As one of the two major players in daily fantasy sports (DFS), DraftKings’ founder and CEO Jason Robins says he never expected to be helming the company that accepted the first legal online sports bets in New Jersey.
The fact he was, he says, was somewhat serendipitous. Just as the news broke that the Supreme Court would be hearing New Jersey’s case to overturn the Professional and Amateur Sports Protection Act (PASPA), DraftKings was told that the U.S. Federal Trade Commission planned to block its merger with FanDual.
“It was almost like cosmic timing that those two things happened together,” Robins recalled during an interview at ICE London 2019. “It allowed us to refocus the team very quickly and follow the next opportunity with the merger behind us.”
There was no time for DraftKings to lick its wounds. By the summer of 2017, a regulated sports betting market in the US was looking highly likely and Robins pursued a dogged first-to-market strategy.
“We started figuring out how to do it and it became apparent very quickly we couldn’t build all that from scratch and we had to have a partner,” he said. “We ended up spending some of the earlier months touring round London and visiting with all the gaming companies, understanding why they had chosen the platform they had.”
After visits with several sports book providers, DraftKings partnered with Kambi – a product Robins says naturally bolted on to DraftKings’ existing platform, UX, marketing and KYC systems.
“What we were looking for was speed to market,” Robins said. “We didn’t really need a platform, we were unique in that sense. Lots of companies trying to get into online gaming need a platform. But we didn’t because we have the fantasy product.”
As such, DraftKings set an internal goal to be ready to launch on Aug. 1 and, with the help of an invite-only wagering promise, it happened.
Robins admits it would not have been possible if the FanDual merger had gone ahead. That twist in the company’s fortunes sealed its fate as a trailblazer in regulated sports betting.
“We wouldn’t have gotten into New Jersey first, which probably means that we wouldn’t be in the market leadership condition we’re in now,” he says.
However, he points out it’s hard to know for sure how the alternative scenario would have looked. A large-scale merger integration would have taken resources away from a move into sports betting, but in the long-term, it may have given DraftKings a stronger position in both sports and DFS markets.
Robins is a pragmatic leader. There is no doubt that DraftKings has proven itself agile but it’s far from reckless. “Right now, DFS is most of our revenue, it’s available for us in 41 states. Our gaming products are available in one state online right now,” he said.
He expects the business to experience growth of between 35-to-45 percent, both this year and next. DFS will be 15-to-20 percent of that figure. Robins has no plans to turn his back on that core business at this stage.
“We are a very data-driven company, and right now, in the early phases, we are not seeing a ton of cannibalisation at all,” he said. “In fact, we’re seeing that while there’s great crossover, there also remains a very large and distinct DFS audience. There is also a large and distinct sports betting audience so they seem like they are not one and the same, but this is also only six months in, so it could change.”
As for the wider market, Robins predicts half a dozen states will pass regulations this year, with no more than two getting up and running before 2020.
“Some of the small to medium sized ones might choose to grant reciprocity with New Jersey for licensing and that might end up making it a far faster path to market,” he says.
Whether this year or next, Robins is clear that creating a viable regulatory regime is critical to the future of the sports betting market as well as successfully winning trade from the offshore books.
“Like … Pennsylvania, (where) the state’s getting close to half or more of the revenue, that’s going to dramatically limit the chance of offering great prices to compete with the black market and to invest in marketing and loyalty,” he warned.
In the long run, greedy states will find they “actually hurt tax revenues,” according to Robins. But if more states emulate New Jersey, where there is a fair balance, the better chances there are of best-practices trickling down.
