A company partnering with operators of the Maryland State Fairgrounds has been approved for a sports gaming license despite concerns that the company has yet to turn a profit.
The Maryland Lottery and Gaming Control Commission voted 6-0 with one abstention to award a license to Crown Maryland Gaming. The company, owned by Boston-based DraftKings, raised concerns from at least one member of the commission because of repeated annual losses totaling more than $3 billion over a five-year period.
“I see a disconnect there,” said Harold Hodges, a lottery and gaming commissioner. “I see it as a very poor decision on our part, at least for the state of Maryland to approve DraftKings even though it’s a publicly traded stock, its a very well-known commodity yet it has shown poor operations and that speaks to management. I’m wondering how did we get there? How is it recommended to go ahead for a license yet they are really are not hitting on all cylinders in an area that is very important.”
Hodges ultimately abstained from a vote to approve the license. He did not provide a reason.
Crown Maryland Gaming has an agreement with the operators of the Maryland State Fairgrounds in Timonium to operate a retail location at the racetrack facility. That agreement also includes operation of a possible mobile license, which is expected to be competitively bid.
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.”
That same report noted DraftKings lost more than $3 billion over a five-year period. The company expects to lose $800 million this year.
“It’s well known that they are not performing all that great,” said John Mooney, Managing Director, Regulatory Oversight.
“We don’t take it lightly that they’re losing significant amounts of money but they have 1.5 billion in cash,” said Mooney. “They are required to put up a bond and they have to have, for the bets they take, they have to have the money to cover those bets.”
Randy Marriner, chair of the commission, called the figure “quite staggering to me” but said it was not a disqualifying factor.
“Our staff vetted you and they find you to be capable and worthy of our blessing but it would be irresponsible of me not to ask,” Mariner said to Joe DeCristofaro, vice president of investor relations for DraftKings.
Mariner said within the industry nine companies including DraftKings control 90% of the action.
“None of them are making money,” said Mariner. “This is not an unusual situation but the numbers are large and I think it’s incumbent on us to ask questions.”
A report made public by gaming investigators attributed the losses to extensive advertising and player incentive as well as the acquisition of new companies and technologies.
As such, DraftKings was required to enter into an annual fiscal review with gaming regulators. Such reviews are not typical and have only been required of a small number of companies, according to Mooney.
A number of analysts cited in the report to the commission expect the company to become profitable by 2025.
DeCristofaro said the company could turn a profit as soon as next year.
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 not applied for a license. On Thursday, owners of the western Maryland casino told state regulators they had an agreement to sell the casino operations and property.
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.
Owners of the fairgrounds will still need to apply for their own license. The facility is already home to an off track betting facility. That license would need approval of the Sports Wagering Application Review Commission.
DraftKings, as the facility operator partner, does not need approval from the review commission.