “Investment Agreement”) on August 8, 2023. The Investment Agreement provided for the issuance to ESPN of certain warrants to purchase shares of PENN common stock, par value $0.01 per share, and set forth certain other governance rights of ESPN.
Pursuant to the Investment Agreement PENN issued to ESPN warrants to purchase approximately 31.8 million shares of PENN common stock, subject to vesting (“Initial Warrants”). The warrants were classified as equity and contained three separate tranches. At the grant date, the $550.4 million fair value of the Initial Warrants was determined using the Black-Scholes option-pricing model with contractual terms ranging from 9.5 to 11.5 years, and strike prices ranging from $26.08 to $32.60. Additionally, if after February 29, 2024 and during the term of the Sportsbook Agreement had PENN achieved specified performance conditions based on an average market share based on gross gaming revenue in the states in which the Sportsbook operated (as defined within the Investment Agreement), PENN would have issued to ESPN warrants to purchase up to an additional 6.4 million shares of PENN common stock (“Bonus Warrants”).
On November 5, 2025, PENN and ESPN entered into the Termination Agreement to terminate the Sportsbook Agreement, effective December 1, 2025 (the “Termination Date”). Pursuant to the Termination Agreement, PENN’s exclusive right to use the ESPN BET trademark for OSB in the U.S. ended on the Termination Date. The Termination Agreement provided that PENN pay ESPN a total of $38.1 million in the fourth quarter of 2025 in respect of all remaining fees owed through the Termination Date. In addition, PENN paid ESPN a total of $5.0 million following the Termination Date for traditional media to support theScore Bet and/or Hollywood iCasino offerings. Per the Termination Agreement, these payments settled all outstanding payment obligations from PENN to ESPN under the Sportsbook Agreement.
On November 5, 2025, in connection with the Termination Agreement, PENN and ESPN entered into Amendment No. 1 to the Investment Agreement (the “Investment Agreement Amendment”) to amend certain terms of the Investment Agreement. Pursuant to the Investment Agreement Amendment, effective November 5, 2025, the Initial Warrants were deemed vested through and including February 8, 2026, the unvested portion of each of the Initial Warrants held by ESPN were forfeited and cancelled for no consideration, and PENN did not issue any Bonus Warrants. As of November 5, 2025, ESPN held (i) a warrant to purchase 3,177,610 shares of PENN common stock with an expiration date of February 8, 2033 and an exercise price of $26.08; (ii) a warrant to purchase 3,200,930 shares of PENN common stock with an expiration date of February 8, 2034 and an exercise price of $29.99; and (iii) a warrant to purchase 1,578,670 shares of PENN common stock with an expiration date of February 8, 2035 and an exercise price of $32.60.
During the years ended December 31, 2025, 2024, and 2023, the Company recognized expenses of $155.6 million, $179.2 million and $33.3 million, respectively, related to the Sportsbook Agreement, and $57.1 million, $67.9 million, and $12.5 million, respectively, related to the Investment Agreement. Expenses related to the Sportsbook Agreement and the Investment Agreement are recorded within “Gaming” expenses on the Consolidated Statements of Operations and recognized in accordance with our policies. See Note 2, “Significant Accounting Policies and Basis of Presentation” for further information.
Litigation
The Company is subject to various legal and administrative proceedings relating to personal injuries, employment matters, commercial transactions, development agreements and other matters arising in the ordinary course of business. Although the Company maintains what it believes to be adequate insurance coverage to mitigate the risk of loss pertaining to covered matters, legal and administrative proceedings can be costly, time-consuming, and unpredictable. The Company does not believe that the final outcome of these matters will have a material adverse effect on its financial position, results of operations, or cash flows.
Location Share Agreements
Prairie State Gaming (“PSG”) enters into location share agreements with bar and retail establishments in Illinois. These agreements are contracts which allow PSG to place VGTs in the bar or retail establishment in exchange for a percentage of the variable revenue generated by the VGTs. PSG holds the gaming license with the state of Illinois and the location share percentage is determined by the state of Illinois. The Company records the location share payments to “Gaming” expense within the Consolidated Statements of Operations. For the years ended December 31, 2025, 2024, and 2023, the total location share payments made by PSG were $43.6 million, $45.0 million, and $45.3 million, respectively.
Purchase Obligations
The Company has obligations to purchase various goods and services totaling $473.4 million as of December 31, 2025, including $268.5 million which will be incurred in 2026. Purchase obligations totaled $1.0 billion as of December 31, 2024. The decrease over the prior year is primarily due to the termination of the Sportsbook Agreement with ESPN, as well as the opening of the Joliet Project and the M Resort project during the year ended December 31, 2025. See Note 11, “Leases” for further information.
Capital Expenditure Commitments
Pursuant to each of our Triple Net Leases, with the exception of our Morgantown Lease (which is a land lease we entered into on October 1, 2020 with GLPI as discussed in Note 11, “Leases”), we are obligated to spend a minimum of 1% of annual net revenues, in the aggregate under each lease, on the maintenance of such facilities. Additionally, during the year ended December 31, 2025, we had project capital expenditures of $408.4 million, the majority of which are in connection with the PENN Development Projects as a result of our Master Development Agreement with GLPI (also discussed in Note 11, “Leases”), for which we received $280.0 million in funding from GLPI during the year ended December 31, 2025. We expect to incur additional capital expenditures in 2026 and 2027, and will receive up to $225.0 million in funding from GLPI for the Aurora Project.
Employee Benefit Plans
The Company maintains a qualified retirement plan under the provisions of Section 401(k) of the Internal Revenue Code of 1986, as amended, which covers all eligible employees (the “PENN 401(k) Plan”). The PENN 401(k) Plan enables participating employees to defer a portion of their salary in a retirement fund to be administered by the Company. The Company makes a discretionary match contribution, where applicable, of 50% of employees’ elective salary deferrals, up to a maximum of 6% of eligible employee compensation. The matching contributions to the PENN 401(k) Plan for the years ended December 31, 2025, 2024, and 2023 were $14.9 million, $14.7 million, and $13.4 million, respectively.
We maintain a non-qualified deferred compensation plan (the “EDC Plan”) that covers most management and other highly-compensated employees. The EDC Plan was effective beginning March 1, 2001. The EDC Plan allows the participants to defer, on a pre-tax basis, a portion of their base annual salary and/or their annual bonus and earn tax-deferred earnings on these deferrals. The EDC Plan also provides for matching Company contributions that vest over a five-year period. The Company has established a trust, and transfers to the trust, on a periodic basis, an amount necessary to provide for its respective future liabilities with respect to participant deferral and Company contribution amounts. The Company’s matching contributions for the EDC Plan for the years ended December 31, 2025, 2024, and 2023 were $4.9 million, $4.7 million, and $4.3 million, respectively. Our deferred compensation liability, which is included in “Accrued expenses and other current liabilities” within the Consolidated Balance Sheets, was $119.3 million and $107.2 million as of December 31, 2025 and 2024, respectively.
Labor Agreements
We are required to have agreements with the horsemen at the majority of our racetracks to conduct our live racing and/or simulcasting activities. In addition, in order to operate gaming machines and table games in West Virginia, the Company must maintain agreements with each of the Charles Town horsemen, pari-mutuel clerks and breeders.Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Feb 27, 2025 | |
| 2023 | Feb 22, 2024 | |
| 2022 | Feb 23, 2023 | |
| 2021 | Feb 28, 2022 | |
| 2020 | Feb 26, 2021 | |
| 2019 | Feb 27, 2020 | |
| 2018 | Feb 28, 2019 | |
| 2017 | Mar 1, 2018 | |
| 2016 | Feb 24, 2017 | |
| 2015 | Mar 15, 2016 | |
About Commitments Disclosures
Commitments and contingencies disclosures catalog a company's off-balance-sheet obligations and legal exposures — purchase commitments, guarantee arrangements, pending litigation, and regulatory proceedings. These items represent potential future cash outflows that may not appear as liabilities on the balance sheet until they become probable and estimable.
Key signals: litigation reserves and disclosed loss ranges quantify management's estimate of legal exposure, but unquantified "reasonably possible" losses often represent the larger risk. Watch for changes in language around pending cases — shifts from "remote" to "reasonably possible" or increases in estimated loss ranges signal deteriorating outcomes. Unconditional purchase obligations and take-or-pay contracts create fixed cost structures that reduce operational flexibility. Guarantee arrangements for subsidiaries or joint ventures can create cascading obligations. Compare the total commitment schedule against projected free cash flow to assess whether the company can meet its obligations without additional financing.