The Shortcut Mirage
Gambling, whether its SGPs, lottery, or meme coins might seem like a shortcut to fortune and glory, but like most shortcuts they often lead to disappointment.
The Bulletin Board
THE LEDE: Gambling offers a shortcut to riches, and that’s the allure.
MIDWEEK ROUNDUP: Churchill Downs closes flagship KY sportsbook; Cordish cuts the ribbon on new LA casino; More negative sports betting press.
NEWS: The important highlights from DraftKings Earnings Call.
BEYOND the HEADLINE: CFTC Commissioner gives prediction markets the stamp of approval.
AROUND the WATERCOOLER: The media we need, and the media we don’t.
STRAY THOUGHTS: Do people gamble for money or entertainment?
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The Lede: No Shortcuts, No Free Jackpots
The following, plus today’s “Stray Thoughts,” look at the two sides of the gambling coin: the shortcut to riches that rarely pans out and the tangled reasons people continue to gamble, even when they don’t win.
There are no shortcuts. Not risk-free anyway.
I spent years in the health club industry, and there’s no shortcut to getting healthy or “in shape.” While some things can speed up the process and give you short-term results, they carry the risk of long-term side effects. I’ve seen a lot of “miracle” drugs, diets, supplements, and exercise routines, and I’ve yet to witness a miracle.
The problem is that everybody wants a quick fix. Besides a few genetic freaks, getting healthy and in shape takes hard work and insane levels of self-discipline. So, when a new product comes along, people either believe the hype or ignore the long-term consequences.
There are no free lunches… The rent comes due… And several other cliches.
I look at gambling and the current meme coin craze similarly. It’s the shortcut to money. Sure, you could invest that money and get a decent return in the long run, but that’s not how most people look at the extra $300 burning a hole in their pocket. Their road to riches doesn’t include seeing their $300 stock purchase bounce between $220 and $450 over two years. They want it to become $10 million overnight.
That’s why the average person is drawn to lotteries, SGP products, and meme coins, where they can risk a little to win a lot—right now.
And yes, some people do win. Early Bitcoin adopters can laugh all the way to the bank. So can the people who get out of a meme coin at the perfect time. But for most people, it’s a shortcut to nowhere. Because there are no shortcuts. There is only short-term luck. And eventually, that runs out, too.
Midweek Roundup: Churchill Downs Closes Retail Sportsbook; Cordish Opens LA Casino; More Bad Press
Churchill Downs closes retail sportsbook at flagship track: Churchill Downs isn’t pulling its cannibalization concerns out of thin air. Per SBC Americas, “The gaming company has decided that continuing that push at its namesake track in Louisville is no longer worth the effort.” Churchill Downs spokesperson Danny Rogers told the Louisville Courier-Journal: “With 98% of sports betting made on mobile platforms such as FanDuel, there simply isn’t a profitable path forward for us to sustain profitability as a retail operator,” he said. “We’re going to focus our time and resources elsewhere.”
Cordish opens Louisiana casino: Online casino legalization in Louisiana was already facing long odds, and with one of the most prominent online casino critics in the country officially opening its Louisiana property, the chances are fast approaching zero. Cordish Companies celebrated the grand opening of Live! Casino & Hotel Louisiana on February 13. The property is billed as a $270+ million resort, and can lay claim to being the first land-side casino in the Shreveport-Bossier market.
More negative sports betting coverage: The New York Times and Wall Street Journal recently published separate articles on the social harms of sports betting. The NYT article, titled, The Price We Pay Betting On Sports, focuses on the widespread legalization and promotion of sports betting in the US and its impact on gambling addiction. Meanwhile, the WSJ continues to dig into what the paper frames as the predatory nature of VIP programs in its latest column: They Were VIP Gamblers With Betting Problems. Now, They’re Suing DraftKings.
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News: Everything You Need to Know From DraftKings Earnings Call
I’ve come across a number of stories and social media posts highlighting different parts of DraftKings’ recent earnings call. Here is a quick summary of all the essential bits, from Sportsbook+ to Jackpocket to crypto to prediction markets. I’ll leave the guidance and numbers for people like Earnings+More.
Sportsbook+
DraftKings CEO Jason Robins was asked about the company’s recently launched subscription service, Sportsbook+, and said there’s not enough data at this point to draw any conclusions: “It's really early, and it's a very limited pilot. So, we don't have enough data yet at this point.” Robins went on to say: “It's something that I think could potentially have some real interest amongst the broader population from what we're seeing early on… We're going to kind of let this one run, gather that data, and then take a step back and say, is this something we want to continue to pursue,” before rolling it out to a broader audience.”
Jackpocket and Cross-Sell
Robins called Jackpocket, which the company acquired for $750 million last year, “an efficient acquisition channel” and a vertical ripe for further investment. “I think Jackpocket has been great in terms of both the cross-sell and also we had really strong customer acquisition during this last Mega Millions $1.2 billion jackpot run,” Robins said, noting its effectiveness in building a database in yet-to-legalize states and in omnichannel markets “because the LTVs in the immediate term are going to be higher because we can cross-sell right away.” Robins also pointed to Jackpocket as the near-term growth opportunity, particularly around billion-dollar-plus jackpots, saying, “OSB and iGaming are going to be pretty steady year-over-year. So it's really Jackpocket.”
Previous STTP coverage of Jackpocket + DraftKings and Lottery couriers
Crypto Payments
Robins was also asked about the possibility of DraftKings accepting crypto payments, saying, “It's certainly something we're looking at.” According to Robins, “It's not entirely a product road map question, it's also getting regulators comfortable with it,” Robins noted the cautious approach to crypto at the state and federal level, but also noted, “there's a lot of pro-crypto deregulation, I think, coming.” Still, he said, “It doesn't feel like a huge opportunity” at the moment.
Prediction Markets and CFTC
Regarding prediction markets and the recent changes at the Commodity Futures Trading Commission (CFTC), Robins said, “We are watching it very actively,” as the company has a keen interest in how it plays out in the next few months. That comment can be interpreted two ways, as DraftKings could get into the prediction market side of the industry or is simply monitoring potential competitors should the CFTC sign off on sports prediction markets.
Odds & Ends:
“While revenue grew 30% in fiscal year 2024, our adjusted operating expenses increased only 5% year-over-year when normalizing for costs related to our acquisition.” Jason Robins
On online casino legalization: “It's actually a very similar story to what happened with sports betting, where a lot of the impetus for legalization came from the fact that… so many people are already doing it that it made sense to protect consumers and generate tax revenue.” Jason Robins
Beyond the Headline: CFTC Commissioner Glazes Prediction Markets
Circling back to prediction markets, CFTC Commissioner Summer Mersinger was part of a crypto-focused webinar and said election markets are here to stay (h/t Dustin Gouker):
"Congress could always come in and tell us differently," Mersinger said. "Of course, we’re going to pivot and do what they [Congress] tell us to do. But as far as the way the commission is going to handle this going forward, short of a rule-making changing things, election contracts are here to stay and we’re going to have to adapt to that environment and those markets. And I think it’s a good thing."
Couple those comments with incoming CFTC Chair Brian Quintenz’s favorable views and you have some very positive news on the prediction market and crypto fronts.
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Around the Watercooler
Social media conversations, rumors, and gossip.
Media we need vs. Media we don’t.
Gaming News Canada is celebrating its fourth birthday. As I said on LinkedIn, it offers the type of media and news coverage the industry needs.
What it doesn’t need is the serial plagiarists and parasitic content (continuing the people taking shortcuts theme of today’s newsletter) that Pokerfuse’s Nick Jones has been calling out of late (thread here):
So keep supporting the Gaming News Canada’s and Pokerfuse’s of the world.
Stray Thoughts
Allan Stone, a recent guest on the Straight to the Point Podcast, touched on a topic that has been near and dear to my heart for many years: Why do people gamble?
From Stone’s LinkedIn post:
“The biggest lie in betting: "Players are here to win money."
“Players stay engaged just as long with virtual currency games. Sometimes longer… Traditional betting companies still lead with jackpots and winning potential. But, the growth of social gaming suggests that entertainment value drives just as much engagement.
“The most successful platforms today blend both worlds with great gameplay, strong community, meaningful rewards, and clear winning opportunities.
“Entertainment first, and winning just adds another layer to the experience.”
The truth is, there isn’t a reason people gamble or choose a specific form of gambling. There are reasons — what Stone calls entertainment.
It’s complicated because, like joining a gym or martial arts school, gambling scratches several itches (including the one I talked about in the lead story of this newsletter above).
Someone may walk into a gym to get in shape, but the motivation is why they want to get in shape. Getting in shape is the payoff, not the motivation. Similarly, when someone signs up for martial arts classes to learn to defend themselves or fight, that’s the payoff they are looking for, not the underlying motivations for walking through the door.
Winning money is the desired result from gambling, but the reasons for choosing to gamble over a job, investing, or a hobby are often a tangled web of motivations — some known and some unknown:
Social Interaction: Gambling can offer a sense of community and belonging.
Escapism: A distraction or escape from everyday life and its stressors/boredom.
Competition: Gambling allows people to test and showcase their skills.
The Thrill: The adrenaline rush from the uncertainty and excitement of gambling.
Contrarianism: Gambling can enable a person to defy conventional expectations.
Gambling is not simply the pursuit of financial gain, but it’s not merely about having fun, either. It’s about wittingly and unwittingly satisfying a spectrum of human needs and desires.
To Stone’s initial point, why would someone keep going to a shitty martial arts school if they aren’t getting better at fighting? Why do people with little to no change in their strength, health, or physique continue the same exercise routine? Because it’s scratching other itches.
Steve: You crush the analysis day after day, but today you answered "why do people gamble" without including "addiction," a key motivator involved in 70-90 percent of online gambling revenue, according to recent Connecticut and Massachusetts studies. Your own analysis of VIPs and also of New Jersey online numbers suggests something similar. I'd be interested in your thinking on addiction as a motivator in a future newsletter. Thank you for all you do.