Following rumors that began circulating earlier this week, U.S. sports betting and iGaming leader DraftKings Inc. announced Thursday evening that it had agreed to purchase digital lottery courier Jackpocket for $750 million, 55% in cash and 45% in the company’s Class A stock.
“We are very excited to enter the rapidly growing U.S. digital lottery vertical with our acquisition of Jackpocket,” said Jason Robins, co-founder and CEO of DraftKings. “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.”
Meanwhile Peter Sullivan, CEO of Jackpocket, which was founded in 2013, was elated.
“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,” said Sullivan, per the release. “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.”
Impetus for the deal
Jackpocket, a leading lottery app in the U.S. market, will give DraftKings access to over one million users, most of them having funded accounts. For a company like DraftKings, having access to such a user base could only further prosper its already well-functioning online sports betting and iGaming operations, both in states where it’s already live and in states that have not yet legalized one or all of the gambling verticals where the company will compete.
The financial impact statement is revealing:
Conservatively assuming no additional OSB and iGaming legalization in the U.S., DraftKings expects the Proposed Transaction to drive $260 million to $340 million of incremental revenue and $60 million to $100 million of incremental Adjusted EBITDA in fiscal year 2026. On the same basis, assuming no additional OSB and iGaming legalization in the U.S., DraftKings expects the Proposed Transaction to drive $350 million to $450 million of incremental revenue and $100 million to $150 million of incremental Adjusted EBITDA in fiscal year 2028.
According to Chris Grove, a gambling industry expert and investor, these projections are somewhat realistic.
“You’ve got JP’s current revenue numbers (looks material based on public data), but remember – that’s across a relatively limited number of states today with more states to come and more products with much higher velocity to come (e.g., instants),” Grove said. “And you’ve got the recently-launched Jackpocket Casino, which gives $DKNG yet ANOTHER online casino brand that attracts a differentiated audience looking for a differentiated experience.”
As of present, of-age residents in 18 jurisdictions are able to purchase lottery tickets online, including: Arizona, Arkansas Colorado, Idaho, Massachusetts, Minnesota, Montana, Nebraska, New Hampshire, New Jersey, New Mexico, New York, Ohio, Oregon, Puerto Rico, Texas, Washington DC, West Virginia.
In a favorable assessment of the deal, Grove concludes:
8/8 Bottom line, the U.S. online gambling market winner will be the company that gives the widest array of players the most ways to play.
This transaction moves $DKNG squarely in that direction and makes the hill all the tougher to climb for $MGM, $CZR, and $PENN.
— Chris Grove (@OPReport) February 15, 2024
In the eyes of many, this deal puts DraftKings in the driver’s seat to take over the market as they will have the opportunity to crossover a large preexisting customer base into its products.
