DraftKings Cuts Sponsorship Ties With WSOP

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Friday, October 30th, 2015 | Written by Adam Brown

The Nevada Gaming Commission’s recent decision to categorize Daily Fantasy Sports (DFS) as a form of gambling has had an immediate effect on DraftKings business strategy in the Silver State, with the operator now cutting all ties with the World Series Of Poker. The decision was made just ahead of the WSOP Main Event final table getting underway on November 8th, with the tournament having been on its traditional four month break since July 14th.

Back then, DraftKings was one of the chief sponsors of the prestigious tournament series, and the company’s logo appeared on all of the WSOP poker tables at the Rio Casino, but now no such DraftKings advertising will be evident. As Seth Palansky, WSOP VP, Corporate Communications, explains:

“In light of last week’s news in Nevada, DraftKings asked us to cease any sponsorship activities around the remaining few WSOP events of the year, and we complied.”

Initially Haled For Crossover Potential

In May, the deal originally struck between DraftKings and the WSOP was initially haled for its “crossover potential,” with the demographics associated with the two games apparently lining up perfectly. At the time, DraftKings was also the only DFS operator permitted to offer $10,000 WSOP Main Event seats through its competitions, an exclusive right which paid dividends after Max Steinberg (photo) became a November Niner, having won his seat via a $27 DraftKings qualifier. The 27 year-old was a full-time poker pro before turning his attentions towards DFS, and after seeing his new career take off Steinberg said he believed another “poker boom” would be just around the corner, and that he was looking forward to his new life as a DFS pro. As he explained at the time:

“..I just don’t have that desire anymore to go travel the tournament circuit. I’m happy living a more simple life, just in Vegas and doing daily fantasy sports and working on my strategy site. But I’m sure I’ll do some things with DraftKings, some promotion stuff, but it’s going to be mostly daily fantasy sports centric and less poker centric.”

That, of course, has now all changed, as has Steinberg’s marketing opportunity to wear DraftKings patches at the WSOP Main Event final table on November 8th.

DFS Gambling Under Nevada Law

Leading up to last week’s ruling by the Nevada Gaming Control Board, daily fantasy sports betting was sweeping the US, with DraftKings and FanDuel the two biggest operators in the industry. The companies had even been spending millions of dollars each week advertising their products on television, which although driving signups to their sites, also caused a backlash from concerned sports fans, as well as politicians. A recent insider trading scandal subsequently encouraged public figures to scrutinize the industry further, with several investigations currently underway examining the industry, including by Preet Bharara, U.S. Attorney for the Southern District of New York.

While other states, such as Michigan, Illinois, Georgia, Massachusetts and Minnesota, are currently considering their approach to the DFS industry, Nevada has already ruled illegal those DFS businesses operating without a sports betting licenses. As Nevada Gaming Control Board Chairman, A.G. Burnett, explains:

“DFS in Nevada is illegal without the appropriate license, [which means] all unlicensed activities must cease and desist from the date of this Notice until such time as either the Nevada Revised Statutes are changed or until such entities file for and obtain the requisite licenses to engage in said activity.”

DFS To Suffer Own Black Friday

After exponentially increasing in popularity over the past 6 months, the Daily Fantasy Sports industry looks set to suffer its own Black Friday in the US. Just like PokerStars and Full Tilt Poker, the two main DFS operators, DraftKings and FanDuel, have grown into huge companies with each currently valued at more than $1.3 billion a piece. In fact, the companies were even considering offering an initial public offerings next year, but needless to say the landscape is now beginning to change drastically. As Fargo Securities analyst Dennis Farrell Jr. explains, losing Nevada, a state that represents the cornerstone of gambling in the US, will undoubtedly negatively influence the way other states view the DFS industry in their own jurisdictions.

Together with an increasing level of federal scrutiny, this all adds up to “a make or break year” for daily fantasy sports, according to Farrell. While the gap seems to be narrowing between the treatment of daily fantasy sports and online poker in the US, one advantage that DFS has that poker did not is that a number of high profile major leagues, such as the Major League Baseball (MLB), and National Football League (NFL), as well as the American billionaires with equity stakes in them, such as Robert Kraft, and Jerry Jones, are unlikely to let millions in potential revenues and investments go down the drain without first putting up a fight.