On a sticky morning in June, Crane Kenney, the neatly pressed president of the Chicago Cubs, ushered a dozen reporters across the loose gravel of a construction site just outside Wrigley Field. “Slip-and-fall,” Kenney, a lawyer, teased a burly cameraman. “I can see it.” Standing beside Kenney, in wraparound mirrored sunglasses and a wide-collared blue gingham shirt open to the breastbone, was the corporate partner he’d come to celebrate: Jason Robins, co-founder of betting app DraftKings.
We were there to watch the two of them sign a steel beam that will eventually sit inside a two-story, Las Vegas-style sportsbook and bar. Robins’s company is paying the Cubs $100 million over 10 years for the right to operate it, according to a person familiar with the agreement. The glass-walled venue will be welded in several places to the stadium and stretch almost half its length near the intersection of Addison Street and Sheffield Avenue. Renderings depict signs flashing the DraftKings name and an L-shaped, 2,000-square-foot TV screen.
Wrigley is holy ground for baseball fans, attracting crowds no matter how well the Cubs play. (Their championship in 2016 was the first in 108 years.) Traditionally, games at the “friendly confines,” with its famed ivy-covered walls, have been a deliciously low-fi affair. Sportscaster Harry Caray used to lead fans in Take Me Out to the Ballgame during the seventh-inning stretch, while spectators crowded onto rooftops overlooking the outfield to catch a glimpse. Wrigley’s portrayal in Ferris Bueller’s Day Off as the ultimate place to play hooky helped inspire a national following, as did writers including George Will, a lifelong Cubs fan. In A Nice Little Place on the North Side, he wrote, “The enthusiasts think the ballpark is a kind of cathedral, and that Wrigley Field is to baseball what Rome is, or was once said to be, to religion: All roads lead there, or should.”
The vibe of the place, and the surrounding area known as Wrigleyville, started to change in 2009 when the Ricketts family bought the team from the Tribune Co. (J. Joe Ricketts, the patriarch, founded securities brokerage TD Ameritrade Holding Corp.) After years of laissez-faire management, during which needed updates to the ballpark were left on hold, the new owners embarked on a $575 million renovation in 2014. They’ve built a boutique hotel; put up sleek new team offices with a conference center, retail stores, and a gift shop selling $44.99 T-shirts; and bought out most of the nearby rooftop owners. “Think of us as a landlord,” Kenney told reporters at the event in June.
When it opens next year, the DraftKings Sportsbook at Wrigley Field will be another way for the Ricketts family to maximize revenue; under the deal, food and drink sales go to the Cubs and its concessions partner. For Robins, the sportsbook will be a valuable customer acquisition tool.
Few neighborhoods in America boast Wrigleyville’s demographic bounty. On the day of the beam signing, Deadheads—now affluent boomers—milled about for a concert at the stadium that night. (The Cubs were away.) There were also young professionals hitting the bars and, quite possibly, the highest concentration of 45-year-old traveling sales managers anywhere in the US. Robins is fine with losing revenue from bratwurst and Old Style beers in order to become a permanent fixture for this clientele—mostly young men who like to gamble on sports. They can now do so legally in Illinois and 29 other states, plus Washington, D.C., after a 2018 Supreme Court ruling ended Nevada’s monopoly.
The average baseball fan is 57. But more than 80% of sports bettors are younger than 55, and they’re more engaged with a game if money is on the line. They may not want to sit through nine innings in a tiny seat under the blazing sun, but an afternoon on a comfy lounger, in air conditioning, watching other games? That’s a fun alternative.
DraftKings has spent lavishly on ads to out-jockey other apps, most notably FanDuel, vying to provide a similar experience. The exposure has primed the market and gotten the leagues comfortable with sports betting, at least to a degree. The Cubs aren’t letting fans pass directly between the stadium and the sportsbook, even though anyone 21 and older can legally bet via phone in either place. Major League Baseball, which saw attendance hit a 37-year low last season, wants the gambling revenue—potentially $1.1 billion a year in sponsorships, ads, and increased fan engagement, according to the American Gaming Association—but doesn’t want parents to feel as if they’re taking their kids to a horse track.
“People who are doing it for profit, those are not the kind of players we want”
That may be a quaint way to look at things. DraftKings Inc. isn’t profitable, but revenue has almost doubled annually, from $323 million in 2019 to $615 million in 2020 to $1.3 billion last year, with an average analyst estimate of $2.1 billion for 2022. This meteoric growth has happened in large part because of how well DraftKings and its rivals hype the game within the game, in which bettors can wager on whether, say, Cubs outfielder Ian Happ will get two hits, rather than just who wins or loses.
Traditional sportsbooks are market makers. They set a betting line—the Cubs will win by two runs or more, for example—to attract a roughly equal number of wagers on each side while keeping a small amount for themselves. DraftKings and competitors start with the same approach, but other techniques they use are controversial and likely to attract regulatory scrutiny if the apps draw tens of millions of new customers, as many analysts expect.
The companies harvest user data to ensure that losing bets outnumber winning ones. This process starts with the companies’ ability, so far permitted by state regulators, to profile customers based on betting histories and limit the size of wagers from those expected to win, much like traditional casinos kicking out sharps from the blackjack table. The apps use internal ratings to target the biggest losers, marshaling online tracking technology in a way that casinos—which once handed out rolls of quarters to entice repeat business—could only have dreamed of. DraftKings and FanDuel hire spokespeople, often retired athletes, to pitch risky multi-leg bets that aren’t likely to pay out. In states where it’s allowed, the ultimate prize is cross-selling sportsbook customers into online casino games. “That’s where the juice comes from,” Adam Kaplan, FanDuel’s general manager and vice president for content until last year, said at an industry conference in New York in April.
Disclaimers display the 1-800 numbers for help lines and offer tips on “responsible gaming,” but the apps’ long-term success depends on more people betting more frequently. DraftKings, in other words, needs your dumb money, and establishing a beachhead in Wrigleyville is a new way to get it.
Robins, hewing to his prepared lines at the signing, said “we’ve really been fortunate to have the Cubs here alongside us” before scribbling his name in Sharpie on the ceremonial I-beam. Construction crews resumed hammering. Across Addison, Danny Pellikan, a clerk at a shop hawking old-timey baseball apparel, anticipated more sales. “Hopefully, people will make some bets and then come over and buy some shirts—with their winnings,” he said, laughing.
Robins conveys excitement for the Cubs deal in his default language: financial metrics. “Baseball is definitely a sport that’s good for us both from a customer acquisition and LTV standpoint,” he says by phone, driving around between meetings in Boston, where DraftKings is headquartered. “LTV,” or a player’s lifetime value, is a casino term that measures expected revenue from a customer. DraftKings has estimated these revenues typically exceed its own marketing costs. In New Jersey, for example, it spent an average of $371 in the second half of 2018 to acquire 54,467 customers—who brought in an LTV of $2,546 apiece.
Robins, who’s 41, grew up in Miami, the son of a teacher and an economics professor. He started a chess club in elementary school and taught himself computer programming at 13. A sports nut, he’d memorize box scores and statistics and ask his parents to quiz him at the kitchen table. In the yearbook at Miami Killian Senior High School, Robins wrote of his career goals: “Get my MBA and get rich.” (He didn’t get an MBA, but he has a bachelor’s degree in economics and computer science, with a minor in math, from Duke.)
In conversation, Robins is affectless and somewhat shy. He warms up as we swap tales of Cubs fandom. As a kid in Mesa, Ariz., where the team trains each spring, I collected autographs from Cubs greats such as Ryne Sandberg, who signed a ball on the way to his cherry red Porsche 911. At one game, a friend and I sat next to then-general manager Dallas Green, who ordered us Cokes. Robins tells me he saw his first game at Wrigley with his father, a Chicago native, and spotted 1980s-to-’90s Cubs star Andre Dawson at batting cages around Miami. “Hawk, Hawk,” the kids would call, using his nickname.
Robins founded DraftKings in 2011 with two colleagues from the Boston-area business-services company VistaPrint, where he worked in marketing and analytics. Their idea was to offer fast-paced, daily fantasy sports contests. MLB was among the first leagues to see the potential, investing an undisclosed sum in the company in 2013. DraftKings got a toehold with the Cubs two years later, putting its name on a covered patio at the intersection of Addison and Sheffield that the company billed as “the closest bar to Wrigley Field” to recruit fantasy customers. Robins got to know the Ricketts family, particularly Joe’s son Tom, the Cubs chairman. “There was a lot of natural chemistry,” Robins says of the relationship.
When Illinois legislators began talking about legalizing sports betting a few years ago, Robins and Tom discussed turning the patio into something more permanent. It would be a place for DraftKings to host current customers and sign up new ones year-round, because a sportsbook would be a draw for the Super Bowl, the NBA playoffs, and other big events.
Cubs officials debated how savory it was to have a gambling partner. There’s been betting in the Cubs’ bleachers for more than a century—at least since 1920. That’s when the Chicago Daily Tribune, a year after the infamous “Black Sox” World Series fixing scandal, reported on a sweep at what was then called Cubs Park that snared 47 illegal gamblers “basking in the sun, exchanging opinions and money.” But there were standards to uphold—the team had turned down would-be sponsor Juul Labs Inc., the e-cigarette maker. Ultimately, the Cubs decided that a sportsbook is like beer or hot dogs: not for a teetotaler or vegan, but fine for people who want it and can handle it. Besides, Kenney saw that betting on phones was the future. He recalled one day seeing his 26-year-old son watching rugby. “I got New Zealand,” Kenney’s son told him. “And I’m like, ‘What do you mean, you “got” New Zealand?’ And he’s got $5 on New Zealand,” Kenney says. “If it’s a young person, that’s kind of the way they bet.”
Much of MLB has made the same calculation. About half the teams already have marketing relationships with sports betting apps. In January, just outside their ballpark in D.C., the Nationals opened the league’s first sportsbook, operated by BetMGM LLC. Robins didn’t mention plans for other baseball stadiums. But he talked about a sportsbook the company is building at the TPC Scottsdale golf course in Arizona, and he brought up a previously announced arrangement with the NBA’s Houston Rockets “should Texas legalize sports betting.” (The Rockets are owned by Tilman Fertitta, who sold his Golden Nugget Online Gaming Inc. to DraftKings in May.)
The apps pitch a dizzying array of so-called proposition, or prop, bets, such as whether a certain player will get a hit. People can even bet pitch by pitch, guessing if the next one will be a ball or a strike. But the most endorphin-producing bets—the ones that are the most potentially profitable—are multi-leg “parlays” that require several things to happen to pay out. For instance: New York Yankees slugger Aaron Judge hits a home run, the team wins, and ace Gerrit Cole records at least 10 strikeouts. Every so often, these low-odds bets bring someone a big payday, and the apps tweet screenshots of the winning virtual betting slips.
The effect is to turn live sports into a video game, says Natasha Dow Schüll, a cultural anthropologist at New York University and author of Addiction by Design: Machine Gambling in Las Vegas. Just like slot machines that issue celebratory dings when someone wins a few coins, no matter how much money that gambler has lost, the apps celebrate “near misses” just as profusely as wins. This reaction maintains engagement. And just as in craps, where a bettor has dozens of options at any one time, the apps offer multiple choices to create excitement—and sow confusion about the bigger picture. “They’re breaking it into many tiny increments, and it sort of blurs the loss,” Schüll says.
The ads for these apps, which are ubiquitous during live, televised sporting events, suggest that free money is there for the taking. The Barstool Sports app, owned by Penn Entertainment Inc., advertised one January 2021 bet as “can’t lose” (satirically, Penn said, in response to a complaint from a watchdog group). Many heavily promoted “risk-free” wagers come with strings attached that require people to wager thousands of dollars more, often within months, to claim the bonuses or watch them disappear.
Egging on users are celebrity brand ambassadors. Former New Orleans Saints quarterback Drew Brees schools a cast of risk-averse nerds in ads for PointsBet USA Inc. “Live your bet life,” he says. Before the Super Bowl in February, Pat McAfee, a former NFL punter and talk show host who has a $120 million sponsorship deal with FanDuel Inc., promoted a four-leg parlay that required heroic performances. A $10 bet would’ve paid $77.70. The wager lost after attracting more than 160,000 customers. DraftKings signed former ESPN commentator Dan Le Batard to a deal that, according to media reports, is worth $50 million. Through early June he promoted 13 bets on his show, according to Audacy Sports, and all of them lost.
Amy Howe, FanDuel’s chief executive officer, has said its customers see sports betting as a form of entertainment. “Consumers are invested in individual players, and when you have the same-game parlay, it allows you to really play into that,” she told a Bloomberg reporter at an industry gathering in July. “It makes it more interesting.” It’s also more profitable for the operator. Data from Nevada casinos compiled by the Center for Gaming Research at the University of Nevada at Las Vegas show that parlays last year generated a 32.1% “hold”—the share of profits that bookmakers keep after paying out winnings—vs. 5.5% for all sports wagers. “People love parlays,” Robins says. “And they naturally have a higher hold rate.” He describes this as a “win-win.”
DraftKings assigns users an internal rating from 1 to 5, says a former customer service representative who requested anonymity to disclose internal information. Users rated as a 1 are infrequent bettors, and 5s—also known as VIPs, given how much money the company makes off them—bet most frequently. At FanDuel, a former employee says, customers are categorized as recreational users, VIPs, or sharps, the smartest bettors most likely to win payouts. (A FanDuel spokesman declined to comment on internal customer ratings.) Robins has talked openly at industry conferences about how the company limits the size of bets it takes from professionals who win consistently. “People who are doing it for profit, those are not the kind of players we want,” he said at a November event.
The apps get a wealth of personal data from users, potentially including Social Security numbers, geolocation, search history, and bank statements. This helps the companies assess each customer’s net worth and target marketing accordingly. DraftKings reminds customers in emails that they can set daily, weekly, or monthly deposit limits. It sets its own internal deposit limits based on background checks, says the former customer service rep. (A DraftKings spokesman says: “Regulated sportsbooks are required to have a robust Know Your Customer system designed to protect the consumers and company operations. The initial collection of personal information as part of these protocols is not used to influence marketing tactics.”)
The goal is to keep the VIPs betting, say former account managers at DraftKings and FanDuel. It’s typical to credit back 10% of these customers’ losses at the end of the month, they say. The sharps, of course, don’t like being stymied and tweet frequently about their displeasure with having their wagers capped.
Robins tells me it’s a matter of risk management. “Sometimes sharps, in order to make their edge and make enough money, want to be betting millions of dollars a year,” he says. “And so we place limits on that.” The company’s most recent annual 10-K filing to the US Securities and Exchange Commission states that it believes all operators take similar action to balance the risk from a “very small segment,” including “highly sophisticated syndicates” or algorithmic bettors. The filing included a caution: “We cannot assure you,” it said, that regulators will always allow the same level of discretion over individual customer accounts.
Two years after companies started taking sports bets in Illinois, an assessment for the state’s Department of Human Services reported in June that 3.8% of adults in the state, or about 383,000 people, have a gambling problem and an additional 7.7%, or 761,000 people, are at risk for developing one. In Michigan, which legalized online casino wagers as well as online sports betting in January 2021, the state health department has said calls to its gambling help line almost tripled to 4,400 last year.
DraftKings runs 30-minute infomercials on local TV stations. Two cheery hosts talk up blackjack games that let people play seven hands at once, and there’s testimonial from a man who says how easy it is to open the app on his phone at night in bed next to his wife. “An industry with state approval delivering a known, addictive product as fast as possible can only cause harm,” says Harry Levant, director of education for the nonprofit Stop Predatory Gambling. “The only question is going to be how much harm.”
In the UK, the industry largely was allowed to self-regulate when online bets were legalized in 2007. A race to the bottom ensued, with operators marketing aggressively to the fraction of frequent bettors necessary to support business. After an outcry from public-health officials and family members of addicted gamblers, authorities banned credit card bets and limited ads during sporting events. “When I looked at America, your perspective is where we were 15 years ago,” says Heather Wardle, a University of Glasgow social scientist and author of Games Without Frontiers. She co-wrote a recent paper showing that from August to October 2020, 40% of gross spending among online sports bettors in the UK came from the 15% of people experiencing a moderate risk of problem gambling.
I talked to two dozen current and former employees of DraftKings, FanDuel, and other gambling companies for this story, many of whom had qualms about the apps’ influence. One person who managed VIP accounts for FanDuel says crediting back a portion of losses every month felt like a bartender handing a shot to an alcoholic. A former customer associate for DraftKings says he was encouraged to report troubling statements to supervisors. Still, he adds, some customers only had their accounts suspended after they’d fallen into serious trouble—struggling with their mortgage or feeling suicidal.
For now the main requirement in many US states is that companies provide help line numbers and avoid marketing to people on so-called self-exclusion lists. Some also require training for customer-facing employees on how to spot signs of problem gambling. But that still leaves critical assessments of who’s at risk to the discretion of the operators, who aren’t motivated to intervene with their moneymakers. Chris Jones, a FanDuel spokesman, says “every employee takes compliance with responsible gaming seriously” and that the company has a compliance team of almost 200 people; at DraftKings, a team dedicated to player protection monitors for problematic play. In January, the company announced it would provide $15,000 a year for three years to 35 state problem-gambling councils—for a total of almost $1.6 million. In 2020 the company hired Christine Thurmond, a former administrator at the Cambridge Health Alliance’s Division on Addiction, an affiliate of Harvard Medical School, as director of responsible gaming.
The day of the beam signing at Wrigley, DraftKings was advertising a 20% bonus on deposits of as much as $1,000. I was curious how the app would respond to a newbie. I put in $200 and opted to risk it all on a parlay. Even if the bet lost, I reasoned, I’d still have $40 to continue the experiment, thanks to the bonus.
Outside a Starbucks at O’Hare Airport, I took a few minutes to work out a series of outcomes—ludicrous even for a Cubs fan like me—that pitcher Kyle Hendricks would get five or more strikeouts, catcher Yan Gomes would get a hit, and left fielder Ian Happ would club a home run. If all three things happened, I’d collect $5,600. Later, after consulting an online odds calculator, I realized that the bet had a 3.5% win probability. OK, so I felt it more in my heart than my head.
That night, the Cubs shut out the Cardinals at Busch Stadium in St. Louis. Hendricks fired six strikeouts. Gomes got two hits. And Happ hit a deep shot to center field in the fifth inning … that landed in front of the wall for a double. It was his only hit.
Opening the DraftKings app after my flight, I saw that my $200 was gone. So was the expected $40. Instead, I would have $8 in “playable credits,” because of some fine print I hadn’t understood: The bonus is awarded in tranches of $1 for each $25 bet. The app now displayed a “bonus tracker” that showed my progress toward claiming the free money. My bonus would disappear in 90 days, I learned, so if I wanted to collect more of it, I’d have to bet more. I was officially dumb money.
Still, that same day I got a cheery e-mail from DraftKings. “Congrats!” it said, with a confetti emoji. “Bonus funds have been credited to your account.” This was the $8. Five days later, another note informed me I had a “mission”: Place a $1 minimum bet on three consecutive days, and I’d get site currency called Crowns that could be exchanged for more credits. A few days later, DraftKings offered me a bet called “the Happer.” The Cubs had to win and Happ needed a multi-hit game, among other outcomes. Then I got an email offering an “odds boost” if I bet that no runs would be scored in the first inning of that day’s Cubs-Red Sox game. It implored me to “Bet Now!” But by then I was back home in Washington state, where if I want to lose money I have to drive to a casino.” – Bloomberg