Last week, DraftKings announced that it would be rolling out new gift cards just in time for Christmas.
The cards work just like those already used for things like restaurants, movies and big box stores. Instead of being used for retail purchases, however, they provide an easy way of funding an account on any of DraftKings’ sites.
The money can be used both for its signature daily fantasy sports product, available in 43 states, and for its sportsbook/casino platform. At the moment DraftKings Sportsbook is available for online play in 10 states, while DraftKings Casino only operates in New Jersey, Pennsylvania and West Virginia. Both should roll out in other states soon. In particular, the hotly awaited launch of Michigan online casinos and sportsbooks is coming in January.
At the moment, they come in $25 and $50 denominations and are available at 7 Eleven locations around the country. In time, we should see other retailers pick them up, and perhaps a broader range of dollar amounts.
DraftKings partnered with InComm Payments, a fintech company, to produce the cards. Gift cards are big business for InComm, whose other clients include the likes of Macy’s, Target and Home Depot. The company has roughly half a million distribution points in the US, through more than 1000 separate retail partners.
Another company, Blackhawk Network, released a similar product, the Game On card earlier in the month. This one is only available in Pennsylvania and New Jersey. However, it is accepted by several different operators, including DraftKings.
Gift cards could well become a popular and commonplace payment option for online gambling sites. There would be upsides and downsides to this, however.
The good: A future-proof prepayment option
If we compare online gambling to a car, then payment processing is the transmission: unsexy, yet essential. It doesn’t get a lot of attention from the marketing department and most customers only notice it when it’s a problem. And yet, without it, nothing else works.
One advantage of the DraftKings gift card, then, is that it presents a marketable form of payment processing. This could be particularly valuable for customer acquisition. After all, existing users presumably already have a preferred payment option. Yet one question that comes up frequently with curious newcomers is how to get money on and off a site. Seeing branded gift cards at the convenient store provides shoppers with a partial answer to the question, without them even needing to ask it.
Having this system in place could prove even more important down the road. Generally speaking, you’d expect more new payment options to appear over time. However, given gambling’s controversial nature and its associated risks, there’s a danger that things move the opposite way. Banks, credit card companies and other financial institutions keep changing their stances on gambling. Sometimes lawmakers and regulators become involved too, as with this year’s ban on the use of credit cards for gambling in the UK.
DraftKings has little control over whether, say, Visa or PayPal continue to serve online casinos. Establishing its own, more direct solution can be seen as the company insuring itself against the risk that certain options disappear in future.
The bad: Gambling makes for a risky gift option
The gift cards have a lot of value from the perspective of marketing and convenience. And yet, they also have the potential to backfire.
In function, gift cards aren’t so different from prepaid credit cards, which are already a popular way of making deposits to gambling sites. However, they’re called “gift cards” and not “personal convenience cards,” and that’s reflected in how people use them in practice. Some bettors might buy them for their own use. However, it’s fair to assume that many will be gifted to others, especially at this time of year.
The issue with this is that gift cards are often seen as a safe and generic gift when the giver doesn’t know the recipient very well. And yet, encouraging someone to gamble without knowing their situation is anything but safe. For someone who was at risk of developing a gambling problem but managed to step away, such a gift could be the trigger for developing a full-blown addiction.
This is already an issue with gifts of alcohol. Wine, and sometimes liquor, are often treated as a default, no-brainer option, yet about 30% of American adults don’t drink, for one reason or another. Many of those are recovering alcoholics, and gifting alcohol to such a person is, at minimum, awkward and uncomfortable. In some cases, it has life-changing consequences.
Here, the problem could be even worse, as even a full-blown, active case of gambling addiction is often entirely invisible. That makes it extremely hard to know whether giving someone such a gift card might inadvertently be fueling a problematic habit.
The ugly: One more target for gambling opponents
It’s a matter of speculation at this point how much of a problem online gambling gift cards cause for responsible gambling. If it doesn’t become commonplace for them to get casually tossed around as stocking stuffers and Secret Santa gifts, they might not prove to be a problem at all.
It’s almost inevitable that they will get pushback either way, however. Gambling in general, and online gambling specifically have many opponents in the US. One thing in particular tends to rile these groups up. That is any time gambling appears in a mainstream context, particularly in a way visible to minors.
It will be bad optics for DraftKings gift cards to appear on a rack next to those for brands like Disney and XBox. Both of these are also InComm clients. The calls to remove the cards or put them out of sight like cigarettes are almost inevitable.
Of course, the gift cards won’t actually facilitate gambling by minors. The Know Your Customer (KYC) steps required to open a legal online gambling account at DraftKings mean its cards will be safer at least in that regard than the lottery tickets already sold at the same locations.
That won’t matter, however, as perception is often more important than reality. And sometimes, lawmakers and regulators end up listening to the loudest voices rather than the most reasonable ones.
The advantages of this approach being what they are, we’ll likely see other operators follow DraftKings’ lead. Yet the more commonplace they become, the more pushback there’s likely to be. Their convenience is undeniable, but we shouldn’t overlook the possibility that the industry could ultimately have to backtrack.