One year after opening its first legal sportsbook, FanDuel says fantasy sports is still its biggest business. But the company can see a time in the near future when its revenue from legal sports betting will surpass its core fantasy sports products.
The demand for sports betting, FanDuel CEO Matt King says, “is growing like a rocket ship.”
The U.S. Supreme Court struck down PASPA, the federal ban on sports betting, in May 2018, which allowed states to legalize sports betting on a state-by-state basis. A number of states moved quickly to do so, and FanDuel moved quickly as well.
That month, FanDuel sold to Irish bookmaker Paddy Power Betfair, which later rebranded this year to Flutter Entertainment.
Then in July 2018, FanDuel opened up a sportsbook at Meadowlands Racetrack in New Jersey, and soon opened five more in the last year. The company now has physical sportsbook locations in New Jersey, New York, Pennsylvania, West Virginia, Indiana, and Iowa, and offers legal mobile betting in three of those states: New Jersey, Pennsylvania, and West Virginia, with Indiana coming online soon.
Legal wagers placed in New Jersey surpassed those placed in Nevada in May ($318.9 million in New Jersey vs. $317.4 million in Nevada), which was taken as a major milestone. FanDuel says it has more than 50% market share in New Jersey.
In other words, FanDuel’s betting business is flying.
That is somewhat ironic after the two-year-long saga in 2015 and 2016, when FanDuel and its rival DraftKings faced numerous legal challenges from state attorneys general (spearheaded by former New York A.G. Eric Schneiderman) accusing them of being gambling operators—before SCOTUS lifted the sports betting ban. FanDuel and DraftKings at the time insisted their fantasy games were not a form of gambling. They also announced a merger, then called their merger off.
Now both companies have fully embraced legal gambling.
“The nice thing about sports betting is it frankly appeals to a very wide demographic, because it’s a more casual product,” King says. “It’s something people were doing illegally for years and years, and this is an opportunity to do it legally.”
So: What’s next?
For one possible answer, look to FanDuel’s origins: politics. Nigel Eccles, his wife Lesley Eccles, and three others co-founded FanDuel in 2009 as a rebrand of Hubdub, which was a political prediction site.
With the 2020 election approaching, Yahoo Finance asked King if FanDuel might like to get back into political fantasy and betting.
“We would love to offer politics,” King says. “Frankly, we like to offer games that everybody loves to play. Our parent company, Flutter Entertainment, does a huge business on the Betfair exchange with political betting. So the reality is it’s just a question of: Will it be allowed from a regulatory perspective? We are working on a couple things that might be more free to play, but will certainly tie into the election.”
For now, political gambling is basically banned across the U.S. (New Zealand-based prediction site PredictIt gets you close to the real thing, offering $1 “shares” in 2020 candidates thanks to a CFTC exemption.)
As for the continued tide of state-by-state sports betting legalization, King predicts it will keep rolling—but he doesn’t expect to ever see full national legalization.
“Our perspective is you’re going to see a big chunk of the U.S. legalize it, and legalize mobile,” he says. “State legislatures, as they get educated on the issue, understand that if they want to generate the tax revenue, and if they want to put the illegal market out of business, they have to have a competitive mobile marketplace.”
But how many states will legalize, and how fast? That, King says, is “the multibillion-dollar question.”
Daniel Roberts is the sports business writer at Yahoo Finance. Follow him on Twitter at @readDanwrite.