What happened
Shares of DraftKings (DKNG -2.31%) were up 12.4% for the week heading into Friday, helped along by the sportsbook announcing it would be introducing a marketplace for nonfungible tokens, or NFTs, the trendy new digital asset that uses blockchain technology to certify authenticity and prevent duplication of digital items.
The marketplace will also give collectors a place to buy and sell other digital sports-related memorabilia.
Image source: Getty Images.
So what
While DraftKings stock was rising before the announcement as the market indexes roared back to life, overcoming a steep drop due to concerns about inflation and the jobs picture, the marketplace news gave the sportsbook new life.
It also helped the stock overcome a short-seller's report issued last month that alleged DraftKings' SBTech subsidiary, acquired last year, was involved in illegal activity. Although there may be less than meets the eye with the charges, the sportsbook's stock is still about 10% below the level it was trading at when the allegations were released.
Now what
Sports betting has been hot from the moment the first bets were placed in 2018 following the Supreme Court ruling that federal bans on such wagers were unconstitutional. States are increasingly authorizing sports betting and DraftKings is the second-largest sportsbook behind FanDuel.
Sportsbooks are bouncing back sharply after sporting events were canceled or delayed in 2020 due to the pandemic. DraftKings' revenue was up 175% in the first quarter and it now expects to generate as much as $1.5 billion in revenue for the full year.
The marketplace opportunity is a chance for DraftKings to diversify a bit and give it a separate revenue stream. NFTs are a hot new commodity, though their long-term utility is still up for debate. Capturing digital moments and selling off ownership interest in them has yet to find more than a very narrow niche market, though pricing for some digit assets has often been astronomical.
Still, sports betting is DraftKings' wheelhouse and it's currently live in 12 states, giving it access to 25% of the U.S. population. Some two dozen states are contemplating authorizing wagering on sporting events and that's where the sportsbook's real growth trajectory lies.
Yet for all the revenue growth foreseen, DraftKings is still producing losses as marketing costs rise exponentially. That should flatten eventually as it becomes established in states where sports betting is legal.
