Potential Modest Impact of Jackpocket Texas on DraftKings' Income Stream
Published on: February 28, 2025, 12:27pm.
Todd Shriber
Last updated on: February 28, 2025, 01:05pm.
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Todd Shriber@etfgodfather
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- Texas's courier controversy shuts down convenient lottery purchasing
- DraftKings boasts a substantial stake in the courier realm with Jackpocket
Following a string of disputes concerning lottery couriers in Texas, the state decided to prohibit the use of these services to buy lottery scratchers and tickets. This decision may result in a minor setback to DraftKings’ (NASDAQ: DKNG) 2025 revenue.
buy 25.8 million tickets for a draw on April 22, 2023, that resulted in the group winning a $95 million jackpot and other prizes. The imbroglio was
The Jackpocket app featured in a press release, stirring up a minor financial bruise for owner DraftKings, which boasts a significant presence in the courier realm. (Image: PR Newswire)DraftKings owns Jackpocket, the industry's primary player in the world of courier services. Despite the sector being in its formative stages, the Texas incident caused controversy when a covert European consortium used a courier to purchase 25.8 million tickets for an April 22, 2023, draw that resulted in a jackpot and other prizes worth $95 million. The fiasco saw renewed discussion earlier this month when a bettor hit an $83.5 million victory in Texas by buying a ticket through Jackpocket.
rehashed earlier this month when a bettor won an $83.5 million prize in Texas after purchasing a ticket on Jackpocket.
In a recent report, Eilers & Krejcik Gaming (EKG) projected that Texas would amount to $57 million, or 25%, of US lottery courier revenue for 2025.
operator’s website doesn’t include Texas as part of that group.Texas had a reputation for not being hospitable to the industry. However, the aforementioned controversies could serve the aim of prompting the industry to take steps to ensure collusive practices are eradicated.
Jackpocket operates in 17 U.S. states, Puerto Rico, and Washington, D.C., with Texas conspicuously absent from the list on the operator's website.
its $750 million acquisition of Jackpocket. Fifty-five percent of that purchase price was paid in cash with the remainder funded by the buyer’s equity. The deal was finalized last May.
Is the Blow to DraftKings a One-Off?
One of the significant challenges tied to courier services like Jackpocket in numerous states is that these markets remain uncertain. States haven't explicitly permitted or banned lottery courier services, resulting in a gray area for such businesses.
EKG suggests that 92% of lottery courier sales originate from just five markets. Except for New Jersey and New York, other states have yet to implement clear guidelines. Although Texas hasn't concluded a ban on couriers, it was generally hostile to the sector until the recent controversies. These incidents might encourage industries to establish safeguards that nullify collusive activities.
“Given the commotion in Texas, it seems unlikely that future syndicate hijackings will go unchecked. Absent sensational stories like these, many states might opt to maintain the status quo or negotiate regulation instead of instituting outright bans,” EKG added.
DraftKings' Acquisition of Jackpocket: Why and How?
Only a year after announcing its $750 million takeover of Jackpocket, DraftKings is now eyeing the potential gains. Fifty-five percent of the acquisition cost was paid in cash, with the remaining 45% funded by the company's equity. The merger was closed in May 2024.
The acquisition was primarily seen as an opportunity for DraftKings to expand its iGaming and sportsbook customers to the lottery market. This move also aimed at raising the participation rate in the lottery sector.
However, the merger wasn't without controversy, as DraftKings co-founder and CEO Jason Robins maintained an investment stake in Jackpocket.
The enrichment data below breaks down the potential impact of the Texas ban on DraftKings' revenue:
Overall
The decision to ban lottery courier services in Texas might result in a minor impairment to DraftKings' 2025 revenue. However, given that Texas represented approximately 25% of Jackpocket's market share, the revenue loss could be substantial. Eilers & Krejcik Gaming (EKG) estimated that DraftKings-owned Jackpocket accounted for $550 million in lottery ticket sales in Texas since 2019.
In the event of a lasting ban, DraftKings must reevaluate its business strategy, potentially considering opportunities in other states and diversifying services.
- The ban on lottery courier services in Texas could potentially impact DraftKings' revenue, as the state accounted for 25% of Jackpocket's market share, a subsidiary owned by DraftKings.
- Eilers & Krejcik Gaming (EKG) projected that Texas would contribute $57 million to US lottery courier revenue in 2025, making it a significant market for companies like DraftKings and Jackpocket.
- In response to the ban, DraftKings may need to reevaluate its business strategy, exploring opportunities in other states and diversifying its services to mitigate the potential revenue loss. [noreferrer][aligncenter][Post Footer][panel__author byline="Todd Shriber" date="February 28, 2025, 12:27pm"][/panel__author] [/Post Footer]