DraftKings sees opening with legal sports betting on horizon
(AP) — With its foothold in fantasy sports, DraftKings couldn’t bear to sit out another Super Bowl.
So the company branched off from the full-slate, roster-drafting contests that made it a leader in daily fantasy competition and created a single-game contest that will allow its customers to partake in this year’s NFL title game.
By next year, the company hopes to be a fan favorite for another way to get in on the Super Bowl action: legal sports betting.
As the U.S. Supreme Court weighs whether to lift a widespread Congressional ban on sports gambling, companies in and around the business are looking for ways to wet their beaks on a potential multibillion dollar windfall.
For Boston-based DraftKings, CEO Jason Robins said, it’s an obvious move, and one the company is eager for.
“We’re certainly going to go after it,” Robins said in an interview with The Associated Press. “I think the Supreme Court — I’m hopeful — will rule that way. You can’t really predict what the government will do, but you have to be prepared.”
From its social origins of rotisserie baseball-style competitions among co-workers and friends, fantasy sports have blossomed into what the industry’s trade organization says is a $7 billion industry. For some fans, the opportunity to win bragging rights over roommates — or straight cash — has even overtaken their loyalties to the teams on the field.
As it grew, daily fantasy drew the attention of state regulators who likened it to gambling and tried to regulate or outright ban it. All but about nine states have come to terms with the contests, in which participants can win money based on the performance of the lineups of professionals they construct on sites like DraftKings and New York-based FanDuel.
And professional leagues that once considered any kind of gambling a threat to their very existence have embraced daily fantasy. “When you have more people participating in a variety of games, it just makes people more interested in sports,” Robins said.
But another upheaval could be coming, with the Supreme Court preparing to rule this term on whether a federal law that banned sports betting in all but four states is unconstitutional. If the Professional and Amateur Sports Protection Act is thrown out, other states could join Nevada, Delaware, Montana and Oregon by allowing gambling on sporting events.
Some leagues, notably the NBA and Commissioner Adam Silver, have even been open to legalized sports betting as a way to create new fans — and milk them for revenue.
DraftKings wants in, too.
“Most of the people I know who bet on sports (also) play fantasy, and vice versa. And they’re doing it for basically the same reason: It makes sports more interesting,” Robins told the AP in a telephone interview as he prepared to head to the Super Bowl to promote the company’s new “Showdown” contest.
“Fantasy will continue to grow, and may even be able to grow faster,” he said. “So we can’t take our eye off the ball. They’re both very important products for us to focus on.”
Now occupying three floors of a downtown office building, appropriately located near the city’s financial district, the tech-heavy Seaport and the TD Garden sports arena, DraftKings is the leading daily fantasy sports company in the world, with 9 million users.
On a tour of the offices earlier this month, DraftKings workers sat at dual-screen terminals, wearing sweatshirts or hats from their own favorite teams while jerseys from endorsed athletes hung on the walls.
Conference rooms are named for local sports stars like Bobby Orr or landmarks like Fenway Park; a kitchen is stocked with snacks and Red Bull. A cardboard cutout of Patriots quarterback Tom Brady stood sentry near a soundproof studio that allows the company to create its own video programming about league news and — more importantly — how it might affect fantasy play.
“Ultimately we consider ourselves an entertainment company. Our goal is to make sports more exciting,” Chief Operating Officer Paul Liberman said. “We’re constantly exploring. The team looks at what’s fun, what are people engaging in.”
That means finding new sports — NASCAR, golf, Australian rules football, cricket — and designing games that capitalize on what makes them unique and appealing to their specific fanbases. DraftKings also acquired the rights to stream European basketball last year, so fans could watch the games on the same screen they were using to follow the progress of their fantasy teams.
It also means creating new games that make entering, say, an NBA tournament on a midseason Wednesday night more like hanging out with your friends at a sports bar.
“This is an attempt at that,” said Matt Kalish, the company’s chief revenue officer and the third co-founder. “It needs to be more social.”
To keep it that way, DraftKings devotes much of its technological firepower not just to avoiding hacks and bugs but to make sure the games are fun for the 95 percent of its customers who are casual users. There are protections against collusion, lineup buying and other practices that have the potential to ruin things for those who are playing for fun, rather than to make a living.
After complaints that daily fantasy sharks were taking home the huge majority of the winnings, the company came up with games that were limited to new or novice users. (To stay in line with local laws, the company must also protect against underage players or those from areas where it is illegal.)
Now, as the company considers a move into sports betting, its fun-and-friends ethos faces a new challenge.
According to the American Gaming Association, $4.76 billion will be bet on the Super Bowl alone — 97 percent of it illegal. Total sports gambling in the U.S. has been estimated as high as $400 billion per year, volume that has the potential to drown the niche fantasy has established.
Robins isn’t concerned.
“I don’t think you have to make that trade-off,” he said, noting that Amazon morphed from an online bookseller into web services and every other retail category. “If you feel there is a big market, which we obviously do, you have to go for both of those.”
“There’s no reason why people can’t play both,” Robins said. “I still buy all my books from Amazon.”