- Legal States
Fiona Simmons June 7, 2022 4 min read
DraftKings CEO Talks California, Illegal Sports Gambling, and Costs of Acquisition
DraftKings CEO Jason Robins is bullish on what his company can achieve. Commenting during the Goldman Sachs Travel and Leisure Conference the executive exuded confidence that DraftKings is on the right track and that the company will continue to expand in the regulated sports betting space.
Illegal Gambling Still Has Sway with the US Bettor
However, he sounded an alarm similar to what his FanDuel homolog, Amy Howe, said last month – offshore wagering continues to impinge on the competitiveness of the regulated market. Right now, the United States’ biggest operators are looking to boost their profit margins, with the market presenting still untapped opportunities and more room for growth, even in places such as New Jersey which have been online since almost Day 1. Robins agreed with this assessment:
“Now it’s all about profitability. So I think that’s caused the overall kind of industry to focus more on it. What works for us well there is, we haven’t really changed our playbook and we think our playbook actually thrives in this type of environment. We’ve stayed disciplined even when there were some, I would say, undisciplined behaviors happening with competitors.”DraftKings CEO and chairman Jason Robins
He didn’t miss to take a swing at competitors who have been “undisciplined” and might be pushing a little too aggressively at the expense of the industry. After all, Europe was in much the same state of flux when sports betting started growing there, but player acquisition had to be eventually scaled back for the sake of consumer protection.
But the problem with DraftKings, some argue, is not so much that the company is breaking any rules, but rather a clear deadline for the company to reach profitability. Right now, the company isn’t expected to turn a positive EBITDA until at least 2025. Robins has talked about the costs of customer acquisitions that have proven steep in some markets, such as New York where an exorbitant tax is already slowing down the initial enthusiasm for the market.
One issue is that many big gamblers are still sticking with offshore. Some of the biggest bettors are still there, Robins reassured and argued that this may last for a while, although acknowledging that many rank-and-file bettors have already switched to the regulated market.
Things are already looking up in that regard. Puerto Rico, Ohio, and Maryland are already adding to the size of the legal gambling markets in the US, with 46% of the adult population exposed to gambling products should they choose to.
Growing the Regulated Gambling Market and Reaching US Adults
Meanwhile, Robins is actually upbeat about the prospects of more entrenched states such as Florida, California, and Texas which are rapidly trying to figure out how to regulate their gambling industry, navigating a mix of local political brinkmanship, private interests, and consumers who are still betting and gambling in neighboring states or offshore.
Should California regulate its gambling industry, though, Robins expects DraftKings to have reached 65% of the adult US population. He and DraftKings are backing a ballot measure launched by commercial operators who want to have access to betting in the state and oppose a tribal counter-measure that wants to retain exclusivity over gambling in the state. Robins used the opportunity of the industry meeting to add his two pence on the matter:
I think if we’re able to pass in November, we could potentially be looking at a 2023 launch, hopefully ahead of NFL for California. Really great bill, too. The tax rate, everything is set in a very reasonable way, because you can actually write the whole piece of legislation on the ballot, which is nice.DraftKings CEO and chairman Jason Robins
Tribal opposition is unlikely to subside over time, though. Nevertheless, Robins is confident that legislators honor the voters’ will and the chief executive is confident that voters are all for a competitive sports betting environment in California.