The Workings of FanDuel and DraftKings
Due to a gap in the anti-gambling laws, the sports betting sector brings in hundreds of millions of dollars every year. Despite the fact that there are many different fantasy sports websites, two entrepreneurs have taken advantage of the rising demand from sports enthusiasts for a simple and quick way to join fantasy leagues by launching short-term fantasy sports.
Here, we examine the performance of these two fantasy sports businesses, FanDuel and DraftKings.
How Do Fantasy Sports Work?
Do you know what fantasy sports are? You’ve probably heard of them. Contrary to popular belief, fantasy sports don’t involve leprechauns or rainbows. In fantasy sports, users assemble their own teams of actual professional athletes from sports like basketball or football. It’s possible for players to come from current leagues like the NFL, NBA, MLB, NHL, or even college teams. Football and baseball are currently two of the most popular fantasy sports in the US.
Users can compete against other players for a specified amount of time, be it a single day or a whole season, after selecting their teams. For specific performance indicators, such as tackles in a football game or blocked shots in hockey, team members are awarded a specified number of points.
In the end, through the fantasy sports operator, their points compete either with their friends in a private league or against strangers in a public league. Users can also draft or trade players to assist their teams’ league statistics.
Summary of FanDuel and DraftKings
FanDuel, one of the biggest fantasy sports websites in the US, was founded in 2009. More than 1,000 people work for the New York City-based business. FanDuel has more than 12 million registered users, according to the business’ website.
The holding company Flutter Entertainment, an Irish bookkeeper with headquarters in Dublin, owns FanDuel. Flutter Entertainment trades on the London Stock Exchange and has a $16.5 billion market cap.
One of the most well-liked fantasy sports sites in the nation is DraftKings. The business was established in 2012 in Boston and now employs over 3,400 individuals across six different nations.
The company reported having 7.3 million total unique paying subscribers as of December 2021 among its daily fantasy sports, sportsbook, and iGaming services.
Between 2012 and 2020, the company raised $719.4 million in capital through various funding deals. Through a reverse merger involving SBTech and Diamond Eagle Acquisition Corp., a publicly traded company that stopped trading, the business went public in April 2020. DraftKings started trading on the Nasdaq after the acquisition under the ticker DKNG. The transaction had a $3.3 billion value.
Changing the game in fantasy sports leagues
FanDuel and DraftKings made it possible for people to partake in short-term fantasy sports on a far larger scale, eliminating the need for long-term commitment. The possibility to take part at any time threw off an already prosperous sector. The organization eliminates the possibility of picking a bad team and being stuck with players all season. It provides avid gamers with the option to relive the entire season every day.
In one-day fantasy football leagues, FanDuel and DraftKings are the market leaders. Users participate in competitions with real money starting with a $0.01 commitment. Because there are no related subscription costs, both services can expand quickly.
FanDuel and DraftKing’s revenue streams
During peak sporting events, the bandwidth needed to handle severe traffic spikes can be very expensive. This implies that FanDuel and DraftKings both need to bring in a sizable sum of money.
So how do they accomplish that? Advertising. Always keep in mind that businesses must invest in marketing to succeed. In 2021, DraftKings spent $981 million on marketing and sales, almost twice as much as the previous year. In just six months, FanDuel spent $1 billion.
While FanDuel reported $1.9 billion in revenue for 2021, DraftKings reported $1.296 billion. Entry fees from players generate revenue for both businesses. For instance, 10% of users’ league buy-in fees may be collected by DraftKings. Therefore, the corporation keeps 10 cents of every dollar a user spends as its part. Each user contributes their remaining 90 cents to the pool, which is then used to determine the winner.
The businesses also generate revenue in other ways. Additionally, they make money through selling ads on their websites and collaborating with well-known brands like NBC, Sports Illustrated, Comcast, and Sporting News. The potential for engaging current fans and attracting new ones is enormous, according to professional leagues.
Prospects for Fantasy Sports
Acquisitions are important in the realm of fantasy sports, just like they are in any other sector. Midway through 2018, the Irish business Paddy Power Betfair, currently known as Flutter Entertainment, purchased FanDuel. Operating as the parent company’s U.S. subsidiary is FanDuel. The agreement’s terms weren’t made public.
The Federal Trade Commission (FTC) objected to the merger of FanDuel and DraftKings at one point because they believed the combined business would control 90% of the U.S. daily fantasy sports market.
Legal and legislative conflicts
There are still several governmental and legal barriers for fantasy sports to go over. In contrast to online casino games, most fantasy sports are regarded as games of skill. Fantasy sports are exempt from the Unlawful Internet Gambling Enforcement Act of 2006, which makes the latter unlawful in the majority of states. Numerous regulators continue to criticize these sites despite this loophole.
According to the FanDuel website, as long as you are an American or Canadian who is more than 18 years old, participating in fantasy sports competitions is generally allowed. The majority of states allow both FanDuel and DraftKings. However, a small number of states continue to outlaw certain websites, including:
• Hawaii
• Idaho
• Montana
• Nevada
• Washington
Each of FanDuel and DraftKings paid $1.3 million to resolve a legal dispute with the Massachusetts Attorney General’s office in 2017. An inquiry into claims that both businesses engaged in dishonest and unfair activities led to the settlement. The chief state attorney declined to go into detail about the specifics of the accusations.
What Countries Allow Draftkings?
Currently, Washington D.C., 30 states, and sports betting are legal.
Only 17 of those have DraftKings available, though. Arizona, Colorado, Connecticut, Illinois, Indiana, Iowa, Louisiana, Michigan, New Hampshire, New Jersey, New York, Oregon, Pennsylvania, Tennessee, Virginia, West Virginia, and Wyoming are the states where DraftKings is now available.
How Do You Withdraw Money From DraftKings or FanDuel?
Players can withdraw their wins from DraftKings and FanDuel in a variety of ways, including wire transfers, prepaid cards, online banking, PayPal, and even traditional checks. Additionally, DraftKings users can withdraw cash in person at the Cage at Resorts Casino in Atlantic City, and FanDuel users can withdraw money through Venmo.
What Age Must You Be to Play on FanDuel or DraftKings?
Both FanDuel and DraftKings require users to be at least the legal age to gamble on sports in their respective jurisdictions. Players must be at least 19 years old in some areas, such Nebraska or Alabama. The age requirement for other states (Arizona, Iowa, Louisiana, and Massachusetts) is 21. The legal age to play in every other state is 18.
The conclusion
Every year, fantasy sports generate millions of dollars in income for businesses like FanDuel and DraftKings, much of it coming from fees, sponsorships, and advertising. Despite the fact that digital fantasy sports are not regarded to be gambling, these businesses nonetheless face several challenges before being entirely legal in all 50 states.
Compete without risk for $100,000 in virtual money.
Utilize our FREE Stock Simulator to put your trading abilities to the test. Trade your way to the top while competing against hundreds of other Investopedia traders! Before risking your personal money, place trades in a virtual environment. Practice your trading techniques so that you will have the necessary experience when it comes time to enter the real market.