ESPN Report: DraftKings, FanDuel DFS Merger “Imminent”

According to a Friday report by’s David Purdum and Don Van Natta, Jr., daily fantasy sports leaders DraftKings and FanDuel are in the process of finalizing the terms of a merger. The writers’ sources told them that the deal has been in the works for quite some time and is now “imminent.”

There had been rumors for a while that the two rivals were going to join forces and it appears that the recent settlement agreement with New York Attorney General Eric Schneiderman was the last major hurdle the companies had to clear before a merger.

A spokesperson for DraftKings would not reveal anything to ESPN, saying, “As we have stated previously, a potential combination would be interesting to consider. However, as a matter of policy, we don’t comment on rumors or speculation, and there can be no assurances at this time that any discussion about a combination would result in an agreement or merger.”

The settlement had to do with “false and deceptive” advertising charges against the two companies. Schneiderman had previously agreed to drop additional charges in exchange for DraftKings and FanDuel exiting the New York market. As for the deceptive marketing practices, Schneiderman said the DFS companies:

•    Misled casual and novice players about the substantial advantages of high-volume and professional players, which included using automated computer “scripts” and sophisticated statistical and game theory strategies;
•    Gave false and misleading statistics in marketing and advertising about the likelihood that players will win cash prizes and earn a positive return on their entry fees (in fact, most players lost money over time);
•    Deceptively promised to match a player’s initial deposit in marketing promotions, while providing a much less generous rebate on entry fees; and
•    Marketed its contests as harmless fun, while failing to disclose the danger to populations at risk for compulsive gaming and addiction or provide responsible safeguards.

Each company settled with New York for $6 million, “the highest New York penalty awards for deceptive advertising in recent memory,” according to a press release from Schneiderman’s office.

A couple days before the October 25th announcement of the settlement, The New York Times reported that DraftKings and FanDuel are struggling so hard for cash that they asked the Attorney General’s office if they could pay the settlement amount in installments. It is so bad that they are having trouble paying vendors.

Additionally, the Times reported that in the past month, FanDuel has laid off more than 60 employees.

The financial problems could be a significant reason the arch rivals would want to get together. The cost savings alone – particularly from their legal battles, lobbying costs, and marketing spending – could be worth the hit to the egos.

ESPN’s sources said some of the latest details discussed were who would be in charge of the combined company, if they would merge into one site or keep their separate brands, what the name of the company will be, and where the headquarters would be located.

draftkings-fanduelFanDuel is based in New York (and has a Scotland office), while DraftKings is based in Boston. ESPN reports that they would likely split revenues and expenses down the middle.

On Monday, Bloomberg reported that DraftKings co-founder and CEO, Jason Robins, would become the Chief Executive of the new company, while FanDuel co-founder and CEO, Nigel Eccles, would be Chairman of the Board. The Board would be composed of an equal number of members form both companies. According to Bloomberg, there is still the possibility that the merged company’s CEO could come from outside both firms.

Robins and Eccles have historically not gotten along extremely well, but Eccles told ESPN this summer that they have been mending fences. A catalyst for the improved relationship has been their legal battles in New York and other states, an “enemy of my enemy is my friend” scenario.

One big question that will need to be answered if and when the two companies to agree to a merger is if it will be permitted. Combined, DraftKings and FanDuel have over 90 percent of the daily fantasy sports market; regulators might not want to approve a virtual monopoly.

Gaming attorney Jeff Ifrah told ESPN, “There are of course good arguments about why such a merger is in fact in the interest of the consumer: pooled liquidity, higher prize pools, etcetera, but that has not always been enough to shut down FTC scrutiny.”

One concern players in the DFS community have been expressing since the news broke is the fear that the new company would increase the rake. With their main competition – each other – out of the way, there might be little incentive, except to be customer-friendly, for the DraftKings/FanDuel combo to keep prices steady. Ifrah agrees that they will likely have to answer questions like this to appease regulators.


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