FanDuel and DraftKings Headed For a Merger?

The daily fantasy sports industry might soon be introduced to its biggest operator yet. Per reports, the two biggest DFS operators, FanDuel and DraftKings, have had preliminary discussions about a potential merger.

Per reports, the two sides have been talking about a potential deal “for some time”. No agreement has been reached yet, however, and neither DFS operator has spoken out in regards to the merger rumors, first reported by Bloomberg.

Daily Fantasy Sports Firms FanDuel, DraftKings in Merger Talks https://t.co/WuijgCF9yZ

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Powers Combining

A future merger is a possibility that has been floated around the DFS industry in the past, while DFS operators are known for buying out other competitors or merging them into their own company. DraftKings was even part of one of the biggest buyouts, securing what was once looked at as the third largest daily fantasy sports website – DraftStreet.com.

The merger talk comes at a convenient time, as both sites are still fighting legal battles in an attempt to convince lawmakers that their product is a “game of skill” and not one of chance. Should the daily fantasy sports industry lose that argument, DFS could be seen as online gambling and quickly made illegal across the United States.

To this point, federal law appears to have deemed DFS legal and refers to it as a game of skill. Some states have differing opinions or official stances on DFS, however.

The legal aspect of DFS grew even more with both websites battling via commercial promos at the start of the 2015 NFL season, while an employee scandal also sparked heated debate that – legal or not – daily fantasy sports was an industry that required regulation and monitoring.

Both companies have been lobbying hard to keep daily fantasy sports legal, coming up short in some states and gaining ground in others.

The idea behind a joint merger would be for FanDuel and DraftKings to halt the competition and pool their efforts and resources to both win their legal battles and also form the biggest DFS site the web has ever seen.

Legality Issues

Daily fantasy sports remains a grey area for some, with 10 states ruling it illegal or at least not allowing it to be played due to fuzzy Attorney General “opinions”. These stances have forced FanDuel and DraftKings to pull their services from several states, most notably Nevada, New York and Texas.

Both websites are heavily backed financially, with FanDyel pulling in over $275 million in Series E financing last summer, thanks to Google Capital and Time Warner Investments Group, among other investors. DraftKings was even better, pooling over $300 million in Series D financing last July, with FOX Sports, MLB, NHL and MLS leading the way in funding.

In addition to their high level financing, both FanDuel and DraftKings have various partnerships with numerous sports leagues and teams.

Per Gambling Insider, the majority of those funds have been placed “on hold” while both companies continue with their fight to make DFS legal across the United States.