FanDuel and DraftKings are in competition to take on the role of America’s premier mobile sportsbook

Until sports betting comes to our favorite online casino, Grande Vegas Casino, we'll just keep watch on those battling it out for the sports betting #1 position.

Currently, the pre-dominant market share in sports betting in mobile-betting-friendly New Jersey is held by DraftKings and FanDuel. The two Fantasy Sports giants hold a 83% market share in sports betting in the state and are looking to expand to other online-sports-betting-friendly states. However, once online wagering is legalized, their dominance might not continue. There’s a Wild West-type atmosphere in U.S. sports betting world today that gives everyone a chance to compete.

Today’s Market

Today, each state has its own set of rules and regulations for sports betting.  Those laws range from allowing sports betting with no online betting to no sports betting to a complete acceptance of online sports wagering. Companies such as DraftKings and FanDuel, which had been struggling to stay afloat prior to the May 2018 Supreme Court ruling that allowed states to regulate their own sports betting laws, are now in a position to operate the lion’s share of America’s online sportsbooks.

Today’s sports betting market in America is both transformative and disorderly. On the one hand, the rules vary almost 360 degrees from one state to the next. On the other hand, the potential to allow sports fans to become more interactively involved in their favorite sporting events is endless.

Theoretically, the market for sports betting operators is huge. The American Gaming Association estimates that Americans have been gambling more than $5 billion legally on sporting events every year and $150 billion through illegal venues. Now that sports betting is legal in many states, the situation is even more explosive. In March 2019 alone, FanDuel, which controls more than 50 percent of the New Jersey market, took in $13.3 million in online sports bets.  During the same month, DraftKings generated $7.3 million in internet sports wagering revenue in NJ. 

FanDuel Chief Revenue Officer Mike Raffensperger  commented, “Our original estimates for the New Jersey market have been very, very, very materially exceeded. Gambling is still dominated by an illegal grey-and-black market, whether with local bookies or offshore operators, that have been in place for a very long time. In a regulated, consumer-protected business, we’re very optimistic that we can actively displace that as more responsible actors.”


The market projections for online sports betting are alluring but the experience is frustrating because, in some areas, it’s a seamless experience while in others it’s impossible. Gambling companies are trying to navigate a grab bag of legislation, regulations and tax rates that are set to limit the addressable market for years to come.

Richard Carter, CEO of SBTech, summarized the situation. “If we’re looking at the U.S. over the next five years, if you take New Jersey as the template and put that over every other state, it would be a huge mistake.” Carter’s company will be providing mobile betting technology in  New Jersey, Mississippi and Pennsylvania for Churchill Downs. Churchill Downs owns the casino company Golden Nugget as well as casinos and racetracks around the U.S.

“There is no doubt both FanDuel and DraftKings will have large market share,” Carter said. “But different states will have different market leaders. You need market access. Some states will be lottery-only. Some states will be limited to tribal gaming. Some states won’t allow FanDuel and DraftKings to use their brands. They’ll have to use the casino brand. There are lots of nuances. You have to take each state as it comes.”


Until last year, Nevada was the only state where bookmaking was legal. That’s because Nevada legalized sportsbooks in 1949. When, in 1992, Congress passed the PASPA  (Professional and Amateur Sports Protection  Act) which outlawed sports betting in the United States, Nevada was grandfathered in and allowed to continue its activities.

Bookmaking involves a house, or a bookmaker, who sets a line that aims to convince an equal number of bettors to take each side of a wager. The bookmaker takes a cut of each “vig” (wager) as payment for their role as market maker. The bookmaker’s goal is to profit on the vig while breaking even on the actual bets.

If the house gets its initial spread wrong and a flood of bets come in on one side or the other, the sportsbook must adjust. If the house doesn’t adjust in time, it can  either end up winning more than expected or taking big losses.  

Sports betting operators such as FanDuel and DraftKings are hoping that the popularity of sports betting will offset the low margins. This seems likely -- less than a year after SCOTUS legalized sports betting, New Jersey’s internet sports betting market amounted to $862 million in the first quarter of 2019.

That compares to $216 million for brick-and-mortar casinos in New Jersey. FanDuel and DraftKings, with a combined market share of 83% in NJ, cleared more than $700 million worth of bets in the first 3 months of the year. The companies haven’t said what their take of each bet is but observers believe that they take about 5% of each bet to put  the two companies at $35 million in sports gambling revenue. 

Over the past year Delaware, New Jersey, Mississippi, West Virginia, New Mexico, Pennsylvania and Rhode Island joined Nevada in legalizing sports betting and an estimated fifteen states could legalize by the end of the year – plus another 30 by next year, In some of those states, online/mobile betting is built into the legislation while other states have not yet addressed the question of whether sportsbooks can accept online bets.

Up and Running

Legalization is only the first step for any company interested in getting an online sportsbook up and running. Each company must apply for a supplier license in that specific state and meet the specific requirements of that state. The process in some states can take years to complete while in others – New Jersey, for instance – it’s a matter of a few months.

Operators need to cut deals with existing brick-and-mortar casinos for “skins” that will give the sportsbook the right to operate in that state. DraftKings is leading in that area thanks to a deal with Caesars Entertainment that gives it market access in 12 states outside New Jersey. The deal ensures that Caesars receives DraftKings equity for the skins access. FanDuel also has a similar agreement with Boyd Gaming.

To date, no state gives mobile operators access to a direct license application process which would allow them to avoid the revenue or equity share,

The key to competing with the incumbents will be to focus on a trait or aspect of sports that’s currently being ignored, says Paul Martino, a former FanDuel board member and venture capitalist at Bullpen Capital.

“If a guy comes into my office and says I’m going to build a sportsbook, the answer is no. You’ve got the land-based casinos, you’ve got FanDuel and DraftKings, that’s a race to the bottom. The margin on that is going to get dang close to zero. Now, you show me a completely different game that hardly looks like sports betting but uses sports betting technology and its legal framework on the back end, now that I’m going to be excited about investing in.”

That means that  FanDuel, DraftKings or some other dark horse must innovate in order to take top spot to take the #1 spot in the industry. They might consider incorporating their ideas or acquiring innovative startups as they vie for the top position.

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