Two Largest Daily Fantasy Companies, FandDuel And Draft Kings, Reportedly Merging
Fan Duel and Draft Kings have been strongly competing against each other since daily fantasy sports became a business. The industry has fallen on tough times and now the two private companies are looking to join forces.
From the Bloomberg article:
Investors in DraftKings and FanDuel, which are privately held, have been pushing for a tie-up for some time, according to the people, who asked not to be identified as the discussions are private. The companies offer nearly identical products and spend a lot of money competing with each other; they also face the same legal challenges that threaten their business across the U.S.
New York and eight other states have banned daily fantasy sports on the premise that it is sports gambling, an activity that is illegal outside the state of Nevada. Lobbying efforts have begun with some states creating daily fantasy sports exceptions.
With the mounting legal fees and problems the whole industry is having to deal with it is very counter-productive for both companies to compete against each other while trying to keep their business models alive.
Madison Square Garden Co and the Kraft Group are investors in DraftKings and KKR & Co and Time Warner Inc. are investors in FanDuel.
The short term benefits will have long-term consequences. When the two companies merge there will only be one business in daily fantasy sports. This means that the company will be subject to anti-trust scrutiny. However, there is not a guarantee the two companies can merge. If daily fantasy is a cingular category instead of a subset of fantasy sports then a merger could be unlawful and thus not take place.