20 November, 2016
The two leading companies in New York's recently legalized daily fantasy sports industry have agreed to merge.
The merger of FanDuel and DraftKings, which offer daily, weekly and season-long sports fantasy contests, will bring together two fantasy sports innovators to better serve consumers.
In a statement, FanDuel chief executive Nigel Eccles - who will become chairman of the board - said the merger will help the new company appeal to "the tens of millions of season-long fantasy players".
The merger is expected to close in the second half of 2017. Numerous states, including New York, Illinois and Nevada, have attempted to ban the companies for operating without gambling licenses.
Following increasing scrutiny by state and federal regulators about whether the daily games constitute as gambling, the companies announced Friday they'd be joining forces.
After months of speculations and rumors that the deal was all but closed, we finally have confirmation that DraftKings and FanDuel will merge into one company. FanDuel has raised funding from KKR, Google Capital, Time Warner/Turner Sports, Shamrock Capital, NBC Sports Ventures, Comcast Ventures, Pentech Ventures, Piton Capital and Bullpen Capital. The daily fantasy sports industry has been bleeding money since its inception, and the turmoil of the past year resulted in a hemorrhage of cash.
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. According to the Fantasy Sports Trade Association, 57.4 million people are playing fantasy sports in the USA and Canada in 2016.
"Being able to combine DraftKings and FanDuel presents a tremendous opportunity for us to further innovate and disrupt the sports industry".
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Daily fantasy customers have plenty to wonder themselves.
The name of the joint company has not been revealed and terms of the agreement were not disclosed.
The industry also suffered a major blow last October when a DraftKings content manager won a $350,000 payday while playing a FanDuel game after accidentally leaking the kind of insider data that would have helped him win.
Investment in the new company and the industry as a whole depends in part on the changing regulatory landscape.
Dustin Hecker, a Boston lawyer, says a more pressing question is whether the companies, even when merged, remain viable.
Saahil Sud, a 27-year-old Bostonian widely considered the games leading player, says hes concerned the newly formed company could substantially raise player fees, a concern the companies have tried to assuage with promises to keep fees competitive..
The enlarged company plans to be "co-headquartered" in their respective home bases of Boston and NY, and the two sites will continue to operate under their existing brands "for the foreseeable future".