March Madness has prompted the two leading mobile sports betting operators, DraftKings and FanDuel, to reassess their positions regarding entry into the Arkansas sports betting market. Both launched last Friday, just in time to capture wagering on the Arkansas Razorbacks’ run in the NCAA Division I men’s basketball tournament.
Strategic Shift Opens Door to Arkansas Market
Mobile sports betting has been up and running in Arkansas since 2022, but none of the major players, including DraftKings and FanDuel, would agree to share 51% of the profits with the in-state casinos with whom they would need to partner.
Since its inception over four years ago, Arkansas mobile sports betting has been controlled by three in-state casinos, including Southland Casino Hotel, Oaklawn Racing Casino, and Saracen Casino. And although all three banded together against inviting third-party platforms into the mobile sports betting market, two of them recently broke ranks after DraftKings and FanDuel acquired licenses in the Natural State last month.
DraftKings announced its partnership with Southland Casino Hotel, while FanDuel did the same with Oaklawn Racing Casino. Saracen Casino is going it alone and is dismayed that its two competitors have allowed the mobile sports betting duopoly into the market.
“All three casinos were [once] together, and I hate that things have changed, but we [Saracen] haven’t changed,” said Saracen spokesperson Carlton Saffa.
However, the excitement of bringing the two national powerhouses on board to increase mobile sports betting is palpable, according to the Chairman of the Arkansas Racing Commission, Alex Lieblong, who says the public has “inundated” him with requests for DraftKings and FanDuel.
“They see all the ads everywhere and they feel like they’re not getting everything that everybody else is getting,” Lieblong said.
Casinos Maintain the Lion’s Share of the Profits
Four years ago, DraftKings and FanDuel said thanks but no thanks to sharing 51% of the profits with casino partners, especially considering Arkansas has a population of only 3.1 million. It would have also set a dangerous precedent to accept those onerous terms while arguing against tax increases in other states that would be much less than the 51% the casino partners were demanding.
But even that doesn’t include the state taxes that the duo must pay after 51% of the profits have been earmarked for the casinos. The Arkansas tax code for third-party mobile sports betting operators imposes a 13% tax on the first $150 million, then 20% on all revenue above $150 million.
However, the national sports betting market is maturing, and there are now only a handful of states without retail or mobile sports betting. Moreover, prediction markets are muscling into the sports betting game, which has prompted DraftKings and FanDuel to create their own prediction markets, which are operated in states without mobile sports betting.
“We’re excited to team up with Southland Casino Hotel to bring DraftKings’ top-rated mobile sportsbook to Arkansas and introduce fans to our best-in-class sports betting offering,” said Gregory Karamitis, DraftKings Executive Vice President and General Manager of Sports.
C-suite executives from both companies have decided that something is better than nothing and that trying to force structural changes to gaming commissions has been a non-starter. Even though both companies are industry giants, they have learned that gaming commissions do not bend to their rules but create those that are in the best interests of the states that they represent.
