Before attracting new sports bettors to use their apps, FanDuel and DraftKings are focused on getting bettors away from the unregulated market.
While DraftKings and FanDuel dominate market share in the regulated US sports betting market, there is a vast number of existing sports bettors they have not been able to reach.
Speaking at the Global Gaming Expo (G2E) in Las Vegas last month, DraftKings CEO Jason Robins and FanDuel CEO Amy Howe discussed their efforts to tap into an unregulated online sports betting market that is bigger than their companies.
“Still most money in the US is being wagered illegally,” Robins said. “Our initial focus is how do we bring people in from the illegal market and create the experience that they want. It’s already there, it already exists, it’s already betting on these products.”
Unregulated gambling costs state governments
Moderator Contessa Brewer pointed to an American Gaming Association report last year indicating that Americans gamble more than half a trillion dollars annually through unregulated options, robbing state governments of $13.3 billion in annual tax revenue. That’s not just sports betting but also includes online casino and “skill game” machines.
“If you don’t capture that initial illegal market first, it kind of defeats the whole purpose of doing this,” Robins said. “That’s the reason states are legalizing. They know there’s hundreds of millions of dollars being wagered illegally.”
In states with legal sports betting, FanDuel and DraftKings can still find themselves at a disadvantage compared to offshore websites.
“There are regulations and costs that we have to bear that the illegal market does not,” Robins said.
Breaking into states without regulated sports betting
Legalizing sports betting in some key states would have the biggest impact for DraftKings and FanDuel to draw players from unregulated sites.
FanDuel and DraftKings aren’t in California, Texas or Florida, the three largest states by population.
Howe cited Google stats she found particularly interesting. On average across the US, 50% of searches for sports betting sites are for illicit operators.
In California and Texas, where there isn’t a regulated option, that number goes up to 80%. In New Jersey and Pennsylvania, two of the most established online gaming states, that reverses to 20%.
“We’re in an interesting time where because sports betting has become so mainstream, it’s confusing to a consumer,” Howe said. “Because some of these sites actually look legitimate. Listen, at the end of the day, we’ve got to keep doing the hard work to open up the states. Not all of them are going to be easy.”