On Missouri Ballot: Caesars vs. FanDuel and DraftKings

It’s been nearly 18 months since a U.S. state legalized sports betting. Missouri could become the latest on Tuesday.

Residents in the Show-Me State are voting on a ballot initiative that would legalize sports betting at a 10% tax rate, with other deductions for promotional costs. The proposed amendment to Missouri’s constitution comes amid a slowdown in new states launching legal sports betting, and it pits some of the industry’s largest sportsbooks against each other.

On one side, FanDuel (NYSE: FLUT) and DraftKings (Nasdaq: DKNG) are advocating for the proposal to pass. The two biggest online sportsbooks in the U.S. by a wide margin, the companies have spent a reported $41 million—a record for a Missouri ballot initiative—to support its passing. If they’re successful, they could apply for licenses in the country’s 18^th-most populous state, and the fourth-largest that is yet to offer sports betting.

The other side has been funded by a rival gaming company. Caesars Entertainment (Nasdaq: CZR), which operates a handful of casinos in the state, has backed the reported $14 million opposition campaign. While it also would likely launch its sportsbook in Missouri if allowed, the company opposes the specifics of this measure, which doesn’t run directly through pre-existing casinos as some other states have done.

Representatives for FanDuel and DraftKings declined to comment. A representative for Caesars didn’t immediately respond to a request for comment.  

Should the Missouri initiative pass, it would mark a rare legislative win for the industry in recent years. When the Supreme Court struck down the federal ban in May 2018, a handful of states were ready to go almost immediately. In the ensuing years, dozens followed suit. What’s left is a handful of jurisdictions that could take years—including massive markets in Texas and California. Currently about 65% of the U.S. population is in a state with legal betting. That was already 49% by the end of 2021.

The Missouri measure was placed on the ballot via an initiative petition, launched in January by a coalition of the state’s pro sports teams, including the St. Louis Cardinals, St, Louis Blues, Kansas City Chiefs, Kansas City Royals and Kansas City Current. Attempts to legalize sports betting via the legislative route repeatedly failed to advance out of the state senate. The ballot measure would also grant market access to the state’s pro teams, a nice financial benefit that has buoyed franchises in other states. The Royals, Chiefs and Current recently wrote a joint letter to the state’s sports fans urging them to vote “yes” on the measure.

It’s not unheard-of for sports betting to wind up as a ballot initiative. In 2020, for example, there were measures in three states—Maryland, Nebraska and South Dakota—all of which passed. A similar measure in the 64 Louisiana parishes passed in all but nine of them.

Tuesday’s vote in Missouri will be closely watched across the industry, not just as a bellwether for public referendums, but also with regard to what it means for other states’ sports betting tax rates and handling of promotional costs. The 10% tax rate is lower than the national average, and a handful of states have recently raised or restructured their tax rates upward. (DraftKings’ short-lived “winnings surcharge” was a direct response to states with rates over 20%). New states coming online with a 10% tax rate is definitely a preferred result for most sportsbooks.