Daily fantasy sports firms FanDuel, DraftKings in merger talks: sources

Mon Jun 13, 2016 10:58pm EDT
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By Liana B. Baker and Diane Bartz

(Reuters) - The two largest daily fantasy sports companies, FanDuel Inc and DraftKings Inc, are in early-stage talks to merge, people familiar with the matter said on Monday, as the industry faces a crackdown by U.S. states over whether it runs illegal gambling.

A deal could reduce legal costs for the two companies, which have had to defend themselves against legal challenges as well as lobby for legislation to make the games legal in states that have declared them illegal.

It could also lower their advertising budgets. Both have spent aggressively in the past few years as they battled for market share against each other. Bernstein research estimated that 59 percent of total U.S. TV ad revenue growth in the third quarter of last year was from spending on daily fantasy football ads.

The sources said no deal is certain. They asked not to be identified because negotiations are confidential. FanDuel declined to comment. DraftKings declined to comment and a spokesman added that "these rumors have existed for as long as both companies have been in operation."

The multibillion-dollar fantasy sports industry has drawn increased scrutiny since last year, with the attorneys general of several U.S. states including New York, Illinois and Nevada questioning the legality of the games.

The merger of two market leaders such as FanDuel and DraftKings would usually attract the attention of antitrust authorities, said Andre Barlow, an antitrust expert with the law firm Doyle, Barlow and Mazard PLLC.

But regulators will also need to decide how easily other competitors could enter the fantasy sports market, Barlow added.

FanDuel and DraftKings agreed in March to halt their business in New York, banking on a legislative path to make the games legal after a months-long fight with the state's attorney general, Eric Schneiderman.   Continued...

A FanDuel logo is displayed on a board inside of the DFS Players Conference in New York November 13, 2015. REUTERS/Lucas Jackson - RTS6UCJ