How Does DraftKings Make its Money?
DraftKings operates an online sports betting and iGaming (online casino) platform in the United States and select international markets. The company earns revenue when bettors lose their wagers (sports betting) and when casino players lose to the house (iGaming). Unlike a marketplace that takes a fee, DraftKings essentially operates as a digital bookmaker and casino.
DraftKings is live with mobile sports betting in 28+ states and iGaming (casino) in 6 states, with the company’s fortunes tied directly to continued legalization of online gambling across the U.S.
Revenue Breakdown
| Revenue Stream | 2024 | 2023 | YoY Growth |
|---|---|---|---|
| Online Sportsbook | $2.90B | $2.21B | +31.2% |
| iGaming (Online Casino) | $1.39B | $0.94B | +47.9% |
| Other (DFS, Media) | $0.32B | $0.31B | +3.2% |
| Total Revenue | $4.77B | $3.66B | +30.3% |
Online Sportsbook — 61% of Revenue
The core business. Revenue equals the total amount wagered minus the winnings paid out to bettors — this is called “Gross Gaming Revenue” (GGR). DraftKings offers:
- Single-game and parlay wagering across NFL, NBA, MLB, NHL, soccer, and more
- Live/in-game betting — wagers placed during an event, the fastest-growing category
- Same-game parlays (SGPs) — Combining multiple bets from a single game, which carries higher margins for the operator
The theoretical hold rate (DraftKings’ edge) on sports betting is typically 7-10% of the total amount wagered. Parlay bets carry higher hold rates (20%+), which is why DraftKings promotes them heavily.
iGaming — 29% of Revenue
Online casino games including slots, blackjack, roulette, and live dealer games. iGaming is the higher-margin segment because:
- Casino games have a built-in mathematical house edge (typically 2-5%)
- No external variables (like an underdog winning a game) cause payout spikes
- Player retention is higher and more consistent than sports betting
iGaming is only live in 6 states (Michigan, New Jersey, Pennsylvania, Connecticut, West Virginia, and Delaware), but those limited markets already generate nearly $1.4B in revenue — demonstrating the massive potential if more states legalize.
Other (DFS and Media) — 7% of Revenue
Daily Fantasy Sports, the original DraftKings product, plus advertising and media partnerships. DFS revenue has plateaued as customers shift to real-money sports betting.
Income Statement Overview
| Metric | 2024 | 2023 |
|---|---|---|
| Total Revenue | $4.77B | $3.66B |
| Cost of Revenue | $2.70B | $2.24B |
| Gross Profit | $2.07B | $1.42B |
| Operating Expenses | $2.22B | $2.20B |
| Operating Income | -$0.15B | -$0.78B |
| Net Income | -$0.31B | -$0.91B |
Key Financial Metrics
- Gross Margin: 43.4% — Lower than pure software companies because DraftKings pays state gaming taxes (typically 15-51% of GGR depending on the state) and must fund promotional credits.
- Operating Margin: -3.1% — DraftKings is approaching profitability. Losses narrowed dramatically from -$780M in 2023 to -$150M in 2024, and the company has guided for GAAP profitability in 2025.
- Revenue Growth: +30.3% — Strong growth driven by new state launches, same-store growth from existing states, and rapid iGaming expansion.
- Monthly Unique Players (MUPs): 3.8M — Up 23% year-over-year, indicating the player base continues to expand.
Where Does DraftKings Spend its Money?
- Gaming Taxes (~$1.1B): State and federal taxes levied on gross gaming revenue. This is the largest and most politically sensitive cost — several states have raised tax rates, which directly compresses margins.
- Promotional Credits (~$0.7B): Sign-up bonuses, free bets, and deposit matches used to acquire and retain bettors. DraftKings has reduced promotional spending as a percentage of revenue as the industry matures.
- Technology (~$0.6B): Platform engineering, odds compilation, risk management, and the in-house sportsbook engine (DraftKings migrated off a third-party platform to its own technology).
- Sales & Marketing (~$1.1B): Advertising, sponsorship deals (NFL, NBA, UFC), celebrity endorsements, and brand campaigns.
- G&A (~$0.75B): Corporate overhead, compliance, and licensing costs for operating in 28+ regulated jurisdictions.
What to Watch
- Path to profitability — DraftKings has guided for positive adjusted EBITDA and is approaching GAAP breakeven. Achieving sustained profitability will be a significant milestone.
- State legalization pipeline — Each new state that legalizes online sports betting or iGaming expands DraftKings’ addressable market. Texas, California, and Florida remain the largest untapped opportunities.
- Tax rate headwinds — Illinois raised its gambling tax rate to a progressive scale topping at 40%. Other states may follow. Higher tax rates directly reduce margins.
- iGaming expansion — If more states legalize online casino, it could be a bigger growth catalyst than sports betting due to higher margins and player frequency.
- Competition — FanDuel (Flutter), BetMGM, and ESPN Bet are all fighting for market share. DraftKings and FanDuel together control ~70% of the U.S. market, but new entrants continue to emerge.