Around 48 hours before Missouri awards its direct sports betting licenses, FanDuel, DraftKings and Circa Sports laid out their cases to the Missouri Gaming Commission (MGC).
The two U.S. market leaders and the smaller sportsbook are the three operators who have applied for one of the pair of untethered licenses, which allow the recipients to offer online sports betting without the need to partner and share revenue with an in-state casino or sports team. Untethered licenses are twice as expensive as tethered ones, at $500,000 versus $250,000.
The MGC is considering aspects such as the respective applicants’ existing U.S. operations, revenue-generating ability and responsible gambling measures before announcing on Aug. 15 which two of the three have been chosen.
On Wednesday, Aug. 13, Show-Me State regulators asked executives from all three applicants to show them why they are worthy of a direct license.
FanDuel, DraftKings look to lean on DFS footprint
DraftKings and FanDuel leaned heavily on their market-leading wagering volume and revenue generation. Both also noted they have sizable existing operations in Missouri via daily fantasy sports (DFS), suggesting that they have proven success in converting and cross-selling those customers to sports betting.
“The citizens of Missouri already are well familiar with us,” added DraftKings Chief Financial Officer Alan Ellingson, citing national advertising during sports games as well as the DFS footprint.
Speaking after DraftKings, FanDuel’s regulatory VP Rich Cooper suggested that the operator’s eight-year history of offering DFS in Missouri puts it in “the best position” to partner responsibly with the MGC to grow Missouri’s online sports betting market to the maximum extent possible.”
Demand clear for all to see
The two heavyweight rivals also pointed to existing demand.
FanDuel’s Senior Director of Strategic Growth and Innovation, Stephen Higgins, told the commission that 110,000 existing Missouri-based customers have already wagered with FanDuel in other bordering legal states, showing that tax dollars are ready and waiting when those players can bet at home instead.
DraftKings’ Ellingson made a similar point.
“We are already live in a number of adjacent states to Missouri, where we know Missourians are traveling across borders to place their dollars,” Ellingson said. “We’re excited to see those dollars come back into the state of Missouri with the launch here in the fall.”
Both operators also vowed to offer a customized and targeted betting experience for Missouri residents through things such as playing up the rivalry between MLB’s Kansas City Royals and St. Louis Cardinals and making sure in-state teams are top of the agenda on their respective sportsbook platforms. FanDuel and DraftKings also pointed to their existing relationships with major leagues and teams.
How much money are we talking?
Ellingson said that DraftKings is projecting $175 million in annual gross gaming revenue within five years of launching, from an average annual customer base of about 900,000, about one-fifth of the legal-age population. “We’ve seen this in other states, and we believe that Missouri will be very consistent with what we’re observing from the neighbors,” he suggested.
In contrast, Higgins said FanDuel expects $400 million in Missouri sports betting annual gross gaming revenue by the time the market reaches maturity in 2034.
Under Missouri’s relatively modest 10% tax rate, DraftKings’ five-year projection and FanDuel’s 2034 estimation would amount to $17.5 million and $40 million in tax revenue, respectively.
‘Small potato’ Circa focuses on big bettors
After the big guns had their say, Circa Sports CEO Derek Stevens commended FanDuel and DraftKings as industry leaders and readily acknowledged that his company cannot compete on revenue or reach.
“If you look at what company will provide the most amount of taxable revenue to the state of Missouri, our company’s not going to be able to compete,” he admitted. “I realize we are a small potato compared to what was just presented in front of me.”
Circ’s advantage, he said, would be in attracting “a different style of bettor,” one who spends big and isn’t otherwise present in Missouri. Stevens noted that Circa’s sports betting hold is around 3.5% compared to rates of typically more than 10% at bigger sportsbooks and that 95% of its handle comes from bets that are worth more than $50.
“These are very high hold percentages that have a lot of different customers who make many smaller wagers,” Stevens added. “Circa is a little bit different. We take larger bets, we do not limit professional players. We focus on bigger bets, bigger volume, bigger handle. We’re going to attract people who are currently betting offshore who are not going to go and bet into a 14 or 16% hold market. We’re going to provide the value that’s really unprecedented. We’ve seen this in other states.”
Missouri state of play
While Circa and DraftKings are applying for the untethered license, they both voiced openness to partnering with a sports team if their direct license application is rejected. Stevens said Circa has had conversations with the St. Louis Blues and also referenced a good relationship with the Royals. DraftKings, which offers retail betting in 14 states, would also consider a brick-and-mortar casino deal if needed.
As well as those three untethered license applicants, Underdog and Fanatics have applied for a tethered license, although they have not revealed who their market access partners will be.
Other operators have made preparatory moves. BetMGM has partnered with Century Casino & Hotel Cape Girardeau and Bet365 has locked down the Cardinals, while Caesars, Bally’s and ESPN Bet owner PENN Entertainment all have their own land-based casinos in Missouri that provide ready market access.
In total, the MGC can issue up to 14 online sports betting licenses, including the two untethered awardees this week. All tethered license applications then must be in by Sept. 12.
