DraftKings and the future of sports betting?
Robins was attending the Web Summit in Portugal; you can see an interview with him here. At the summit, DraftKings announced that it would be providing live streaming of EuroLeague games. DraftKings and the pro basketball league signed a deal this summer.
There was also this nugget:
Both companies sent representatives to the Global Gaming Expo — the world’s largest gaming conference — in Las Vegas last month. And while that had something to do with their DFS products, it’s foolish to think that’s the only reason either of them was there.
There are a lot of “ifs” about the legalization of sports betting. And there are plenty of reasons why DFS sites will find it challenging to become sportsbooks in the short term, if sports wagering becomes legal. But they also have some advantages.
First off, how would a DFS site as sportsbook work?
There are a lot of questions about how a rollout of legal sports wagering will go down in the US. But the most likely scenario is state-by-state regulation if New Jersey wins its US Supreme Court case involving sports betting.
Sports betting becoming legal nationwide would take a new law and a federal framework from Congress, something that is still difficult to envision in the short term.
That leaves an environment where sportsbooks go live piecemeal around the US, as new state-level laws go on the books (like the one we just saw in Pennsylvania).
So what’s the path of least resistance for DraftKings to become a sportsbook if that happens?
States are likely to give sports betting licenses to already-licensed gaming entities, or allow them to conduct sports gambling, in that scenario. Those casinos, horse racing tracks, etc. could then provide single-game sports betting. Those entities would likely partner with companies that specialize in running sportsbooks. (See the Nevada sports betting industry, for example.)
That leaves an opening for DraftKings to partner with a company that already has a sports betting platform and leveraging its database of US users. (That’s more than 4.5 million actives and eight million total registered users, according to the company earlier this year.)
Anyway, that’s just one plausible scenario of how a DFS site could get involved with sports betting.
There are still real-world problems of putting DFS and sports betting next to each other
Despite that possible path, there are myriad problems confronting DFS platforms getting into the sports betting business. Here’s a short list of the issues:
- Despite the law in PA authorizing online sports betting, it’s not clear that other states that want to legalize sports betting will do so outside of a land-based setting, initially. (Still, the user databases of DraftKings and FanDuel would be valuable commodities.) But DraftKings and FanDuel, as online products, are intriguing.
- DraftKings is used to working with a variety of regulatory bodies. There are 17 different DFS laws on the books (and possibly 18 soon). They are also licensed in the United Kingdom and by Malta. Still, outside of its UK license, it is not used to the kind of regulatory scrutiny that comes with being in the gambling sector. DFS sites becoming full-blown gambling operators would be a new world, to some extent.
- All the above states have basically given DraftKings and FanDuel a carveout to operate outside of their gaming laws. How those states (and others) would view a hybrid DFS/sports betting platform is unknown.
- The major US pro sports leagues all have varying degrees of interest and partnerships with DFS sites. The NHL and the MLB both have equity in DraftKings, for instance. While the leagues’ acceptance of sports betting has evolved in recent years, are they interested in having an actual investment in a sportsbook?
And that’s not an all-inclusive list of potential stumbling blocks.
The potential for sports betting is immense in the US
There’s little doubt that DraftKings would benefit from becoming a sportsbook down the road. You only have to look at the numbers from Nevada in September to see why.
Nevada sportsbooks handled over half a billion dollars in that month alone. That would be roughly a quarter of what DraftKings handles in the entire world for the entire year. (Here’s a primer on handle vs. revenue, lest anyone confuse the two things.)
The ceiling for sports betting is undoubtedly higher than the current market for DFS. That’s why, at some point, you’re likely to see more of an effort on this front from the established DFS industry.