Jackpocket Texas Could Be Modest Hit to DraftKings Revenue

Jackpocket Texas Could Be Modest Hit to DraftKings Revenue

After two controversies related to lottery couriers in Texas, the state prohibited that method of buying lottery tickets and scratch-offs. The action may lead to a slight reduction in DraftKings’ (NASDAQ: DKNG) revenue for 2025. 

DraftKings possesses Jackpocket, a leading entity in the lottery courier industry. The sector, still in its formative stages, faced backlash in Texas after a secretive European group employed a courier to purchase 25.8 million tickets for a lottery on April 22, 2023, leading to the consortium winning a $95 million jackpot and additional rewards. The situation resurfaced earlier this month when a gambler claimed an $83.5 million reward in Texas after buying a ticket via Jackpocket. 

A recent report by Eilers & Krejcik Gaming (EKG) projected that Texas would account for $57 million, or 25%, of US lottery courier revenue this year, second only to New York.

"We estimate DraftKings-owned Jackpocket had 60-70% revenue share of the Texas market, which puts the revenue impact at or around $34 million-$39 million. That represents <1% of DraftKings’ projected CY25 net revenue of $6.45 billion,” according to the research firm.

Jackpocket operates in 17 states, along with Puerto Rico and Washington, DC. The operator’s website does not list Texas as part of that group. 

Texas Might Be a One-Time Event 

A significant problem related to couriers like Jackpocket is that in various states, they function in a gray area since those states haven't clearly authorized or prohibited lottery courier services. 

EKG estimates that 92% of lottery courier sales come from only five markets, yet only New Jersey and New York have established regulations allowing companies like Jackpocket to function in those areas. 

While it hadn't explicitly prohibited couriers, Texas was known for being unwelcoming to the sector. The previously mentioned controversies may encourage the industry to implement measures to eliminate collusive practices. 

“Given the furor in Texas, we suspect future syndicate coups will be prevented, and without this kind of explosive story, we suspect many states will be content to maintain the status quo or negotiate regulation, rather than pushing for outright bans,” adds EKG.

How Jackpocket Became Part of DraftKings 

DraftKings is one year past the announcement of its $750 million purchase of Jackpocket. Fifty-five percent of the total purchase cost was settled in cash, while the rest was financed through the buyer's equity. The agreement was concluded in May of last year. 

The acquisition, which has positively impacted the buyer, was seen as a chance for DraftKings to promote iGaming and sports betting to lottery players. 

Nevertheless, it was not without some controversy, albeit minimal, since DraftKings co-founder and CEO Jason Robins had invested in Jackpocket.