FanDuel Is Parlaying Legalized Sports Betting Into Big Business

September 6, 2018

By Ian McCue, senior associate content manager at NetSuite

In short:

  • Earlier this year, the Supreme Court struck down a law that generally forbade sports betting outside the state of Nevada, opening up a market for sports betting nationwide.
  • In response, fantasy sports company FanDuel launched a sports betting app this month. FanDuel sees the app as a promising revenue stream that will help it grow into a broader, more powerful sports brand.
  • However, FanDuel expects daily fantasy sports to remain its primary revenue generator for the foreseeable future.

When the Eagles and Falcons kick off the 2018 NFL season tonight, fans outside of Nevada will be able to legally bet on the game for the first time in more than a quarter of a century.

That’s because the Supreme Court struck down a federal law(opens in new tab) that banned sports betting back in May. The ruling presents a landmark opportunity for casinos, online sportsbooks and daily fantasy sports companies like FanDuel.

FanDuel just launched a sports betting app and opened The FanDuel Sportsbook at the New Meadowlands Racetrack in New Jersey earlier this year.

Reports value the U.S. illegal wagering market anywhere from $100 billion to more than $300 billion(opens in new tab).

Thus, legalized sports betting opens up a huge market for brands like FanDuel. Fans are likewise pleased with the new law, according to FanDuel Chief Product Officer Nik Bonaddio.

“I think nationwide, this is legislation that people have wanted, and the logic for it not being legalized didn’t really make sense,” he told Grow Wire. “So now that it is legalized and legislation is in the books, I think there’s just a very palpable sense of excitement from our users.”

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FanDuel started in 2009 as the first daily fantasy sports business. Users pay to enter a variety of contests across NFL, college football, NBA, NHL, MLB, professional soccer and more, choose a lineup that stays under a set salary cap and compete against one another in competitions with fields that range from two players to thousands. Just like regular fantasy sports, players’ performance determines point totals, and users earn a cash prize if they win or finish in a high enough bracket.

The Supreme Court left it up to Congress and individual states to legislate sports betting when it struck down the Professional and Amateur Sports Protection Act (PASPA) of 1992. At the moment, sports betting through an app is only legal in New Jersey, while Mississippi and West Virginia allow casinos to have sportsbooks.

More states will likely follow in New Jersey’s footsteps in the months and years to come, though it is unpredictable. (Just last week, New York Sen. Chuck Schumer outlined his interest in creating a national sports betting regulation(opens in new tab).)

However, FanDuel isn’t scrapping its daily fantasy sports offerings. 

“Fantasy sports is still very important for us,” said Bonaddio. “I think … there’s a bit of a misconception that suddenly FanDuel is going to go all-in on sports betting. I think what you’ll see us do is be thoughtful, work with the states.

“But there’s no denying the fact that this is a billion-dollar market, and it’s a billion-dollar market that FanDuel is uniquely suited to be a very large player in.”

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Bonaddio expects fantasy sports to remain the business’s primary revenue generator for the foreseeable future. Ten years down the road, however, he believes that could change as more states legalize Internet-based sports betting. But even then, he expects fantasy sports to remain a key part of the business.

Their plan for sports market domination? Mergers.

In this new market, FanDuel will face intense competition from fellow daily fantasy sports giant DraftKings as well as MGM, SugarHouse Sportsbook and local casinos. But, as Bonaddio sees it, his company is at an advantage because it already has six million users and name recognition.

“If I think about who’s going to win in the sports betting market, it’s going to be a company that already has the existing brand that speaks to sports consumers, one that has built out great experiences and is a native-first, digital sports company,” he said. “FanDuel is by definition in a great, great spot to tackle this.”

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In May, not long after the Supreme Court decision, FanDuel merged(opens in new tab) with the U.S. businesses of Paddy Power Betfair, a large European bookmaker based in Dublin. The new FanDuel Group includes BetFair’s online casino, a horse racing TV and wagering network called TVG and DRAFT, a smaller daily fantasy company.

The merger is a step toward FanDuel’s goal of becoming a one-stop sports hub. Sports betting is just one piece of the puzzle, though an important one.

“We see a world where FanDuel as a company isn’t just known as a fantasy sports company, but also isn’t just known as a sports betting company,” Bonaddio said. “All of these things are connected, whether it’s fantasy sports, whether it’s sports betting, whether it’s watching a game or creating content.

“Ultimately, FanDuel wants to be a destination where any sports fan can find something interesting and fun to do.”

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