Since DraftKings announced a proposed acquisition of Jackpocket last month, much of the focus from sports betting industry stakeholders has surrounded the potential cross-selling opportunities for DraftKings through the courier lottery service.

After all, DraftKings projects that the acquisition could drive as much as $100 million in Adjusted EBITDA during Fiscal Year 2026. But with any major M&A deal, the synergies from a large transaction are intended to be mutually beneficial for both parties. On the lottery side, the entry of the DraftKings’ imprimatur could provide the tailwind needed to modernize the industry.

Lottery Now CEO Kevin Kramer describes the proposed deal as a “watershed moment” for lottery innovation.

“This strategic move underscores the online sports betting industry’s commitment to driving innovation in the gaming space and recognizes lottery couriers’ opportunity to bring that same innovation to state and international lotteries,” Kramer wrote in a press release provided to US Bets.

Driving innovation in lottery apps

Jackpocket, the largest seller of lottery tickets in New York, operates as a courier lottery service. As a result, Jackpocket users are able to purchase lottery tickets through the company’s app. Lottery couriers face lower political hurdles than iLottery providers since the former can partner with state lottery commissions to gain market access in various jurisdictions.

Kramer believes the acquisition can bolster the courier lottery space from a technical standpoint through some of the innovations that have driven the online sports betting (OSB) industry since the historic PASPA decision in 2018.

For instance, innovations through artificial intelligence, automated bet placing, and machine learning tools have fueled the growth of the OSB industry in recent years, he notes. While OSB operators have made significant investments in technological solutions, the lottery industry has lagged behind, with brick-and-mortar businesses dominating ticket sales.

I like accretive deals, plus we know the lottery market is huge and $DKNG already has a strong userbase so CAC for Jackpocket should be lower than it is now and now Jackpocket can help generate users for DraftKings at lower CAC.
if they can strip out some overlapping costs and…

— Jonah Lupton (@JonahLupton) February 24, 2024

While Americans purchase more than $100 billion in lottery tickets per year, the process for purchasing a ticket can still be “incredibly archaic,” Sharp Alpha Advisors Managing Partner Lloyd Danzig told Lottery Geeks. Despite the presence of intuitive apps such as Jackpocket, the process of buying a lottery ticket involves a trip from your home to a convenience store — a trip that may distract you from other errands on your daily schedule. Upon the purchase, a customer will receive a paper ticket, Danzig noted, one that can be easily lost. Jackpocket ameliorates the process by allowing a customer to simply purchase a ticket on the app.

Since the announcement of DraftKings’ $750 million acquisition, Jackpocket has increased the frequency of television commercials in the New York City metropolitan area. One promotion grants new Jackpocket users a free lottery ticket for opening a new account on the app. The promotion draws parallels to some of the sign-on bonuses offered at DraftKings on the sports betting side.

In August 2022, Jackpocket recorded market penetration for Powerball and Mega Millions in the range of 9% to 12% in three key states: New York, New Jersey, and Texas, according to internal company data. The trends underscore the appeal of high-stakes payouts offered in both lotteries. In hockey, Jackpocket has sponsorship agreements with the NHL’s Dallas Stars and New York Islanders, two deals that provide additional cross-selling opportunities for DraftKings.

On Wall Street, reviews of the transaction have been mixed. Barry Jonas, an analyst with Truist Securities, sees no imminent threats to the deal as Jackpocket solidifies its brand and builds up its database in the coming years. Another analyst, Carlo Santarelli of Deutsche Bank, questions whether DraftKings overspent with a price tag that approaches $800 million.

DraftKings’ proposed acquisition of Jackpocket is expected to close by the second half of 2024, the company said in a statement.

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