DraftKings Reverses Surcharge Decision Amid FanDuel's Move

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00:00Welcome back to Newswire.

00:04We've got Sam McQuillan with us from Legal Sports Report.

00:07We've got some earnings reports to talk about specifically

00:09FanDuel.

00:10We'll get to that in just a minute.

00:11But let's start off with Sam bringing him back on the show

00:14here second time this week Sam.

00:15Thanks for coming on.

00:16Let's dive into the very latest.

00:18You've had now some time to unpack the story about DraftKings

00:23where a couple of weeks ago they come out and they say hey,

00:25look, if you win money with us, we're going to take a very

00:28small piece of your pie and you won't even notice it.

00:32That got a lot of backlash social media everywhere else.

00:35They decide to pull the plug on that making that announcement

00:38a couple of days ago Sam and you know, obviously you're

00:40reporting on this stuff, but you also have an opinion clearly

00:43on this.

00:43Why do you think DraftKings decided to go from one extreme

00:47to the other here?

00:50Yeah, Craig.

00:51It's been an eventful last couple of days since DraftKings

00:55first announced the surcharge which really caught a lot of

00:59people off guard.

01:00It was going to come to states like New York and Illinois,

01:02Pennsylvania that have high taxes on sports betting.

01:06So they've talked for a while about you know, passing this

01:08down to the better in some way.

01:09No one thought it was going to be an actual fee that shows

01:13up on your bet slip.

01:14A lot of people thought hey, maybe they could just make

01:15the odds worse.

01:16So I think that's one of the most interesting parts here

01:18is why they chose to do this whole announcement and then

01:21a few days later they decide hey, just kidding.

01:24We're not going to go through with it.

01:25Now that announcement actually came a couple hours after

01:28FanDuel said that they would not be considering such a fee

01:32which a lot of people had speculated.

01:33Maybe if FanDuel does it and DraftKings do it, you'll have

01:35the two biggest players in the market kind of leading the

01:38way and it won't impact DraftKings as much.

01:41But with FanDuel saying we won't do it, that left DraftKings

01:43pretty much on an island and they came out two hours later

01:47and said we're not going to have it.

01:48So if I had enough space right now in my home studio to

01:51take a victory lap, I would.

01:53You know, I predicted that FanDuel wouldn't do this.

01:55Why would they? They really had no reason to.

01:57They've been weathering the storm in high-tax states just

02:00like DraftKings has.

02:01So really interesting to see them come out and say hey,

02:04we're not going to end up doing it.

02:06Now we have some fallout from that.

02:07How is that going to affect their business going forward?

02:10They had projected that they would lose about 50 million

02:12dollars just the next four months from Illinois raising

02:16its tax alone.

02:17So does that mean they're going to lose a hundred fifty

02:19million from Illinois next year?

02:21How are their investors going to react to that news that

02:24they won't be making up this money in that way?

02:26Then are you going to have the fee being passed down to

02:29the betters just in a different form?

02:30Is it going to be worse odds like we talked about in

02:33the past? And quite frankly, I'm wondering why that hasn't

02:36why that wasn't the case to begin with.

02:38Maybe that means it's too hard for them to do.

02:40Maybe that means it's completely off the table.

02:42So there's a lot of burning questions kind of in the

02:44wake of DraftKings rescinding its announcement.

02:47Now the stock is back up a little bit today to about

02:50$33 a share.

02:51It dropped 18% after the news that they would add the

02:54surcharge just two weeks ago.

02:56So it was a big impact on the stock market.

02:58Some people were thinking maybe they were just testing

03:00the waters, but why test the waters if you know, the

03:03stock is going to react so much.

03:04So DraftKings different than one of those companies like

03:07Caesars different than Flutter, which owns FanDuel even

03:09and really they are beholden to their investors.

03:12There's a lot of pressure to show a profit, especially

03:15because the US and online sports betting and iGaming

03:17are really their only operations.

03:19They don't have other sectors of the business.

03:21They can lean on as much like these other companies.

03:23So I think it's really interesting that they decided

03:26to get a do away with this thing, but now it's going

03:29to be even more interesting to see what happens as a

03:31result in these states, whether it's bettors, whether

03:34it's investors.

03:35It really impacts a lot of people.

03:37Yeah, and you're right, Sam.

03:38It's you know, to me instead of taking your announcing

03:41that you're going to take some winnings.

03:44I mean, you could just go from minus 110 on all bets

03:48to minus 112, you know, like I understand that that's

03:52noticeable just like taking the money out of people's

03:55winnings, but it's not unheard of on a lot of these

03:57books to have different odds.

03:59And if that's what you're after especially from novice

04:01people, I mean, it seems to me that would have been

04:04the smarter thing to do and not that I'm endorsing

04:07that but I very odd operation.

04:10I would say an announcement and everything else

04:12from now.

04:12I think we can agree on that.

04:13All right, let's get to FanDuel.

04:14Let's talk about FanDuel.

04:16They have some announcements coming.

04:17I know you guys wrote about this over at Legal

04:18Sports Report that their growth numbers are in as far

04:21as this latest quarter.

04:22What did they report?

04:25Yeah, so aside from the news that FanDuel wouldn't

04:27be adding the fee, there was some really big takeaways

04:29from Flutter's earnings call.

04:31They reported 47% of the total US online sports betting

04:35market and 41% of the total US iGaming market, which

04:39great numbers for FanDuel.

04:40It continues to be in the number one spot.

04:42They had about one and a half billion dollars of

04:45revenue in the US versus DraftKings which had about

04:481.1, so ahead of them there and about 3.4 average

04:52monthly users on FanDuel versus 3.1 for DraftKings.

04:57So the CEO of Flutter, Peter Jackson, talked about

05:02their ability to add more customers but then at the

05:04same time get even more revenue from those customers.

05:07Their acquisition was up about 30% in the quarter

05:12but revenue was up about 41% which they attributed

05:15to a number of benefits from product enhancements,

05:18product changes.

05:18These are things like having more people placing bets

05:22on the NBA that are live bets as opposed to pre-match

05:25bets. They had about a 4% increase in handle that

05:28was live as opposed to pre-match and that's important

05:31given the fact that live betting is a lot more profitable

05:34for sportsbooks.

05:35They have a higher hold rate generally, which is why

05:37you've seen companies like FanDuel, companies like

05:40DraftKings try to push live betting more and more

05:42lately, whether that's in promos that they're giving

05:44out to people, whether that's in investments they're

05:46making in the product with companies like SportRadar

05:49which have really touted their live betting capabilities.

05:52Parlays in the MLB were also up about 8.4% year-over-year

05:57which is a huge increase from last year.

06:00You know, if you know anything about the sports

06:01betting industry, parlays are really where they are

06:04making their money on these high holds that we're

06:06seeing compared to back in the day when you know

06:09about 6% hold in Vegas would be really good.

06:11Now companies like DraftKings FanDuel are getting

06:13you know, 10 to 12% just from people betting these

06:16basically these lottery tickets, these $5 bets that

06:19would be you know, $300, $400 something like that.

06:22So that was up and WNBA betting as well was up

06:24about 400% from last year.

06:27Obviously WNBA has been a lot more popular but FanDuel

06:30also made a lot of significant investments in its

06:33WNBA product.

06:34It's one of the two partners with WNBA.

06:36So more to come on those fronts as well.

06:38I'd imagine, you know, they're just going to roll

06:40their winnings over and keep betting on product

06:43changes, product enhancements as they continue

06:45to grow their customers.

06:46So really good quarter for FanDuel and obviously,

06:49you know with the surcharge news as well, they're

06:51riding high right now.

06:52Yeah.

06:53Yeah, no doubt.

06:53And again, they got out front and said we weren't

06:56going to employ this surcharge and I think maybe

06:59FanDuel looked more positive upon for that.

07:02Okay, Nebraska sports bettors have to go in person

07:05to make bets, but I know that they've been pushing

07:07to get this online for a number of months.

07:10How much closer do you think Sam that this is

07:12getting?

07:14Yeah, it's getting closer from the standpoint that

07:17there's a lot of support behind it happening.

07:19The problem here is so much support is needed for

07:22this to happen and more importantly needed for it

07:24to happen anytime soon.

07:26A Senate committee in Nebraska advanced a bill

07:30this week that if it gets to the Senate floor, the

07:33Senate votes on it.

07:34It'll essentially allow voters to vote on the

07:36ballot if they want sports betting, but everything

07:38else is what happens after that.

07:40They need about 80% of the full Senate vote for

07:43this to pass.

07:44If they don't get it, they need 60% for it to pass

07:48in 2026.

07:49So a lot of support is really needed here because

07:51of the nature of changing a gaming law in the

07:54state like Nebraska is really difficult.

07:56If this does get to the ballot people would have

07:58to overwhelmingly approve it and then lawmakers

08:01would then come back in January 2025 to then

08:04figure out how sports betting is all going to

08:06work, what the legal framework would look like.

08:09So there's a ton of steps, a ton of you have to

08:11approve this for us to approve that for us to

08:13approve this.

08:14So it's still pretty far away in Nebraska.

08:16You only have four casinos getting placed bets

08:19out right now, but things are progressing in a

08:22good direction.

08:22It's just going to be a very, very slow direction

08:25if you're in Nebraska and you want online sports

08:27betting.

08:27So it'll be something we monitor for the rest of

08:29the year as it continues to unfold.

08:32All right, Sam.

08:32Well, thanks once again for coming on the show.

08:34A couple times this week.

08:35We'll catch up with you next week here on Newswire.

08:38Yep.

08:38Thanks, Greg.

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