2024-06-30 10:49:29 ET
Summary
- The sports betting market is consolidating around two major players, which produce more profit than expected, but high tax rates in states like New York are counterbalancing the profit growth.
- As I predicted, the industry standard is moving closer and closer to New York's 51% rate. Over half of gross profits will be taxed away in the long run.
- The key question now is whether the remaining gross profits go to the bottom line of operators or leagues. So far, there have been no major league fees imposed.
- That could very easily change, however. The operators remain, as always, on the wrong end of a three-way asymmetrical power dynamic.
- Despite considerable growth and the potential for more, I am avoiding DraftKings.
Two years ago, I wrote an article that DraftKings ( DKNG ) was a questionable investment because it was caught in a uniquely unfavorable market structure which almost guaranteed that while its activities would generate profits, most of them would be arbitraged away by its key partners, leaving relatively little for shareholders. I also thought the low barriers to entry would see the market splinter among many operators and fail to consolidate, spurring an almost permanent state of intense competition.
DraftKings bulls argued just the opposite, that the market would consolidate around a few key players and that such absurdly high tax rates as the ones imposed by New York would not last long in the system, and even if they did they certainly would not spread....
Read the full article on Seeking Alpha
For further details see:
DraftKings: Massive Profits Await Someone, But How Will The Spoils Be Divided?