DraftKings and FanDuel — the two biggest names in daily fantasy sports — are currently waiting on federal regulators to approve a merger that would combine the two companies into one operation. However, a new report claims that the Federal Trade Commission may try to block this blessed union.
The FTC is tasked with reviewing this merger for concerns about its impact on competition. While there are other providers of competitive fantasy sports services, DraftKings and FanDuel are by far the two most dominant sites in the market. In addition to controlling an estimated 80% of this market, the companies each currently have exclusive deals with national broadcasters and professional sports leagues. The two websites also offer basically the same service.
According to Recode, some at the FTC are apparently concerned that allowing the two companies to merge would effectively remove all competition from the marketplace, and may recommend to FTC Acting Chair Maureen Ohlhausen and the sole remaining Commissioner Terrell McSweeny that they vote to fight this merger.
The commissioners don’t need to follow that recommendation, but if they did, FTC attorneys would file a lawsuit in federal court seeking to stop the deal. The companies could then either abandon the merger, fight the lawsuit in court, or try to reach a settlement with the FTC that would allow the deal to go through with concessions.
Both DraftKings and FanDuel were thrust into the spotlight in 2015 amid a massive advertising blitz that saw fantasy sports come out of nowhere to become one of the most advertised products on broadcast TV. At the same time, several state regulators began to question the companies’ business practices and whether or not DFS ran afoul of state anti-gambling laws.
The DFS industry spent millions lobbying state legislatures, with varying degrees of luck. State lawmakers in New York legalized fantasy sports last year, but residents of Alabama, Arizona, Delaware, Hawaii, Idaho, Iowa, Louisiana, Montana, Nevada, Texas and Washington state are currently still barred from playing.
DraftKings and FanDuel declined our request to comment on the Recode report.