The Week In Sports Betting News: When Losing $161 Million Is OK

Posted on August 17, 2020

Happy Monday, everyone. Sports betting appears to be back in full swing after the news that two states saw significant growth in July with limited major events.

More state sports betting revenue reports, including Pennsylvania and Nevada, are still due out for July. Those results should confirm that sports betting is back in full swing and ready for NFL betting in less than a month.

The surge of betting and other hot topics were discussed on the latest LSR Podcast. The podcast is now even easier to consume on the go with video snippets on specific topics.

And as always, follow @LSPReport on Twitter for breaking news updates.

Top sports betting news: DKNG ‘well-positioned’ despite cash burn

DraftKings‘ stock fell nearly 6% Friday after its earnings report showed a $161 million net loss.

But management is far from concerned about the business, saying DraftKings is “well-positioned to continue to deliver on its key priorities.” Those include entering new states, investing in technology, and adding new customers.

A lot of that optimism is because of the $1.2 billion on DKNG’s balance sheet. Management also expects pent-up demand to drive sports betting results in the second half with total 2020 revenue projected at $500 million to $540 million.

The balance sheet also allows DraftKings Sportsbook to be open to opportunistic acquisitions, CEO Jason Robins said.

FanDuel Sportsbook paying up in NJ, doesn’t take blame

FanDuel Sportsbook is on the hook to pay out bets concerning a pricing error in New Jersey. But the company is laying the heat elsewhere.

An incorrect MLS line left up for more than 24 hours was caused by one of its vendors, FanDuel said. The vendor was installing new bet types that led to erroneous lines, the company said.

This is the second time FanDuel Sportsbook is paying out in New Jersey after a pricing mistake. But paying on palps won’t always be the case, according to NJ sports betting regulators.

Not automatically voiding those mistakes “encourages operators to have appropriate controls in place to avoid offering erroneous sports wagers,” the Division of Gaming Enforcement said in a statement.

FanDuel Sportsbook was let off the hook for bets on the line in Indiana, however. The state allows sportsbook operators to cancel bets on incorrect lines themselves, although regulators promised a review of and possible response to FanDuel’s mistake.

DFS companies on hook for sports betting tax?

According to the IRS, daily fantasy sports companies might owe some back taxes.

DFS operators should also be paying the 0.25% federal excise tax that applies to all sports betting handle in the country, an internal IRS memo suggested.

The fact that DFS has been treated largely as a game of skill and not gambling doesn’t matter in this case, according to the memo:

Most importantly, whether DFS is a game of skill for state gambling statute purposes is not relevant for determining whether DFS is wagering for federal excise tax purposes.

MLB, NBA return boosts sports betting results

The US sports betting industry was pretty positive pent-up demand would lead to significant sports betting growth. It finally received proof of that theory last week.

Sportsbooks in both Indiana and New Jersey saw increased activity toward the end of the month when the MLB finally launched its 2020 season and the NBA resumed its season. New Jersey’s July handle jumped 91% over June while Indiana’s handle more than doubled June’s total.

Operators were sparse with details concerning the return to sports, though BetMGM said it was seeing record handle size and activity since the return of major US sports. FanDuel Sportsbook said the back half of July definitely outpaced the front end in New Jersey.

Pennsylvania is the next big state to report July’s results this week.

IAC takes big MGM Resorts stake

Sometimes, significant sports betting news doesn’t always look like it.

IAC, a company that builds digital media brands, took a $1 billion investment in MGM Resorts last week. The stake is worth 12% of the company.

MGM Resorts CEO Bill Hornbuckle called the investment a natural fit. MGM is looking to improve its joint venture Roar Digital business after it and GVC increased their investments in the business to $450 million total.

IAC called the investment a once-in-a-decade opportunity, as it likes the digital sports betting and online casino business. The company plans to offer its experience in e-commerce to help MGM build out its online gaming product. That includes optimizing the funnel of Mlife loyalty customers and recruiting new digital-first customers.

Kambi comfortable with DraftKings platform decision

While some investors think Kambi went too easy on DraftKings in ending its partnership, chief commercial officer Max Meltzer defended the decision.

Kambi and DraftKings agreed to end their relationship in September 2021 as DKNG plans to migrate to its in-house technology by SBTech.

Meltzer called it a lose-lose if a technology provider pushes operators off the platform too quickly. It hurts revenue, is bad for the customer and looks bad from a brand perspective, he said.

Meltzer also sees an opportunity for other Kambi-powered sportsbooks like Barstool Sportsbook and BetRivers to take market share from DraftKings during the transition.

“They won’t be looking to migrate, they’ll be innovating on top of what we’ve already got,” he said.

Illinois shags golf betting into bunker

Illinois sports bettors want to bet on the PGA Tour. But that isn’t as simple as in other states, it appears.

Golf betting has been spotty in the state because of a statute that requires competitors to receive compensation in excess of expenses for the event.

Apparently, Illinois thinks there’s a chance for corruption if a competitor doesn’t make enough to cover their fees, like travel expenses.

Sportsbooks have already requested a change to reinstate golf betting, but that won’t come until at least next week. Regulators must wait 30 days before reacting to the request made July 23.

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Matthew Waters

Matthew Waters is a reporter covering legal sports betting and the gambling industry. Previous stops include Fantini Research and various freelance jobs covering professional and amateur sports in Delaware and the Philadelphia area.

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