All

The NFL has a DraftKings problem . . . again

The NFL was the only major sports league that didn’t end up with an official daily fantasy sports  partner when DraftKings and FanDuel took over what seemed like every commercial on podcasts, radio and television. It ended up being the right decision by the league. The daily fantasy sites (DFS) ended up going through some legal issues and bad PR. They had to restructure some sponsorship deals. The league made a smart decision while their owners jumped in head first and two owners — Robert Kraft of the Patriots and Jerry Jones of the Cowboys — actually bought an ownership stake in the startup. That may turn into a bit of a problem.

Daily fantasy sites aren’t considered gambling — although they basically are — and instead are considered a game of skill. The NFL has no rules prohibiting ownership of a DFS company. The NFL does prohibit ownership stakes in companies that generate over one-third of their revenue from gambling. DraftKings and FanDuel recently announced that they would get involved in sports gambling when PASPA was struck down by the Supreme Court. So it’s not a problem that Jones and Kraft have to address now, but it’s something they may have to address in the very near future.

DraftKings and FanDuel have a leg up in electronic and mobile betting in the United States due to the fact that they already have customers who would be more likely to gamble. They don’t have to worry about customer acquisition costs. They have a target list readily available. Even folks who played DFS once or twice are in the system. All the DFS companies have to do is flip the switch when a state legalizes gambling and voila, they are available to take bets.

Kraft and Jones need to be ready for what’s coming next. Their investments are owned under separate subsidiaries. Jones’ stake falls under his interest in Legends which is co-owned by the Steinbrenner family of the New York Yankees. Kraft’s ownership most likely falls under his Kraft Sports Group which offers consulting and other advisory services. The stake could also be owned by a family investment group. The Krafts did not comment when asked by ESPN about their ownership stake.

Business wise, this could create problems for the NFL. Jones and Kraft are not going to want to divest their ownership stake just as the companies are recovering and at critical point where growth may be inevitable. No one sells an investment when it could make them more money. That’s bad business. The NFL was steadfast in its battle against legalized gambling and is unlikely to change its rules because two owners are benefiting from a pivot from one of their investments. Jones and Kraft — both who have been in recent battles with the commissioner — won’t just give up something that could see a huge return on investment. They didn’t become billionaires by accident.

The NFL is right to be wary. They are concerned about the integrity of the game. It wouldn’t look good if one of their owners — never mind two powerful owners — had ownership in a company that takes bets on their games. Just the perception of impropriety is bad enough, and the NFL is right to not want to deal with that when it has other issues on the table. Each sports book has its own spread. Imagine if the spread on a Cowboys or Patriots game was even slightly different than other books. Someone will call out a conspiracy theory real quick.

For now, it doesn’t matter. The NFL already lost the legalized gambling battle. Sports wagering will happen in over 20 states in the next three to five years. Jones and Kraft have time to change NFL bylaws to make their ownership stake legitimate. It’s something the NFL and ownership should address now before it becomes an actual issue

0 comments on “The NFL has a DraftKings problem . . . again

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: