DraftKings Maryland sportsbook approved despite regulators’ financial concerns
DraftKings’ retail sports betting license at a Maryland horse track was approved by state regulators Thursday even with concerns over the company’s massive cash losses.
Despite multiple questions about the company’s finances, the Maryland Lottery and Gaming Commission approved DraftKings’ application to run the sportsbook at Timonium Racetrack on the state fairgrounds.
A gaming commission report and publicly disclosed financial statements showed the company lost more than $3b between 2018 and 2022. DraftKings announced earlier this year it expected to lose more than $800m additionally in calendar year 2022, though it has cut those projected losses to closer to $600m in more recent forecasts.
“It seems that you’re excited about the fact that you’re only going to another $800 million dollars,” commissioner Randy Mariner said during Thursday’s meeting. “These numbers are quite staggering to me.”
Gaming commission staff assuaged commissioners’ concerns, noting the company has $1.5b cash on hand and would be more than able to cover its expenses. John Mooney, the commission’s managing director of regulatory oversight, said the cash, and the company’s reputation across the industry, installed confidence DraftKings could successfully manage the sportsbook.
DraftKings executive Joe DeCristofaro said the big losses came largely from player acquisition costs that would decrease in coming years. DeCristofaro said that none of its major competitors have yet achieved profitability.
DraftKings, along with FanDuel, Caesars and BetMGM have more than 80% of the US sports betting market share by handle. Each has spent hundreds of millions of dollars to acquire players in recent years and only FanDuel has ever returned a single profitable quarter.
With Thursday’s licensing decisions, DraftKings has now been approved to open an online and/or retail sportsbook in 19 states. CEO Jason Robins said during a conference earlier this week he expects DraftKings to be profitable in 10 of those markets by year’s end.
DeCristofaro echoed those statements Thursday, saying DraftKings as a company overall expects to have a profitable quarter by the end of 2023 and be cash positive in calendar year 2024.
Maryland Lottery and Gaming Commissioner Randy Mariner: “It seems that you’re excited about the fact that you’re only going to another $800 million dollars. These numbers are quite staggering to me.”
The gaming commissions’ questions come as markets and the broader gaming industry are increasingly scrutinizing the massive cash burn from US market leaders including DraftKings and its major competitors. DraftKings’ stock is down more than 60% in the last 12 months as sports betting and tech stocks have fallen even more dramatically than the markets overall.
The major operators have reaffirmed their commitment to massive initial spends on marketing, advertising, free bets and other promotions at the launch of new states. DraftKings and its competitors say that after the initial spending blitz, operators can decrease marketing expenses and then better target promos toward already acquired customers. DraftKings has said it takes two-to-three years for a state market to reach profitability.
Most major operators expect costs to remain high across the next wave of states set to launch in the coming months.
Kansas will have a full launch of its online sportsbooks on Sept. 8. Ohio is set to open online sportsbooks Jan. 1, 2023 and Massachusetts could do so around that same time.
California voters could approve statewide mobile wagering through a November ballot measure, which DraftKings and several other sportsbooks have helped finance. Approval in California, America’s most-populated state, would require a new spending blitz and subsequently extend the runway to profitability.
Maryland, which opened its first retail sportsbooks last year, expects to have its mobile offerings live by the upcoming Super Bowl. DraftKings has not announced a timeline to open its retail book at the Timonium Racetrack.
Once live, Maryland’s online sportsbooks are expected to make up more than 90% of the state’s total sports betting handle. Online books in Maryland go through a separate regulatory process from the retail options, so Thursday’s approvals have no impact on any future DraftKings mobile platform.
DraftKings, along with Caesars, BetMGM, FanDuel and nearly all other US sports betting market leaders are expected to earn one of the 60 statewide mobile licenses permitted in Maryland. The state could see more than two-dozen books live by next year, which would be the most of any US jurisdiction.