Bryan P. Sears//August 23, 2022
//August 23, 2022
State gaming regulators are recommending that a popular online gaming company be given preliminary approval for a sports wagering operator license.
The Maryland Lottery and Gaming Control Commission is expected to qualify Crown Maryland Gaming LLC for a license. The company is operated by Boston-based DraftKings Inc. The license would be used to operate a sports wagering facility at the Maryland State Fairgrounds in Timonium.
“There are no areas of concern with the licensure of Crown MD Gaming, LLC as a Sports Wagering Facility Operator or with Crown Gaming Inc. as a sports wagering principal entity,” according to a public report provided to the commission.
A vote to qualify DraftKings for a sports wagering operator licenses is just the first step in gaining the license.
The application and license award must be approved by the Sports Wagering Application Review Commission. That panel typically ratifies the decision of the lottery and gaming control commission. The review commission is not scheduled to meet until next month, though it can schedule one sooner to award a license.
Gaming regulators will also ultimately have to sign off on the facility and its operations.
The fairgrounds is one of more than a dozen locations guaranteed a sports betting license under state law.
Sixteen were guaranteed to go to 17 locations, including the state’s six casinos, the Laurel and Pimlico racetracks, and the Maryland State Fairgrounds, as well as some off-track betting sites, licensed bingo parlors and the stadiums where the Orioles, Ravens and Commanders play.
Currently, there are 11 licenses awarded, including to five of the six casinos — Rocky Gap so far has decided to not apply for a license.
In December 2020, DraftKings and the operator of the fairgrounds entered into a 10-year agreement to operate mobile and retail sports betting at the facility.
As part of the agreement, DraftKings and the fairgrounds will share the costs of renovating a portion of the Timonium racetrack grandstands. That facility will house the sports wagering operation.
As the exclusive operator, DraftKings will provide all related equipment and personnel for the facility.
Fairgrounds officials did not immediately respond to a request for comment.
The fairgrounds is not the only group to have a partnership with the popular online betting company.
One year ago, the Baltimore Ravens announced DraftKings as its new fantasy sports partner. DraftKing officials at the time said the deal could “perhaps soon” include sports betting.
Since 2018, DraftKings, a publicly traded company, has been in a period of rapid expansion offering mobile and retail sports betting in 18 states. In 2021, the company bought Golden Nugget gaming for nearly $1.6 billion.
That rapid expansion has come at a cost. Investigators for the state gaming agency reported DraftKings’ financial performance over a five-year period was “consistently poor.”
“Although the Company’s revenues increased significantly with market expansion, increases in both cost of revenue and operating expenses have far exceeded revenue growth, resulting in net losses totaling $3.05 billion over the period reviewed,” according to the report to the commission. “These cost increases are due in large part to extensive advertising and player incentive costs incurred each time the Company enters a new market. Additionally, DraftKings continues to acquire new businesses and develop new products and technologies which are often very costly. As a result of its poor operating performance, the Company is not generating positive cash flows from its operations and is having to rely on other measures, such as the issuance of promissory notes, to fund its operations and meet its capital demands.”
A number of analysts cited in the report to the commission expect the company to become profitable by 2025.
Even so, investigators recommend that the company have its “financial performance and suitability be reviewed on an annual basis.”
(This story may be updated.)