Bet On It: DraftKings leans into live betting opportunity with Simplebet deal

Welcome to the latest edition of “Bet On It,” where The Fly looks at news and activity in the sports betting and iGaming space. 

SECTOR NEWS: Nevada reported July statewide gaming win was down 6.91% to $1.306B. Additionally, the Nevada Gaming Control Board also reported the Las Vegas Strip gaming win was down 15.04% in the month from last year to $709.34M.

Cathie Wood’s ARK Investment bought 25.1K shares of DraftKings (DKNG) on Tuesday. and 51.3K shares on Monday.

On August 20, the Court of First Instance in the country of Georgia ruled in favor of Aviator LLC’s copyright and trademark infringement claim against gaming company Spribe Oundefined and Adjarabet, Georgia’s largest online casino, owned by Flutter Entertainment (FLUT). The court ruling found copyright and trademark infringement and invalidated trademark registrations based on bad faith registration and copyright infringement, awarding the claimant damages in the amount of $330M. Aviator LLC owns several trademark registrations for the graphic logo “Aviator” for gambling services including online and physical casino services and gambling. In 2021-2022, Spribe Oundefined registered its own “Aviator” trademarks for computer games and gambling services, which the claimant argued were infringing on their original trademark. The court ruled that trademarks of Spribe Oundefined were registered in bad faith, and that the trademarks of Spribe Oundefined infringed copyright on the claimant’s image. As for the claim against online gambling platform www.adjarabet.com the court ruled in favor of the claimant, ordered the platform to stop the use of the name Aviator for its flagship game and online streaming of the casino games. The court has awarded Aviator LLC $330M in compensation for trademark and copyright infringement for prior illegal use.

BetMGM (MGM) is kicking off the 2024 football season with the debut of a variety of new offerings. Headlining the upgraded roster of available features are markets by Angstrom, Entain’s (GMVHF) sports modeling and analytics company, that power exclusive betting markets. “BetMGM puts customers first, responding to players’ feedback and investing in user experiences to exceed expectations,” said Adam Greenblatt, BetMGM CEO. “Leveraging our powerful in-house technology, we developed a more seamless, intuitive and integrated product. The BetMGM sports betting app is the perfect companion for the upcoming football season whether fans are enjoying the action in Vegas or at home.”

LIVE BETTING M&A: DraftKings announced that it has entered into an agreement to acquire Simplebet, a sports betting provider of in-play micromarket content and pricing. The merger agreement and the proposed transaction have been approved by the boards of directors of each of DraftKings and Simplebet. The Proposed Transaction is subject to the receipt of required gaming regulatory approvals and other customary closing conditions. The proposed transaction would allow for the integration of Simplebet’s proprietary machine-learning models into DraftKings’ pricing and technology platform to create highly accurate betting opportunities during every moment of a game. The company said the proposed transaction would improve the quality, breadth and speed of data throughout the DraftKings trading lifecycle, and would unlock a faster and more frictionless experience for the Company’s customers. “Live betting represents an area for potential growth for online sports betting, and the proposed acquisition would allow DraftKings to leverage Simplebet’s proprietary technology to create an in-play wagering experience that moves at the speed of sports,” said Corey Gottlieb, DraftKings chief product officer. “And while we continue to elevate our product offering in this space, we are also committed to building technology that supports our robust consumer protection standards.” Founded in 2018, Simplebet is a B2B provider of micromarket pricing for the NFL, MLB, NBA, NCAAF, NCAAB and the NHL. Simplebet has developed a scalable, maintainable, and highly performant foundation for a live betting platform that is algorithm oriented. With machine learning and automation to supplement the betting experience, Simplebet’s proprietary models offer more in-play moments for bettors. Simplebet uses in-house technology to price micromarkets. Simplebet and DraftKings both have proprietary machine learning libraries and platforms that, once combined, will present an opportunity to step-change DraftKings’ machine learning operations. “Joining forces with our long-term collaborators at DraftKings will further the Simplebet mission to make every sports moment matter,” said Chris Bevilacqua, Simplebet co-founder and CEO. “This transformative acquisition, upon completion, will marry our best-in-class AI and machine learning technology with the DraftKings product offering, enhancing the customer experience for a new era of real-time, in-play gaming.”

PARLAY PEFORMANCE: In the first half of 2024, the U.S. gambling market generated $39.9B in gross gaming revenue, or GGR, according to Benchmark, citing data from Yield Sec. Of this total, illegal platforms accounted for $29.1B between January and June. During this period, 892 illegal operators were identified across the country. The legal market has seen significant growth, rising from $12.3B in GGR in 2022 to $16.9B in 2023, with $10.8B generated in just the first half of 2024, the firm noted. Projections suggest that the legal market could exceed $20B in GGR by the end of the year. In North Carolina, a newly launched market in 2024, $340M in wagers were reportedly placed, yielding $42M in revenue during the state’s first five months of operation. Meanwhile, in Illinois, BetMGM’s parlay performance during the first half of 2024 revealed a competitive gap compared to market leader FanDuel. BetMGM posted an 8.9% hold on parlay wagers, generating $6.3M in winnings from a $70.4 million handle. In contrast, FanDuel achieved a 23.4% hold, earning $186M from 48.8M parlay wagers in Illinois alone—nearly 30 times BetMGM’s parlay earnings. This significant difference underscores the crucial role of parlay offerings as a revenue driver and highlights the challenges BetMGM faces in closing the gap with top competitors.

CREAM OF THE CROP: Macquarie considers DraftKings a top online stock to own heading into the NFL season. While North American online gaming stocks have risen 18% year-to-date on average, DraftKings has lagged behind, remaining flat due to recent regulatory challenges and its heavy focus on the U.S. market, the firm told investors in a research note. However, as these regulatory issues stabilize, Macquarie believes the company is well-positioned for near-term gains, driven by favorable NFL game outcomes, higher structural hold, and overall growth momentum in online sports betting and iGaming. Historically, holding DraftKings stock in the two months leading up to the NFL season opener has been the most profitable strategy. Still, recent softness in the stock during the fourth quarter has been linked to the company’s hold falling 50-100 basis points below market expectations from September to December. Given current third-quarter hold and growth trends, a more favorable year-over-year hold comparison in the fourth quarter, and recalibrated guidance for 2024, the firm believes DraftKings is well-positioned to exceed expectations in the second half of the year. Additionally, Macquarie estimates that the company has increased its handle market share by approximately 200-300 basis points year-to-date compared to last year, likely at the expense of higher hold. This positions the operator to further monetize customers through progress in same game parlays, or SGPs, and continued improvements in live betting technology, which remains in its early stages compared to mature European markets, according to the firm. For the second half of the year, the analyst estimates that market hold will provide a slight year-over-year growth boost for most operators in the third quarter. However, with expected monthly volumes to rise by about 70% sequentially in September, much is still uncertain. Macquarie currently models a 31% growth in online gross gaming revenue in the third quarter, accelerating to 40% year-over-year in the fourth quarter, driven by an easier OSB hold comparison. The firm continues to rank online gaming as a top sector within the gaming industry due to ongoing mainstream adoption and the long runway for state legalization, particularly for iGaming, which is currently legal in only 12% of the U.S. As such, we view any pullback in the sector due to consumer sentiment, regulatory news, or low hold as a long-term buying opportunity, especially with much of the sector now generating positive free cash flow at reasonable valuations, the firm told investors.

ADDITIONAL ANALYST COMMENTARY: Maxim initiated coverage of Light & Wonder (LNW) with a Buy rating and $144 price target. The company is well-positioned for the digital – iGaming and Social – as well as “analogue”, or land-based, future of gaming, which are growing again following the pandemic setback, the analyst noted. Light & Wonder’s balance sheet has also been strengthened following the 2022 divestitures of its lottery and sports betting businesses that reduced leverage, the firm added.

Berenberg lowered the firm’s price target on DraftKings to $37.60 from $41.50 and keeps a Hold rating on the shares.

Berenberg raised the firm’s price target on Flutter Entertainment to 18,800 GBp from 18,600 GBp and keeps a Buy rating on the shares. The company reported a “somewhat flawless” Q2, with underlying momentum remaining solid across the business and upgrades to both the U.S. and outside the U.S. business, the analyst tells investors in a research note.

PUBLICLY TRADED COMPANIES IN THE SPACE INCLUDE: Accel Entertainment (ACEL), Bally’s (BALY), Boyd Gaming (BYD), Caesars (CZR), Churchill Downs (CHDN), DraftKings (DKNG), Flutter Entertainment (FLUT), Gambling.com (GAMB), Gan Limited (GAN), Genius Sports (GENI), Las Vegas Sands (LVS), MGM Resorts (MGM), Penn Entertainment (PENN), Rush Street Interactive (RSI), Super Group (SGHC) and Wynn Resorts (WYNN).