DraftKings and FanDuel Closer to Merger

Two leading daily fantasy sports companies, Boston-based DraftKings and FanDuel headquartered in New York might finally close down the talks about the merger that have been going on since June this year. Combining these two companies into one would see them form a fantasy sports giant on the market, controlling 90% of it. Being that their target audience is the same, the eventual merger is a logical move. Nevertheless, there hasn’t been any official confirmation from either of the companies though many sources such as Bloomberg, Boston Globe and others have already announced the details of the future deal.

Join Forces Instead of Competing

DraftKings and FanDuel are two biggest daily fantasy sports (DFS) operators and their combined pool of users makes up around 90% of all DFS players. This is due to the fact that they target the same base of customers so inevitably they pose direct competition to one another. In the past couple of years, they have been lobbying and investing in advertising, thus spending a total of over $200 million on ads.

The logical solution would be to join forces and serve the entire customer base as one shared company. Reportedly, both companies have been considering this option and the talks about the possible merger have been going on since June.

Despite the fact that the executives from both DraftKings and FanDuel refused to comment on the rumors and speculations, some details about the future partnership have already leaked. According to Bloomberg, the board positions will be equally distributed between DraftKings and FanDuel, while the CEO of the newly-formed company will supposedly be DraftKings CEO Jason Robins. Meanwhile, FanDuel CEO Nigel Eccles will act as the chairman of the board. The rest of the details such as headquarters of the new firm or the name under which it will go by haven’t been discussed yet.

Tackling the Legal Issues

Should this merger be finalized, it would create the most powerful player on DFS market, thus eliminating all the competition or at least making it barely noticeable. While this bodes excellent for the two existing companies, it might turn the heads of legislators who already have their doubts about whether daily fantasy sports is considered online gambling and therefore illegal or a game of skill.

Many debates have been going on about whether DFS is a game of skill. Fantasy sports players gather actual information and statistics of real-time sportsmen and then create a team of their own, while they score points based on actual statistics. In order to play, the users must pay an entry fee and the prizes are awarded from the prize pools. Advocates of DFS argue that in order to play the users must possess the knowledge of the game and data which is considered a skill unlike games based on chance such as online casino games and similar.

At the federal level DFS are not considered gambling but many states disagree. Last year, precisely these two DFS firms in question have faced investigation opened by New York Attorney General in order to find out whether their employees have broken the gambling law. This is another point where the merger of the two firms would pay off as they could also fight legal battles together.

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