A DraftKings Inc. attempt to introduce a winning bet surcharge in its high-tax states backfired, with a public outcry forcing the company to walk back the controversial move. The announcement came after its main rival, Flutter Entertainment, owner of FanDuel, publicly announced that it would not implement a similar surcharge. Deciding to backtrack may have been crucial for DraftKings to maintain its competitive edge.
DraftKings Showcased Admirable Adaptability
Despite the controversy, DraftKings managed to gain market share in the US sports betting scene. JMP Securities analysts estimate that in July of 2024, DraftKings held 37.8% of the total US online gaming market across reported states versus 35.5% in Q2. This gain came during the typically weak month of July, thanks to gaming margins bouncing back to over 10%.
These results put DraftKings in a good spot as it heads into the football season starting in late August. Analysts also indicate that the operator could gain even more market share if the gaming margins continue increasing. DraftKings has proven it can adapt to dynamic market conditions and should be able to maintain its position at the very least.
The timing of these gains comes after DraftKings reversed its decision to introduce a winning bet surcharge. If implemented, many analysts suggested it would have hurt DraftKings’ market share, given customers would move to the likes of FanDuel, which took a firm stance against such charges despite rising costs.
Other Leading Players Also Found Success
Sentiment among the analyst community remains optimistic, with many currently holding price targets on DraftKings and Flutter Entertainment well into the six-figure range. JMP Securities analyst Jordan Bender highlighted Flutter Entertainment’s robust US performance, noting an 8% increase in revenue from Q1 to Q2 2024. The operator benefited from consistently high margins of 12.7%.
According to Bender, Flutter enjoys continuous growth opportunities as the operator looks to reinvest in its player base ahead of major sports seasons and possibly expand through mergers and acquisitions in emerging markets like Brazil, Latin America, and Eastern Europe. Its FanDuel brand remains among the leading US brands and should deliver sustained value.
Other industry players also saw gains at the onset of Q3. BetMGM, for example, increased its market share to 6.7% from 5.3% in Q2, reporting handle growth acceleration for the fourth consecutive month. These results underscore the intense competition in the US online sports betting industry as operators hone their strategies before the upcoming market season.
