The Pivot: DraftKings/FanDuel Transition (2018)

Introduction

The repeal of the Professional and Amateur Sports Protection Act (PASPA) in 2018 by the Supreme Court marked a pivotal moment in the history of sports betting in the United States, enabling states to legalize and regulate sports betting ^[1]. This landmark decision paved the way for Daily Fantasy Sports (DFS) giants DraftKings and FanDuel to transition into the sportsbook market, leveraging their existing user base and technological infrastructure to gain a competitive edge.

Key Strategic Moves

FanDuel's Acquisition and Technological Enhancement

FanDuel's acquisition by Paddy Power Betfair (now known as Flutter) in 2018 was a crucial step in its transition, providing immediate access to a mature, global-grade technology stack and risk management infrastructure ^[2]. This strategic move allowed FanDuel to quickly adapt to the regulatory requirements and operational demands of the sports betting market, thereby enhancing its competitiveness.

DraftKings' Partnership and Vertical Integration

DraftKings initially partnered with B2B provider Kambi to launch its sportsbook operations rapidly. Subsequently, DraftKings went public via a Special Purpose Acquisition Company (SPAC) and acquired SBTech to vertically integrate and own its technology stack ^[3]. This strategic acquisition enabled DraftKings to enhance its control over the user experience, reduce dependencies on third-party providers, and improve its operational efficiency, ultimately strengthening its market position.

Implementation of the Shared Wallet System

Both DraftKings and FanDuel implemented a shared wallet system, allowing users to seamlessly transfer funds between their DFS and sportsbook accounts. This feature maximized the cross-sell rate by reducing friction and enhancing the overall user experience ^[4]. The shared wallet system played a critical role in the companies' ability to leverage their existing user base and increase customer engagement across both DFS and sports betting platforms.

Conclusion

The successful pivot of DraftKings and FanDuel into the sportsbook market in 2018 was facilitated by their strategic acquisitions, partnerships, and technological innovations. By leveraging their existing user base and infrastructure, these DFS giants were able to capitalize on the repeal of PASPA and establish themselves as dominant players in the US sports betting market. The evidence suggests that their strategic moves, including acquisitions and the implementation of a shared wallet system, were critical factors in their success ^[5].

References

^[1]: Supreme Court. (2018). Murphy v. National Collegiate Athletic Association.

^[2]: Paddy Power Betfair. (2018). Acquisition of FanDuel.

^[3]: DraftKings. (2020). Acquisition of SBTech.

^[4]: Eilers & Krejcik Gaming. (2020). US Sports Betting Market Analysis.

^[5]: See references ^[1]-^[4] for a comprehensive overview of the topic.