Gambling giants invest in DFS

Caesars Entertainment and Bally’s Corporation both issued announcements on January 25 of their respective investments in daily fantasy sports (DFS) companies. Caesars Entertainment revealed a strategic investment in SuperDraft Inc., while Bally’s Corporation agreed to acquire Monkey Knife Fight (MKF).

Bally’s is working on launching online sports betting operations through Bally Bets, while Caesars already has an online sportsbook up and running in certain states. The new DFS investments will bolster the online gaming networks of both operators.

Caesars Entertainment tweeted out the news of its deal on Monday:

The casino giant believes the integration of the DFS offering will reinforce customer acquisition and retention channels across both its brick-and-mortar and online gaming business arms. Bally’s said it is pursuing a long-term growth strategy with a diverse offering that includes online and land-based operations in the US.

Integration into the Caesars network

As part of the new deal, Caesars will initially hold a minority equity stake in SuperDraft. The casino and hotel company has the option to grow its equity to 100% of the New Hampshire-based DFS operator over time. No details about the financial terms of the deal have yet come to light.

option to grow its equity to 100% of the New Hampshire-based DFS operator over time

Currently, SuperDraft caters to seven professional sports and runs operations in over 35 states, targeting casual and advanced DFS players alike. SuperDraft’s main differentiating feature from other DFS sites is its Multiplier Mode. It gives users more flexibility when picking players and greater opportunities to win, rather than using the standard salary cap system.

This DFS platform will become part of Caesars’ collection of online brands, which already includes Caesars Online Casino and World Series of Poker (WSOP). William Hill will also be part of the network once the ￡2.9bn ($3.96bn) acquisition becomes final.

Speaking about the latest investment, Caesars Entertainment CEO Tom Reeg said: “The addition of daily fantasy sports fits seamlessly with our strategic vision for mobile and online sports.”

Bally’s to build user databases

According to Bally’s official press release, MKF is currently the third-biggest North American DFS operator after DraftKings and FanDuel. The all-stock purchase will make Bally’s just one of a few US sportsbook operators to also have a DFS offering. MKF reportedly has about 180,000 users, 80,000 of which are paying customers. The DFS product will integrate into Bally’s Interactive after the deal closes.

all-stock purchase will make Bally’s just one of a few US sportsbook operators to also have a DFS offering

Bally’s latest acquisition will aid its plans to build a database of possible sports bettors in major states that do not currently have legal sports betting, like Florida, Texas, and California. All three states have large populations and would represent about 20-25% of sports betting revenue in the US once legislation is in place.

MKF will also help to build a similar database in Canada, where single-event sports betting legalization is under consideration. As well as having operations in Canada, MKF is present in 37 US states and the District of Columbia.  

Closing the MKF acquisition deal

Expectations are that the MKF acquisition will come to a close during the first quarter of 2021. After completion, MKF will get penny warrants that are immediately exercisable, allowing it to buy about $50m worth of Bally’s common shares. Two sets of contingent penny warrants, both allowing the holder to buy up to about $20m worth of Bally’s common shares, will be available one and two years after the finalization of the deal.

Bally’s CEO George Papanier said the MKF addition will allow the corporation “to leverage both its current customer database as well as DFS’s collection of depositing players.”