Online.Gambling.org last reported on rumors of a possible merger between daily fantasy sports’ two largest operators, DraftKings and FanDuel, on June 14, 2016. At that time, talk of a merger was actually more than a rumor, but because the two companies are privately held, no specifics had been released to the media. With both companies providing the exact same product and fighting the exact same battles with attorney generals across the U.S. over the legality of daily fantasy sports, it looked like a perfect setup for a merger. An alliance would also put an end to the waste of millions of dollars of investor funds being spent trying to capture market share at the expense of each other.
On Friday, October 28, as reported by ESPN, a merger between the two fantasy sports giants was “imminent” and that an announcement could be forthcoming as soon as this week. The fact that both companies had settled with New York Attorney General Schneiderman for $6m each for deceptive marketing practices helped fuel the merger speculation.
Bloomberg reported Monday, October 31, that the organizational aspects of the new company had already been settled. Supposedly, DraftKings CEO Jason Robins would take the leadership role while FanDuel CEO Nigel Eccles would serve as chairman. The rest of the new company’s board members would be drawn equally from both companies. Still undecided is the new company name and where corporate headquarters will be based. This certainly seems to be a lot of information already decided without either FanDuel or DraftKings releasing any statements.
Because both companies are cash poor at the moment, once a merger is finalized, the new company would have to immediately seek new investor funding. But before everyone gets too excited, the Department of Justice and the Federal Trade Commission will undoubtedly scrutinize the deal. By controlling as much as 90 percent of the U.S. daily fantasy sports market, all sorts of red flags concerning anti-trust issues will be raised. This could likely delay finalization of the merger.
Also contributing to possible anti-trust issues and inviting regulatory scrutiny is the fact that the National Basketball Association, Major League Baseball and the National Football League all hold ownership stakes in both companies.