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FanDuel and DraftKings are racing to open sports betting operations

For two years, DraftKings and FanDuel, the two leading “daily fantasy sports” companies, spent most of their time fighting legal battles with state attorneys general, and arguing that their fantasy contests did not constitute gambling. As recently as last fall, each company had to pay a $1.3 million “unfair and deceptive practices” fine in Massachusetts. Even today, there remain nine states where DraftKings and FanDuel don’t operate, because state law deems their fantasy contests illegal gambling.

And yet the companies are now focusing full-steam-ahead on gambling.

After the U.S. Supreme Court in May struck down PASPA, the federal law that prohibited states from legalizing sports betting, some states have scrambled to pass sports betting bills, and DraftKings and FanDuel have raced to set up shop along with them. Delaware and New Jersey moved quickly; both launched legal sports betting in June. West Virginia, Pennsylvania, and Rhode Island are next up; all have all passed sports betting bills and are expected to launch in the fall.

FanDuel was first out the gate in New Jersey, setting up a physical sportsbook at Meadowlands Racetrack. The operation opened on July 14 and took in just over $1 million in bets in the first weekend. (That’s “handle,” not revenue.) That number may look small, but Meadowlands chairman Jeff Gural told the website Legal Sports Report, “Our goal was to do over $1 million for the weekend.” It was a decent haul considering it opened during the slow days of summer for sports: apart from World Cup soccer, there was really only MLB and WNBA to bet on. Once the NFL season starts, action will get hot, especially since both the New York Giants and New York Jets play next door at MetLife Stadium.

FanDuel also has deals in place to open physical sportsbooks at The Greenbrier hotel in Charleston, West Virginia, and at Tioga Downs racetrack in New York, if and when New York passes sports betting.

People wait in line to enter the FanDuel Sportsbook at the Meadowlands Racetrack in East Rutherford, N.J., on July 14, 2018. (AP Photo/Julio Cortez)
People wait in line to enter the FanDuel Sportsbook at the Meadowlands Racetrack in East Rutherford, N.J., on July 14, 2018. (AP Photo/Julio Cortez)

FanDuel’s lead in the physical sportsbook race over DraftKings is thanks to having sold a majority stake to Irish betting giant Paddy Power Betfair in May, immediately after the SCOTUS decision came down. Paddy Power Betfair’s U.S. business, which includes FanDuel and another DFS app PPB bought last year, Draft, is now called FanDuel Group.

DraftKings, which launched four years later than FanDuel, eventually grew bigger than FanDuel in both user base and revenue—but interestingly, it is FanDuel that looks more formidable for the moment, as part of a much larger international gambling player. Many industry onlookers now wonder if DraftKings, too, will sell, rather than go public.

DraftKings looks more focused on online wagering.

DraftKings CEO Jason Robins teased on Twitter the forthcoming DraftKings Sportsbook mobile app, which is likely to launch first in New Jersey, where DraftKings cut a licensing deal for online sports betting with Resorts Hotel Casino in Atlantic City. So far, only New Jersey has legalized online and mobile wagering, but no offering has launched there yet.

DraftKings also announced a combo deal with Del Lago Resort & Casino in Waterloo, N.Y., to open both a physical sportsbook and online wagering—if and when New York passes both.

Of course, the two companies still offer their core daily fantasy sports products, and the start of another NFL season is their biggest time for new user signups. Neither company is overtly walking away from DFS. “They’re going to say, okay, DFS is one product, and sports betting is going to be over here, that’s another product,” says Dustin Gouker, managing editor of Legal Sports Report. “Whether you buy that, and whether that’s a great thing to do, having two things that are arguably both skill-based gambling products… That’s what they’re going to sell, they’re going to say, sports betting is over here, DFS is over there.”

The SCOTUS decision has brought instant change to the identities of these two tech brands. It’s easy to foresee a time in the next two years when the brands will be first associated with gambling, not fantasy football.

The swift pivot DraftKings and FanDuel are making into legal sports betting was the subject of a recent episode of the Yahoo Finance Sportsbook podcast; listen below.

Daniel Roberts is the sports business writer at Yahoo Finance. Follow him on Twitter at @readDanwrite. Sportsbook is our sports business video and podcast series.

Read more:

Supreme Court strikes down sports betting ban: what happens next

Daily fantasy sports is at a crossroads heading into 2018

Ireland’s biggest betting company buys a DFS app

MLB commissioner: ‘We are reexamining our stance on gambling’

A ‘perfect storm’ is brewing for legalized sports gambling

Trump presidency could legalize sports betting