DraftKings Scores Big with Strategic New Partnership in Cutthroat Sports-Betting Arena

Game on: DraftKings just leveled up its playbook.

The sports-betting giant inked a surprise partnership—details still under wraps—that could reshuffle the deck in an industry where everyone’s chasing the same pot. No specifics yet, but insiders whisper it’s a power move against rivals like FanDuel and BetMGM.

Why it matters: In a sector where user acquisition costs bleed operators dry, alliances are the new Hail Mary. DraftKings’ stock? Probably already pricing in moon shots—because nothing says 'sustainable growth' like betting on gamblers to keep gambling.

Key Takeaways

• ESPN ended its partnership with PENN after the betting platform failed to hit market share targets. ESPN then announced a new deal making DraftKings its sportsbook partner.
• Shares of Penn slipped in Thursday trading, while DraftKings stock edged higher.

ESPN is betting on DraftKings.

In the latest news to illustrate the competitive nature of the sports-betting market, The Walt Disney Co. (DIS) unit and PENN Entertainment (PENN) on Thursday morning said that agreed to terminate their U.S. online betting pact early. Not long afterwards, it named its new partner: DraftKings (DKNG).

"We appreciate the collaboration we had with PENN and are now pursuing other media and marketing opportunities within this space," ESPN Chairman Jimmy Pitaro said in a press release. Shares of DraftKings were recently up nearly 1%, while Penn's were more than 6% lower.

Why This Matters

ESPN’s shift from PENN Entertainment to DraftKings reflects the intense competition in the U.S. sports betting market. The MOVE comes amid heightened scrutiny of sports gambling following recent NBA-related scandals.

The ESPN-PENN deal, announced in August 2023, was worth $1.5 billion over 10 years. Both companies had a right to terminate the pact "after the third year if specific market share performance thresholds were not met." The ESPN Bet platform, however, found competing with companies like DraftKings and FanDuel, a unit of Flutter Entertainment (FLUT).

Starting Dec. 1, PENN will offer U.S. sports betting under theScore Bet brand, while DraftKings will become "the exclusive Official Sportsbook and Odds Provider of ESPN," including operating the betting tab on the ESPN app. "

The change comes just weeks after an alleged pro basketball gambling scandal came to light. More than 30 people were arrested in two gambling schemes. Federal prosecutors allege that Rozier and several others used insider information to bet on NBA games.

Earlier this week, NBA attorneys and others met with Congressional committee staffers in Washington to discuss the scandal, with The Athletic reporting that a Senate committee chaired by Sen. Ted Cruz (R-Texas) has requested that the NBA provide a written briefing on the betting matter.

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