Legal Sports Bets Mean Rapid Growth for This Internet-Gambling Pioneer

All eyes were on this year's election...

The battle between President Donald Trump and Democratic presidential nominee Joe Biden was what many in the media were calling the "most consequential election" of our lifetimes. But while the Election Day focus was on who would be our country's next leader, voters also decided some other important matters...

Voters in three states – Maryland, South Dakota, and Louisiana – passed ballot measures that will legalize betting on sporting events. This brings the total number of states that have legalized sports betting to 25 plus Washington, D.C. And more states are likely going to follow suit.

If those states continue to ban sports betting, their residents will simply take their bets – and the resulting tax dollars – to another state. That would never do... especially with the coronavirus pandemic hurting state budgets.

Sports betting is a massive industry. And with legalization spreading quickly, it's continuing to grow rapidly.

The total amount wagered in the U.S. is expected to grow from about $15 billion in 2019 to as high as $149 billion by 2023, according to management consulting firm Activate Consulting.

And a lot of this is growth is happening through online-betting firms. In many states that have legalized sports betting, the majority of bets are placed online – including more than 80% of bets in New Jersey and about 90% in Pennsylvania.

One prominent company benefiting from this trend is DraftKings (DKNG)...

DraftKings was one of the first companies to offer daily fantasy sports leagues. In fantasy sports competitions, folks can build their own teams from players across a given league – like the MLB, NBA, or NFL – and duke it out with a friend or other opponent.

Recently, DraftKings also made a big push into the online sports-betting and online casino-gaming industries.

DraftKings has daily fantasy sports operations in 43 U.S. states. More importantly, it can take bets in 10 states, which it says is the most of any company.

But DraftKings isn't stopping there...

The company is working with regulators in both Michigan and Virginia to receive licenses to launch sports betting there. And it will likely do the same in the three states that just passed sports betting through the election.

DraftKings' latest earnings report shows its incredible growth...

Revenue topped estimates, rising 98% from the same quarter last year. This led to the company raising its full-year sales forecast. And DraftKings reported more than 1 million monthly unique users, up 64% year over year.

DraftKings is already one of the leaders in the market. New Jersey is a great example of this...

Since New Jersey legalized sports betting in 2018, the market has soared. Now, more bets are placed in the state than in Nevada (which is home to the gambling capital of the U.S. in Las Vegas). This makes New Jersey one of the most important markets to sports-betting companies.

In New Jersey, DraftKings has 38% of the market. That's second only to Flutter Entertainment's (PDYPY) FanDuel, which has about 43% of the market.

The story is the same in other states. DraftKings and FanDuel are far and away the leaders in the market. And given the incredible growth ahead, there's room for both companies to profit.

The company has a wide range of partnerships, too...

It has an exclusive deal with the Chicago Cubs, which makes it the baseball team's official sports-betting partner and daily fantasy partner. But the deal also allows DraftKings to build a sportsbook at the Cubs' famous stadium, Wrigley Field.

It's also the exclusive daily fantasy sports provider for ESPN. And as part of the deal, DraftKings will also be one of two sports-betting companies – along with Caesars Entertainment (CZR) – that ESPN will link to on its website. These partnerships pull more and more people onto DraftKings's platform.

Since DraftKings went public last year, investors have plowed into the shares. DraftKings' stock is up more than 400% from when it started trading in July 2019. And since investors got news that more states were legalizing sports gambling, the gains have continued... The stock is up nearly 30% since Election Day.

For decades, sports betting has been conducted under the table through "bookies" or offshore sportsbooks that skirt U.S. regulations. Today, you can place a bet legally with the click of a button. This is a dramatic shift. And DraftKings has already taken steps to lead this rapidly growing industry.

Sometimes investing is simple.