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DraftKings is eyeing further expansion into California, Texas, North Carolina and its home state of Massachusetts, but does not expect to raise additional capital before it reaches profitability, according to CEO Jason Robins.
With the addition of Maryland, Ohio and Puerto Rico, regulated sports betting would be available to almost half of U.S. adults, a stat DraftKings chairman and CEO Robins said was impressive considering retail or mobile wagering is not yet available in California, Texas and Florida.
“So naturally, those states are going to be a big focus area for us, starting with California,” Robins said.
California represents about 12.5 percent of the U.S. population. Add that to the current 46 percent with access to legal sports, and that would make 58.5 percent of the population.
“If we just got that one, we’d be near 60 percent … 65 percent has been our long-term target. So really important,” Robins told gaming and leisure analyst Stephen Grambling on Monday (June 6) at the Goldman Sachs Travel and Leisure Conference in New York.
DraftKings is part of a coalition of commercial operators behind a proposed November ballot initiative that would permit mobile sports betting throughout the most populous state in the U.S. through partnerships between operators and California Indian tribes.
The coalition submitted about 1.6m signatures to the Secretary of State’s Office for verification last month, or well over the 997,139 required to get on the ballot. Any ballot measure in California needs 8 percent of the total votes cast for governor in the preceding general election to qualify.
As of Tuesday, about 74.14 percent of signatures submitted on behalf of the measure, known as The Californians for Solutions to Homelessness and Mental Health Support Act, had been verified by state election officials.
Robins said that DraftKings, along with FanDuel, BetMGM, Penn National Gaming/Barstool, WynnBET, Bally’s Corporation, and Fanatics Betting and Gaming, “are behind and supportive of” the ballot initiative.
“So that’s pretty exciting,” he added. “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.”
Robins stressed the proposed tax rate, “everything is set in a very reasonable way because you can actually write the whole piece of legislation in the ballot, which is nice.” DraftKings and other commercial operators would pay a 10 percent tax on revenue earned on wagers placed in the state but outside tribal lands, with permitted deductions for free bets and other bonuses.
“So there’s still licensing and other stuff that will have to go through the regulators, but a lot of that which could make it faster ... is already defined through the legislation,” he added.
The commercial operators are competing against a tribal initiative already on the November 8 general election ballot that would legalize retail-only wagering at tribal casinos and racetracks and establish new restrictions on commercial cardroom operations.
A third constitutional referendum to allow mobile sports betting by a coalition of California tribes that includes the San Manuel Band of Mission Indians will not try to qualify for this year’s ballot, while supporters of an initiative submitted by the state's cardroom industry have stopped their signature gathering efforts.
Rather than try to qualify for the November ballot, supporters of the tribal mobile proposal instead plan to put their initiative on the 2024 ballot.
During the 30-minute discussion, Robins did not mention the mobile proposal released by tribes in California.
As for Texas, Robins told Grambling that he expects legislators will, at the very least, consider legalizing sports betting in their upcoming legislative session. Lawmakers are scheduled to return to Austin for the 2023 session on January 10, 2023.
Any legislative move to legalize casinos or sports betting in Texas would revolve around the outcome of this year’s governor’s race. VIXIO GamblingCompliance reported June 2 that Republican Governor Greg Abbott is not expected to block the legalization of retail and mobile wagering.
Democratic gubernatorial nominee Beto O’Rourke has said he is inclined to support the legalization of sports betting and casinos in Texas. But to move any bill through the legislature in Austin requires support from Republican Lt. Governor and Senate President Dan Patrick, who is opposed to legalizing gambling.
Robins said DraftKings is also focused on its home state of Massachusetts. The Sports Wagering Conference Committee made up of three state representatives and three senators is set to meet Thursday (June 9) to try to hammer out a compromise between sports-betting bills that have passed both branches of the state legislature.
Robins was also bullish on North Carolina passing a bill this session, while in Georgia, which did not get a bill through in 2022, he was hopeful “that will come in a future year.”
Profits Versus Market Share
Despite a late May rally, shares of sports-betting companies remain near 52-week lows as some investors and analysts have lost patience with the lengthy time it is taking for DraftKings and other operators to reach profitability.
Grambling asked Robins what he thought about the path to profitability.
“I think the overall market has changed a lot,” Robins said. “But for, I don’t know, the last couple of years until say about four or five months, six months ago, seven months ago, market share was what we got asked at this conference.”
“'How are you going to get your market share higher? Do you think the other players are going to take market share?' Now it’s all about profitability.”
Robins said that change has caused the industry to focus more on profitability.
Grambling also asked Robins what he thinks about liquidity and the path to profitability, and if is there were any scenario where DraftKings would need other sources of capital.
“We’ve been very consistent that we have a multi-year plan that does not entail us needing to raise more capital,” Robins said. “Of course, there could always be a black swan type situation like what happened in 2020, if that were for a really extended period of time where maybe the math changes.”
Robins said that even if an event like that were to happen DraftKings would have several options, including shutting off marketing. At the end of the first quarter, DraftKings reported cash and cash equivalents of more than $1.77bn.
“So it would be really hard to come up with a scenario where we would need to raise capital. So the plan is not to. The plan is that we should get profitable on the current capital we have. We have a multi-year financial plan.”
