DraftKings, the leading online sports betting and gaming company in the US, has announced its acquisition of Jackpocket, the first and only licensed lottery app in the country. The deal, worth $750 million, is expected to boost DraftKings’ revenue and customer base, as well as enhance its position in the online gaming industry.
What is Jackpocket and How Does It Work?
Jackpocket is a mobile app that allows users to buy official state lottery tickets from their smartphones. Users can choose from a variety of games, such as Powerball, Mega Millions, Cash4Life, and more. Jackpocket acts as a courier service, purchasing the tickets on behalf of the users and scanning them into the app. Users can then view their tickets, check the results, and claim their winnings through the app. Jackpocket also offers features such as auto-play, subscriptions, pools, and gift cards.
Jackpocket was founded in 2013 and launched its first app in 2015. Since then, it has expanded to 18 states, including New York, Texas, Ohio, and New Jersey. Jackpocket is the first company to receive a lottery courier license from New York and New Jersey, two of the largest lottery markets in the US. Jackpocket has also partnered with various responsible gaming organizations, such as the National Council on Problem Gambling, to promote safe and responsible play.
Why Did DraftKings Acquire Jackpocket?
DraftKings stated that the acquisition of Jackpocket will enable it to access and grow into the massive US lottery industry, which generated over $90 billion in sales in 2020. DraftKings also expects the acquisition to increase its customer lifetime value and acquisition efficiency, as Jackpocket has demonstrated strong cross-sell capabilities and retention rates among its users. DraftKings also believes that Jackpocket’s proprietary and scalable technology, strong brand, and outstanding management team will complement its existing online sports betting and gaming offerings.
Jason Robins, the co-founder and CEO of DraftKings, said, “We are very excited to enter the rapidly growing US digital lottery vertical with our acquisition of Jackpocket. This transaction will create significant value for DraftKings not only by giving our customers another differentiated product to enjoy but also by improving our overall marketing efficiency similar to how our daily fantasy sports database created an advantage for DraftKings in OSB and iGaming.”
Peter Sullivan, the CEO of Jackpocket, said, “Together with DraftKings, we will be able to bring tremendous value to our customer base as we advance our mission to create a more convenient, fun, and responsible way to take part in the lottery. DraftKings’ broad footprint and exceptional mobile products present an opportunity to meaningfully expand the digital lottery vertical, and we could not be more excited to come together with DraftKings.”
What Are the Terms and Benefits of the Deal?
The deal, which was agreed on Sunday and revealed in a SEC filing on Thursday, will see DraftKings pay $750 million for Jackpocket, with 55% of the consideration payable in cash and 45% payable in DraftKings’ Class A common stock. The deal is subject to customary closing conditions and regulatory approvals and is expected to close in the first half of 2024.
DraftKings stated that the acquisition will generate an additional $340 million in annual revenue and $60 million to $100 million in adjusted EBITDA in fiscal year 2026. DraftKings also raised its 2024 fiscal year revenue guidance range to $4.9 billion, following a solid end to 2023. DraftKings reported a 44% year-over-year increase in revenue to $1.4 billion in 2023, beating analysts’ expectations.
The deal also marks the latest in a series of strategic moves by DraftKings to diversify and expand its online gaming portfolio. In 2020, DraftKings acquired SBTech, a sports betting technology provider, for $3.3 billion. In 2021, DraftKings acquired Golden Nugget Online Gaming, a leading online casino operator, for $1.56 billion. DraftKings also recently launched its own NFT marketplace, DraftKings Marketplace, in partnership with Autograph, a digital collectibles platform co-founded by Tom Brady.
How Will the Deal Impact the Online Gaming Industry?
The acquisition of Jackpocket by DraftKings is expected to have a significant impact on the online gaming industry, as it will create a new and powerful player in the digital lottery space. According to a report by Grand View Research, the global online lottery market size was valued at $8.7 billion in 2020 and is expected to grow at a compound annual growth rate of 11.5% from 2021 to 2028. The report also stated that the US is one of the fastest-growing regions for online lottery, driven by the increasing adoption of smartphones, the legalization of online gambling, and the rising demand for convenience and entertainment.
The deal will also create more competition and innovation in the online gaming industry, as other players will likely follow suit and pursue similar opportunities. For instance, FanDuel, DraftKings’ main rival in the online sports betting and gaming market, could also look to acquire or partner with a digital lottery provider to enhance its product offerings and customer base. Other potential players in the digital lottery space include online casino operators, such as BetMGM and Caesars Entertainment, and traditional lottery operators, such as IGT and Scientific Games.
The deal will also benefit the consumers, as they will have more choices and convenience to play the lottery online. Jackpocket’s app allows users to play the lottery anytime, anywhere, without having to visit a physical retailer or handle cash. Users can also enjoy features such as auto-play, subscriptions, pools, and gift cards, which can enhance their gaming experience and social interaction. Additionally, users can benefit from the responsible gaming tools and resources that Jackpocket and DraftKings provide, such as deposit limits, self-exclusion, and helplines.
