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DraftKings has major plans for its Marketplace product, which is described online as “the best place on the blockchain to buy the latest NFT drops from your favourite celebrities”.

The US operator views Marketplace as its fourth digital entertainment vertical, alongside online sports betting (OSB), online casino (iGaming) and daily fantasy sports (DFS).

“We went through a very rigorous process to think about what else we could do and what our fourth vertical should be,” DraftKings CFO Jason Park told Bank of America analyst Shaun Kelley during an online gaming virtual field trip session last week.

“We realised that crypto and NFTs were something that our players were already engaging with. That is important for our investors to know. This was a systematic process and there were other good ideas, but this emerged as the clear winner,” he added.

DraftKings Marketplace launched in August 2021 after the US operator struck a partnership agreement with Autograph, a sports collectibles specialist backed by Tom Brady.

As part of the deal, DraftKings has exclusive distribution rights for Autograph’s sports products, which includes a portfolio of NFTs from US sporting royalty such as Tiger Woods, Wayne Gretzky and Tony Hawk, among others.

DraftKings expects Marketplace to contribute revenue of approximately $70m in full-year 2022. Crucially, it does not believe investing in the vertical will drag on the bottom line, unlike the costly and competitive arena of US online sports betting, for example.

“The economics are very good in terms of the percentage of the growth merchandise value and the flow through to EBITDA,” said Park.

“It only takes a small investment around marketing and fixed costs in people to manage that, so we absolutely think this will be profitable out of the gate – not like OSB where you have to invest in a state before it becomes profitable two or three years later.”

Marketplace will only be profitable from the get-go if consumers understand the product and its use cases. DraftKings is primed to launch a new NFL-branded NFT concept in the coming months, which will combine NFT collectibles in a more conventional DFS format.

DraftKings CEO Jason Robins said he didn’t want to upset his product team by giving too many details away during a recent investor day, but the basic premise is that customers will build an NFL draft where ownership of NFTs will be required to transfer in certain players.

Robins, who is described as an “NFT bull” in his Twitter bio, also revealed that DraftKings was exploring adding cryptocurrency payment capabilities to its platform due to customer demand, although there were no concrete progress updates to share at present.

In December 2021, DraftKings gained access to licensing rights for active NFL players via an undisclosed agreement with The NFL Players Association and OneTeam Partners.

Elaborating on the concept, Park said: “The thesis here is that NFTs can have utility. So not just the collectible portion, but the ability to actually utilise your NFT to play a game.

“To put it really simply, what if you had a DFS game or contest where in order to put a player in your line-up, you actually needed to own the NFT to be able to do that?

“When it was explained to me – and I’m going to embarrass myself here – they said think about Pokémon. The card itself has value but once you own the card, you can play the game as well. That may be an easy way for folks to think about it,” he added.

Finally, the operator hopes to attract a new breed of customer via its disruptive technology offering before cross-selling those individuals to more profitable verticals, including OSB and iGaming.

While DraftKings remains bullish over the technology, there is concern in investor circles that the hype surrounding NFTs has already reached its peak.

The average selling price of an NFT has dropped by more than 48% since a November peak to around $2,500 over the past two weeks, according to data from the website NonFungible and published in the Financial Times.

Daily trading volumes on NFT marketplace OpenSea have also plummeted 80% to roughly $50m in March, just one month after they reached a record peak of $248m in February.

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