DraftKings' fastest-growing fantasy game category last year was esports

Key Points
  • Entry fees for League of Legends fantasy games went up 59 percent year over year in 2017, and the fees are on track to beat that rate this year.
Arjun Kharpal | CNBC

DraftKings' fastest growing fantasy sport last year was esports, in which people create fantasy leagues of professional video gamers, showing yet another example of how gaming is inching its way into the mainstream.

It could become an interesting business for the company, given the U.S. Supreme Court decided on Monday to allow more states to legalize sports betting. With the new decree, DraftKings may be allowed to expand its sports betting legally.

Though esports are still a small part of DraftKings' overall business, it's growing rapidly. Last year, entry fees for its League of Legends fantasy games were up 59 percent year over year.

"We are certainly aware of how fast the sport has grown," said Matt Kalish, chief revenue officer and co-founder of DraftKings.

To play in the League of Legends contests, users stay under a salary cap while selecting professional gamers to an 8-person roster, each of whom is given a hypothetical salary based on previous statistics. Players are then scored based on the actions they do in the game, as well as the performance of their teams.

The company has had 2.5 million entries in League of Legends contests since it launched in 2015, despite not marketing the fantasy games Kalish said. It's already seeing massive interest this year, and thinks the entry fee growth rate in 2018 will exceed 2017.

"One of the reasons we believe esports could be much bigger on DraftKings is we haven't really penetrated to the full breadth of games," Kalish said.

Esports may seem like a strange bet, considering there are other global sports with big followings like cricket or rugby which Draft Kings hasn't tackled yet. However, Kalish said there's high potential for esports over the next few years, with esports analyst Newzoo expecting the global esports economy to reach $905.6 million in 2018. With big names like the NFL New England Patriots owner Robert Kraft and tech investor Ted Leonsis also backing the sport, DraftKings thinks it's worth the risk, he said.

Right now, DraftKings only offers fantasy games around League of Legends but it is exploring adding other games in the future. It's also looking at other opportunities, including expanding coverage or sponsoring tournaments and venues.

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