Gamechanger? DraftKings Appears Close To Buying Online Gambling Company SBTech

Details and timing of a deal, if finalized, are unknown.

Such a deal would give DraftKings its own in-house platform provider as it rolls out online sports betting and casino games around the country. Currently, it works with European company Kambi for its sportsbook and online casino in New Jersey.

DraftKings would not confirm the deal, but did offer the following statement:

“DraftKings speaks to a variety of companies regarding various matters in the normal course of business, and it is our general policy not to discuss the specifics of any of those discussions.”

How much is a DraftKings – SBTech deal worth?

LSR believes the price DraftKings could be as low as $300 million or as high as $500 million, but has no direct knowledge of the terms.

SBTech is an international company with the ability to provide both an omnichannel sports betting platform and an online gaming platform. It also has consumer-facing sportsbooks.

Sports betting expansion likely the motivator

The number of states that will offer online sports betting is set to rise in the coming year. DraftKings is likely eyeing Iowa, Tennessee, Indiana and Illinois for possible launches in 2020 and beyondd.

DraftKings Sportsbook is already planning to launch an app in West Virginia and is hoping to find an avenue to offer Pennsylvania online sports betting.

Interestingly, SBTech is the platform provider for the Oregon Lottery as it rolls out sports betting this summer. It’s not clear how that might involve DraftKings, if at all.

It’s also interesting to note that DraftKings (and Kambi) replaced SBTech to power the retail sportsbook earlier this year at Resorts Casino in Atlantic City.

Recent news at both DraftKings and SBTech

Just in the past week, there have been moves at the executive level for both companies.

DraftKings hired a new chief financial officer, Jason Park. He was previously an operating partner for Bain Capital Private Equity, focused on technology investments. He also spent eight years with McKinsey & Company. Details here.

SBTech also just hired a new president of its US business, Melissa Riahei. She was the General Counsel to the Illinois Lottery and has also worked in the online gambling space previously.

It’s not clear if these moves are simply a coincidence or somehow have a tie-in to this deal.

So why the deal for DraftKings?

For DraftKings, the deal provides an immediate boost to its ability to provide a one-stop shop for sports betting and online casino — all in house.

Instead of working to continue to develop its own platform at great cost (of time and money), here it simply acquires it all in one fell swoop. Development and trading (for sports) would now be under the DraftKings umbrella.

With the price being unknown, it’s not clear if it’s a great deal or not. But, in terms of the immediacy of DraftKings’ need, this ramps up the timeline in which it can provide a full platform.

For instance, right now, DraftKings’ casino still exists as functionality within the sportsbook. And while this is pure speculation, the acquisition would seemingly make it more immediately possible for DraftKings to provide a full online casino and sportsbook in Pennsylvania, should it find a casino to partner with there.

What does this mean for Kambi and DraftKings?

That’s not at all clear. What we do know is that Kambi — which helped with launch, trading services and continued operation of the DraftKings Sportsbook in NJ —  had a multi-year deal in place to provide those services.

Short of word from any of the three companies, it’s not clear what the future could hold, other than DraftKings is likely not immediately switching functionality over to an SBTech platform.