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DraftKings recently faced a sharp dip in its stock value following an unexpected surcharge announcement, but financial experts believe the volatility is now behind them as investors shift focus to the upcoming NFL season.

Initial Stock Reaction and Recovery

Earlier this month, DraftKings stock plunged nearly 20% after the company announced a new fee on winning bettors, aimed at offsetting high state taxes like those in Illinois. However, the stock has since rebounded, currently trading around $35.46 per share—up 19% from a nine-month low of $29.83. Despite this recovery, DKNG remains flat year-to-date, lagging behind the 18% average growth seen among North American online gaming stocks.

Minimal Financial Impact from Surcharge Incident

According to Barry Jonas of Truist Securities, the financial impact of the brief surcharge saga was negligible. “While they [DraftKings] continue to grow and maintain their position as a market leader, most people will overlook this incident. This is a company known for consistently beating and raising expectations,” said Jonas. He added that while the incident caught the attention of the “Twitter gaming mafia,” the average consumer or investor is unlikely to remember it.

The surcharge, which was intended to begin in January, was designed to mitigate high taxes from states like Illinois, where the tax rate has recently increased to a graduated range of 20% to 40%. However, after FanDuel chose to absorb the tax impact without imposing a surcharge, DraftKings decided to retract the fee, citing customer feedback.

Wall Street’s Influence on DraftKings’ Decision

Jordan Bender of Citizens JMP suggested that DraftKings may have been more concerned with its stock performance and investor sentiment than customer feedback. “It didn’t seem like they fully thought this through and were going to let investors and analysts interpret it during the months before its launch,” Bender commented. He also noted that the decision to scrap the surcharge might have been influenced by concerns about its impact on DraftKings’ stock narrative.

Some analysts believed that DraftKings could have managed the loss of its biggest bettors if it maintained loyalty among more casual bettors. However, others criticized the decision, calling it “economically illiterate.” An analysis by LSR indicated that the surcharge could have added as much as $220 million annually to DraftKings’ bottom line, raising questions about the trade-off between additional revenue and customer loyalty.

Positive Outlook for DraftKings Amid NFL Season

Chad Beynon of Macquarie sees DraftKings in a strong position to outperform its competitors as the NFL betting season approaches. He pointed out that the stock’s flat performance in 2024, coupled with updated second-half guidance, suggests a potential upside for DKNG. Beynon highlighted that DraftKings is “best positioned for near-term upside from favorable NFL game outcomes, higher structural hold, and general online sports betting and iGaming growth momentum.”

Beynon has rated DraftKings as outperform with a $50 target price. Historically, DraftKings stock has performed best in the two months leading up to the NFL season, although it typically drops by an average of 29% four months after the season begins. However, Beynon believes that the current trends, along with an easier comparison period in the fourth quarter, set DraftKings up for a strong finish to the year.

Betr announced today the rollout of its innovative peer-to-peer Daily Fantasy Sports (DFS) product, “Group Mode,” for Betr Picks, alongside the soft launch of the new Betr Sportsbook.

Expanded Reach for Betr Picks

Group Mode has extended Betr Picks’ availability to 33 states plus Washington, D.C. Currently live in Florida and Massachusetts, the game will soon launch in Virginia, Arizona, Tennessee, Missouri, Alabama, West Virginia, New Hampshire, and Delaware. This expansion allows Betr Picks to be accessible in 34 jurisdictions, covering 65% of the U.S. population.

Group Mode enables users to enjoy Betr Picks in a peer-to-peer setting, where they compete against each other rather than the house. This move is particularly significant as several states have introduced regulations against DFS competitions that pit users directly against the house, making Group Mode a strategic solution for Betr to expand its offerings in such regions.

New Betr Sportsbook Now Live in Key States

Simultaneously, Betr has taken a significant step by launching its Betr Sportsbook in Ohio and Virginia. The Betr Sportsbook represents the company’s expansion beyond its initial microbetting focus, offering a comprehensive suite of betting options, including same game parlays, player props, futures, exotics, and other traditional markets, both pre-match and in-play.

The company plans to expand the sportsbook to Indiana and Maryland in the coming months, leveraging its temporary sports betting licenses in these states. Further launches are anticipated in Pennsylvania, Colorado, and Kentucky, contingent on the acquisition of the necessary sports betting licenses.

Built on the Chameleon platform, which Betr acquired from Fans Unite in May 2023, the Betr Sportsbook positions the company as a growing contender in the online sports betting market.

A Word from Betr’s Leadership

“We are thrilled to launch Group Mode for Betr Picks and to introduce the new Betr Sportsbook,” said Joey Levy, Founder and CEO of Betr. “These product launches mark a significant milestone for Betr. With Betr Picks now available to 65% of the U.S. population, we can engage millions of new sports fans. The Betr Sportsbook sets us on a path to becoming a leading competitor in the Online Sports Betting industry, alongside top fantasy sports pick’em operators. While we have significant product improvements on the horizon, we are proud of the rapid progress we’ve made.”

Strategic Expansion and Future Plans

Founded in 2022 by Joey Levy, Betr also brought on Jake Paul as president in the same year. The company’s rapid growth and strategic product launches signal its intent to become a dominant player in both the DFS and sports betting landscapes across the United States.

DraftKings is set to enhance its live betting capabilities with the acquisition of Simplebet, a leading live betting technology provider. The financial terms of the deal, announced on Wednesday, were not fully disclosed, but Jordan Bender of JMP Securities estimates the transaction could be worth up to $195 million, with $70 million paid upfront. Both companies’ boards of directors have already approved the deal.

Strategic Move to Deepen Live Betting Offerings

The acquisition marks DraftKings as the latest US sports betting operator to secure a live betting technology provider, further expanding its offerings in the highly competitive market. DraftKings has been collaborating with Simplebet since August 2021, and this acquisition will now allow the company to fully integrate Simplebet’s technology into its platform.

The acquisition also positively impacted DraftKings stock, which saw a 1.5% increase in premarket trading, opening at $34.86 after a 2.8% drop on Wednesday.

According to a statement from DraftKings, the acquisition is expected to “improve the quality, breadth, and speed of data throughout the DraftKings trading lifecycle, unlocking a faster and more frictionless experience for the company’s customers.”

Enhancing the Live Betting Experience

The deal will enable DraftKings to offer a more extensive selection of live bets, with AI-driven pricing allowing these markets to be made available faster. Corey Gottlieb, Chief Product Officer at DraftKings, emphasized the potential growth in live betting as a key area for online sports betting. He stated that the acquisition would empower DraftKings to leverage Simplebet’s proprietary technology to deliver an in-play wagering experience that “moves at the speed of sports.”

Other major sportsbooks, such as bet365, Caesars, and ESPN Bet, also have agreements with Simplebet for in-game betting content. However, it remains unclear how these deals will be impacted by the acquisition.

Interestingly, there’s a connection between Simplebet and Betr, as Joey Levy is a founder of both companies. Last week, Levy announced that Betr had acquired a license for Huddle Tech technology, showcasing his continued influence in the industry.

AI-Driven Live Betting on the Rise

The live betting market in the United States still trails behind the United Kingdom, where live betting accounts for around 70% of total handle, compared to 35% to 40% in the US, according to Sportradar. However, the integration of AI-driven technology through acquisitions like this one could accelerate growth in the US market.

The move to acquire Simplebet follows a trend among major operators to bolster their live betting offerings. In March 2021, PointsBet acquired Banach Technology for $43 million. More recently, in July 2023, Entain enhanced its BetMGM joint venture by acquiring Angstrom in a deal potentially valued at $265 million.

With the expansion of live betting markets, DraftKings is also likely to see growth in same-game parlays, a popular option among bettors. For instance, BetMGM reported a 40% increase in active customers placing same-game parlays on MLB games in the first half of 2024, with weekly volumes doubling compared to last year.