DraftKings Co-Founder Matt Kalish: Drafting a plan for the future

o invest time and money on a pivotal Supreme Court decision has been considered a risk that only few companies dare take. DraftKings Co-Founder and Chief Revenue Officer, Matt Kalish, gives GI readers the scoop on how the company has been gearing up to capitalise on this goldmine market in the past 12 months

In what ways have DraftKings been active in the lead up to the Supreme Court’s ruling on PASPA?

DraftKings has been actively discussing and preparing for sports betting since the Supreme Court made the decision to hear the PASPA case in June of last year. We have spent a year preparing a compliant sportsbook product and we feel will be very competitive in the US marketplace. Most recently, we opened a New Jersey office and named a head of sportsbook to oversee the development of the sports book vertical. We look forward to continuing to build up talent in house, improving our sportsbook product, and continuing our work with state legislatures and regulators as formal sportsbook regulations are established.

Are there any states you plan on targeting first?

There are a few states that have actively worked to be at the forefront of regulating this emerging industry. Our early focus has been on New Jersey, as they have led the way for sports betting all along.

States will still need to pass sports betting legislation and put in place the necessary regulatory framework. We anticipate some states moving fairly quickly and having operational sports betting products in 2018. Other states will have a longer process before sports betting is permitted. And there will be some states which make the decision to not pass legislation that permits and regulates sports betting.

We have spent the last few years interacting with legislators, regulators and other stakeholders, in an effort to pass fantasy sports legislation in states across the country. DraftKings is especially well-positioned to navigate this state-by-state process.

What lessons have you learned from marketing daily fantasy sports that can be transposed in any sports betting rollout which DraftKings undertakes? Our core DFS customer is very similar to the American sportsbook customer – they are sports fans who don’t want to just watch sports, but they want skin in the game, too. They want to make predictions, compete, and play as they watch the sports they love.

We think we will have a unique opportunity to offer sports betting products to our DFS customers and similarly convert new sports betting customers into trying fantasy sports for the first time. Regardless of our approach, we have a continued commitment to innovation and providing our customers a variety of products and services.

What has been the biggest challenge for DraftKings in setting up its sports betting business?

Similar to our experience in DFS, we have had to get up to speed with a new product category quickly, find the right partners, and scale up the organisation in a short amount of time. When scaling DFS, we went through the experience of having single years where we have grown our user base ten-fold, and more than tripled our headcount. Being able to rapidly and successfully scale up the DraftKings team in all areas, integrate a lot of new talent, all while maintaining our extremely high bar for driven people with the right skills and values, is essential and hard.

DraftKings, with our existing DFS product and world class in-house engineering and product team, has always been especially well positioned to enter the sports betting market. Since the Supreme Court made the decision to take up New Jersey’s case, DraftKings has been preparing for PASPA to be overturned and the ban on sports betting to be lifted. We had to commit significant resources a year ago, not knowing what was going to happen with the Supreme Court. Our process paid off and DraftKings aims to be ready to go on Day One in most states.

How will DraftKings current relationships with the leagues and professional sporting associations (leveraged via its DFS) have to evolve to accommodate sports betting? Have you already started these sorts of discussions with them?

We’re fortunate to have extremely strong relationships with numerous professional leagues and teams, they have supported us tremendously, and in turn we believe we have created incredible engagement for their content through our Daily Fantasy Sports offerings. We think sportsbook will be equally important to creating strong fan engagement for the leagues and teams. While some of our relationships may evolve and change somewhat given the Supreme Court’s decision, we expect to always maintain strong, productive relationships with our league and team partners.

In your opinion does this existing relationship with the associations give you an advantage over your competitors in this area? And why?

Absolutely. Leagues and teams are our strategic partners, and we already collaborate on a variety of projects that drive fan engagement through our existing DFS product. With the new sportsbook product, many leagues have already moved to embrace the opportunity to see a safe to play, legal and regulated sportsbook product. None of us want this product to exist in the black market, absent of important consumer protections for sports fans. We want fans to have protections while becoming closer to the games they love. We think we share the same goals, serve the same audience and our relationships make achieving our mutual goal possible.

Where do you see are the biggest issues for gaming businesses expanding their offerings into sports betting?

Navigating the state by state regulations will be challenging for many gaming companies. Fortunately, DraftKings has spent several years passing fantasy sports legislation in multiple states and setting up the necessary internal compliance structure. Ultimately, we think that experience will give us a competitive advantage over others in the space.

Additionally, customer insight will be an issue for many operators not currently serving many American consumers. As an American company based in Boston, MA with over ten million customers, we are confident we can succeed in resonating with American consumers.

In your opinion, does the legalised sports betting market represent a more significant business opportunity for DraftKings than pursuing its ambitions in the DFS market?

We think the combination of DFS and sports betting will be incredibly attractive to our existing customers, and expect both to provide growth steadily as many players will engage in both products. We think the combination of DFS and sports betting will be incredibly attractive to our existing customers—and new ones. DFS and sports betting are unique products which offer different, complimentary fan experiences.

In your opinion are there any cross-pollination opportunities available between your sports betting business and your more established DFS offering?

The customer we serve for both DFS and Sportsbook will be the same customer – sports fans who want skin in the game. We think the brand we have built is extremely strong in sportsbook; we are front of mind for American sports fans looking to not just watch the game, but who want to play.

We expect that many within our customer base will adopt sportsbook if the state they live in passes legislation and implements regulations and consumer protection. We will have a unique opportunity to have the first look when our players consider sports betting products they want to try as this new space emerges.

We see exciting opportunities to further diversify our product offering with sports betting, and build on our unique ability to drive fan engagement with the sports, teams and athletes they love. We think we will have a unique opportunity to offer sports betting products to our DFS customers and similarly convert new sports betting customers into trying fantasy sports for the first time. Regardless of our approach, we have a continued commitment to innovation and providing our customers a variety of products and services.

Given your company's experiences over the past six years, in what ways does the example of DFS legalisation in the US serve as a guideline as to how the potential legalisation of sports betting might go?

The process of legalising sports betting will take many years, as state legislatures and Congress weigh legalisation and regulation moving forward. We expect that sports betting regulations will differ state-by-state as with fantasy sports. Some states are actively working towards developing sports betting legislation, and made clear their intention to be ready to license operators at the first opportunity to do so. I expect other states, in the next few months, will also take this stance. As with fantasy sports, there are necessary steps potential operators must take in order to offer sports betting in an individual state. Our experience working with state legislators and regulators on fantasy sports has us well positioned to navigate this process.