Fantasy Sports as Betting Front Door
Trevor John, co-founder of Underdog Fantasy, on the business model of fantasy sports
The real asset in fantasy sports is not the contest, it is the customer relationship that can be reused in higher value betting products. Daily fantasy trains users to pick players, deposit money, sweat results, and come back the next day, so when a sportsbook launches inside the same brand, the jump feels small. That playbook is what turned DraftKings and FanDuel from fantasy apps into much larger betting businesses, and it is the opening Underdog and Sleeper are trying to follow.
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Fantasy is the cheap front door. DraftKings and FanDuel used DFS to build a user base in 40 plus states before sports betting was legal, then converted those users after PASPA fell in 2018. By 2024, sports betting had become more than 60% of their revenue, while fantasy was only 5 to 7%.
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Brand matters because the products are close substitutes. In pick'em and fantasy, users are often choosing between similar player stat cards, payouts, and promos, so habit, app familiarity, and a single wallet can decide where they place the next bet. That is especially important for Underdog, which already runs fantasy contests and launched sports betting in North Carolina in March 2024.
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The broader pattern is cross sell from a lower CAC fan product into gambling. Fanatics does it from merchandise, using a 100M plus fan database and roughly $19 CAC to push users into betting. Underdog and Sleeper are trying to do the same from fantasy instead of commerce, with fantasy engagement acting as the retention layer.
The market is moving toward stacked fan monetization, where one company starts with a sticky sports habit, then adds sportsbook, and eventually casino or other higher ARPU products where regulation allows. The winners are likely to be the brands that own the daily sports routine before they try to own the wager.