August 19, 2019
A year after DraftKings launched its first legal online sports book in New Jersey, the daily-fantasy-sports service is preparing for the day when other states join Jersey and Nevada in offering legal sports betting.
A decision by the Supreme Court that effectively legalized sports gambling for any state that wanted it has proven to be a windfall for the Garden State, which was quick to let operators like DraftKings in.
"New Jersey has become a huge part of our business," said DraftKings co-founder and CEO Jason Robins. "It's almost a third of our revenue at this point" despite the fact that less than 3 percent of the U.S. population lives there.
The other two-thirds come from DraftKings' original raison d'être: fantasy sports. That segment is still growing at a 15 to 20 percent annual clip, Robins noted ー huge, but peanuts compared to the popularity of legal sports betting, which is showing 50 to 60 percent year-over-year growth in New Jersey alone.
"I think somewhere in the five to seven year time frame, you'll see at least two-thirds of the country with live online sports betting," Robins said. By some measures, that's conservative. The success of the New Jersey market ー which has already brought in nearly $26 million in tax revenue, according to the state's gambling authority ー is leading to a rush to bring new legislation in states around the country. At least eight states have either pending legislation or have passed a law that could legalize sports betting as soon as this year. Robins said DraftKings is hoping to launch sports books in four of those states ー Iowa, Indiana, West Virginia, and Pennsylvania ー before the Super Bowl.
Like the recent wave of cannabis legalization, sports betting has benefited from a growing consensus among lawmakers that it's better to codify into law something that has long been done underground. The illegal betting market is worth $150 billion a year, Robins said, and the lion's share is happening online. "People still think you call up your local bookie," he said. In reality, the plethora of offshore websites that offer access to sports books makes it all the more attractive for states to open up their laws, and get the tax revenue that they'd otherwise miss out on.
"Everybody wants to see something get done," Robins said, recognizing that state legislatures don't always move at the speed of business. "But that's what the democratic process is for."