DraftKings and FanDuel are two of the biggest Daily Fantasy Sports (DFS) operators in the United States and control a major portion of the market share for the multi-billion DFS industry. The two DFS operators were reported earlier this year to be in discussions for a possible merger and while the companies admitted to holding discussions, there was no other information released.
Now both DraftKings and FanDuel have confirmed that they will enter into a merger of equals and go through a lengthy approval process that is expected to be completed during the second half of 2017. The two companies will continue to operate as separate entities till they receive approval from regulators and plan to offer services under their own brands till the 2017 NFL season is over.
There has been no information on the financial terms and conditions surrounding the merger but both companies are expected to benefit by the reducing costs and increasing operational efficiencies. The DFS industry has faced a backlash during the past 18 months as state attorney general’s from numerous states have cracked down on the DFS industry labeling it similar to gambling.
New York State attorney general Eric T. Schneiderman was one of the most prominent attorneys to target both DraftKings and FanDuel and get the courts to ban them from offering DFS cash games on the basis that they were illegal. Schneiderman would later go on to get the legal framework in order to legalize DFS games in New York and got the bill approved in August 2016.
DraftKings and FanDuel have stopped offering their services in 10 states in order to avoid more lawsuits as they have already piled up their expenses in legal fees and fines. The two companies paid a combined fine of $12 million to New York for deceptive and false advertising practices. Both companies have faced financial difficulties as a result of the DFS crackdown and have requested New York’s attorney general’s office to allow them to pay back the fine in installments.
Gaming regulators could pose problems for this potential merger as it would create a single DFS entity that would have significant control over the DFS market in the country. Should everything go per plan, then the new entity will be co-headquartered with FanDuel maintaining its base in New York while DraftKings will remain in Boston, Massachusetts.
In a statement, Jason Robins, chief executive of DraftKings said “Joining forces will allow us to truly realize the potential of our vision, and as a combined company, we will be able to accelerate the pace of innovation and bring a richer experience to our customers than we ever could have done separately.”
When the merger takes place, Robins will continue as the chief executive officer while Nigel Eccles, the chief executive officer of FanDuel will be the chairman of the board.