DraftKings and FanDuel in merger talks, according to reports

The two largest daily fantasy sports companies, DraftKings and FanDuel, according to Bloomberg, are in discussions about a possible merger. Both have been embroiled in controversy as 10 states have blocked both from operating. Legal challenges aside, the two have been pushed, for some time, to get together by investors as both offer essentially the same product but spend tremendous amounts of money to compete.

“As a business proposition, it makes sense,” Daniel Wallach, a partner at the firm Becker & Poliakoff, told USA Today. “These two were bitter adversaries a year ago with all their advertising as they vied to be the number one fantasy site. Fast forward one year and their agendas are perfectly aligned. Each face identical challenges in each state and they’re pouring millions of dollars into legal and lobbying fees. It makes too much sense to at least consider a merger.”

Both are facing regulatory issues in the US, with several states (most prominently, New York state) deciding that they are engaged in illegal gambling. New York is expected to put new regulations for the games into place, which would allow residents in the state to take part again. New York attorney general Eric Schneiderman has been highly vocal and public about regulation, and both FanDuel and DraftKings barred residents from playing since March.

Outside of the US, DraftKings launched in the UK in February with high-profile partnerships including Arsenal, Liverpool and Watford. FanDuel is eyeing the UK market, with an August launch, but has yet to secure a license. According to an interview with Gambling Insider, a FanDuel spokesperson said that “the date is not set in stone and still provisional - we are looking to launch then.”

Per Bloomberg, both have taken a substantial valuation hit fighting regulation. Each were valued at more than $1bn each around a year ago, but have lost about half since. Boston-based DraftKings counts Fox Sports, Major League Baseball, New England Patriots ownership, Kraft Group, ESPN and Madison Square Garden as investors or partners. Comcast Ventures, Google Capital, Time Warner the National Basketball Association (NBA) and several individual NBA and National Football League (NFL) teams are either investors or partners of New York-based FanDuel.

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