One of the leaders in Daily Fantasy Sports, FanDuel, may be forced to seek a new round of funding after the Federal Trade Commission in the US challenged a proposed merger between it and competitor DraftKings last week.
“The proposed merger would deprive customers of the substantial benefits of direct competition between DraftKings and FanDuel,” said Tad Lipsky, acting director of the FTC’s Bureau of Competition.
FanDuel has little time to wait for any change of heart from the FTC. Companies House records show FanDuel's accounts for the period to 31 December 2015 are overdue as of 30 June.
Furthermore, FanDuel CEO and co-founder Nigel Eccles is understood to have now reduced his stake in the company to less than 10 per cent.
Research firm Eilers & Krejcik Gaming LLC estimates FanDuel and DraftKings together command a 95 per cent share of the lucrative US daily fantasy sports market.
The proposed merger would have prevented another round of funding.
Investors may be less willing to pump addition monies into the likes of FanDuel and DraftKings as the industry has witnessed a downward spiral since a number of US states questioned the legality of Daily Fantasy Sports. In 2015, New York State Attorney General Eric Schneiderman filed suit against both companies.
A source told the Sunday Times : “The merger plan allowed the company to avoid another funding round late last year and was driven by the investors with a view to preparing the combined company for flotation in New York.
“Following the FTC decision that plan is at best facing a delay into next year.
“The NFL [American football season] starts in a couple of months and FanDuel needs to boost its advertising to compete.
“It could mean they look for other potential investors but another round of funding from existing investors is more likely.”
Several smaller and mid-sized Daily Fantasy Sports firms have folded since the start of the year and the industry shows little sign of building liquidity.
- Aaron Goldstein, Gambling911.com