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‘Vast majority’ of Super Bowl sports betting is in the illegal market, DraftKings CEO says

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DraftKings CEO Jason Robins joins Yahoo Finance Live to discuss the huge rise in sports betting and importance of content creation.

Video Transcript

[MUSIC PLAYING]

JULIE HYMAN: This Super Bowl Sunday, there will be 45 million more potential sports bettors than there were last time around. That's because of legalized sports betting that's happened in a number of states. That's according to numbers from Axios.

And one of the folks who wants to benefit from that is DraftKings CEO Jason Robins. He joins us now. Jason, it's great to see you. And I know you're out in LA ahead of the big game. So I'm curious what you expect from the-- I should say our Josh Schafer is here as well-- what you're expecting from the game in terms of what kind of volume of bets you expect associated with it.

JASON ROBINS: Well, I saw a study from, I think it's from the AGA, saying over 30 million people were planning on making a bet this year in the Super Bowl. I think it was around $7.6 billion they were estimating would be bet.

But the interesting thing is still the vast majority of that is happening in the illegal market. I know a number of states have legalized, but there's still a ton of concentration of activity. And still, the three largest states by population don't have legal sports betting. So hard to say what we're going to do, but I think it's a big opportunity to keep expanding sports betting into more states and keep getting more people over from the illegal market.

JOSH SCHAFER: Jason, we've seen the promotion starts coming in from DraftKings this week with the push notifications for different prop bets and boosted bets, kind of trying to gain customers that way. What have you guys seen from that thus far? And how do you sort of balance the spend there of trying to get people into the app, while not giving too good of odds on some sort of boosted bets and promotions?

JASON ROBINS: Well, promotion is exactly that. It's designed to acquire new customers, to activate people. And for a game like the Super Bowl, which is the biggest sports day of the year, that's the perfect time to be doing that. That's the best opportunity or one of the best opportunities to get a ton of new customers to try the product, maybe to get people who haven't played in a while to come back and make a bet. So that's really the goal.

I think the balance has much more to do with where we are at this stage of the industry. It's really that early days where, as I mentioned earlier, there's over 30 million people still betting in the illegal market. So there's already a huge built-up market. And that's a big difference from other industries most other industries, when you find product market fit, they kind of build customer bases organically.

This is one where because it's been in the illegal market for so long, there's literally tens of millions of people that were already planning to make a bet on the game. So I think that's why you're seeing such aggressive activity on the customer acquisition side. There's just a flood of new customers coming into the legal regulated industry right now.

JOSH SCHAFER: Well, and the other part of that customer acquisition, too, that a lot of the sportsbooks are getting into is the content buildout and kind of creating your own content and covering the Super Bowl that way. I know DraftKings has been doing that throughout the week this week. Where does the company stand in terms of content creation? Are you planning on investing more in content moving forward and kind of creating more of a-- instead of it being a two-screen betting experience, maybe it being a single screen betting experience more moving forward?

JASON ROBINS: Well, I think for us, it really is still very early in our foray into media. We just brought on a bunch of new talent. And I think that's going to make a big difference and accelerate our efforts. I'm very excited about it because there's a clear synergy between content and betting. As for what we'll do, I think we're still figuring that out.

But I think you will see us continue to increase our focus on trying to do things that appeal to sports bettors so that we can build the top of the funnel, but also so we can engage our customers. Our customers are much more likely to watch sports, much more likely to watch content related to sports. And we want to be there to engage them all the time on all the things that they are interested in related to this subject, not just on the betting and DFS side.

BRIAN SOZZI: Jason, how different or how much more live betting will be done on the platform this year compared to last year?

JASON ROBINS: Oh, I don't-- you know, it's still early in the year. It's hard to say, but we've seen it growing every year for the last few years as more live bets are put on the platform. It's more kind of organic adoption happens. I think a lot of people, when they first start betting, don't even realize you can live bet.

And once they discover it, they find it's a fun way to enjoy things during the game. And sometimes your bet on the spread or your money line bet by the time you get to the third or fourth quarter, it's not looking good, so you can come and make a live bet, and that'll keep your attention and engagement in the game and make that last quarter or two more fun.

JOSH SCHAFER: And Jason, how's the technology held up with that? We know as bigger states come on, like, say, New York, and you have more and more people on the app, has that been a challenge at all when it comes to the micro betting and the live betting from a technology standpoint?

JASON ROBINS: Well, we're very fortunate. We have a great engineering team. They work really hard. You know, I think during the months over the holidays, when we're ramping up going into playoffs and Super Bowl, everybody is working really hard to make sure the platform's stable in August, going into NFL season, same thing.

So we've been fortunate we haven't had any real hiccups on that front this year. It's obviously a lot to keep up with when you're growing that quickly. The traffic is also very spiky, so it's a bit of a different problem than some other services have, where their traffic is more smooth. We get huge spikes during right before the games, during times when big plays happen and people are checking their bets or checking their fantasy teams. So it's a unique challenge, and the team's done a great job handling it.

JULIE HYMAN: Jason, the Super Bowl is in California-- sports betting not yet legal in the state of California. So how does that affect sort of the flow of things and how it works? And what's your outlook for this coming year in terms of how many more states could legalize it?

JASON ROBINS: Well, it's hard to know because, you know, states-- government isn't always predictable. And sometimes you think you're going to get a law passed, and it doesn't go through. And then sometimes the state that you never thought was going to even consider it out of nowhere decides to take the issue up. So, you know, we haven't really gone the route of trying to predict how many.

As far as California goes, we have a ballot referendum that we are in the process of gathering signatures to qualify for on this November's ballot. I'm very excited about that. California is obviously a huge market. If California were a country, I believe it would be the fifth largest in the world by GDP. So really big opportunity if we can get California there, and I'm looking forward to hopefully getting enough signatures to qualify for the ballot. And then we just need the voters to turn out and vote for it.

BRIAN SOZZI: Jason, this coming Sunday for the Super Bowl, I'm probably going to eat 20 boneless wings, suck down some tequila. I'm going to have fun, but can you have fun during Super Bowl day? This is essentially a workday for you, no?

JASON ROBINS: It's funny because I love sports, but you're absolutely right. You know, I used to just be able to have a Super Bowl party and watch with friends or family. And my kids are back home, and they always wish that I were there watching with them. So it's definitely work.

I mean, of course it's fun to be here. There's a lot of action. I've gotten to see a lot of people that I haven't seen in a long time. So that's been nice. But you're right. I can't just sit back and relax and watch the game. It's work the whole way through. But I'll try to catch a little bit of it in between talking to people and meetings.

JULIE HYMAN: That is a good point. Like, even just being in the same space with a lot of people you know is a fairly novel experience at this point. Jason, finally, I'm curious what the most popular bet or bets are on the platform right now. And finally, do you actually placing bets before the game, or is it sort of like a church and state situation?

JASON ROBINS: Well, I have always loved betting, but I'm not. I think it's probably better to, at least for now, not do that. And certainly I can't do it on our platform. And there are certain states that actually don't allow me to do it at all. But I just found it better to steer clear. I'll probably have a few Daily Fantasy games going against my co-founder, Matt. He and I enjoy playing against each other, but other than that, I'm going to steer clear.

You know, as far as the most popular bets, obviously, the typical stuff-- spreads, money lines, over, unders. But actually on the prop bet side, the most popular bet is the coin flip. And then as far as player props [AUDIO OUT] scoring and touchdowns up there. A lot of people think he's going to score, and rightly so-- he's had a great season.

JULIE HYMAN: Well, our producer Val is very excited to bet on what flavor of Gatorade is going to be dumped on the winner. Jason Robins, great catching up with the ahead of the game. I hope you manage to watch little and have some fun. Have some beers as well for us. Jason Robins, DraftKings CEO, as well as our Josh Schafer, who covers sports for us. Thanks.