DraftKings FanDuel Merger & a Brief History of DFS

DraftKings and FanDuel are nearing the end of negotiations to merge the Daily Fantasy Betting giants despite the possibility that the FTC & DOJ will deem the merge a monopoly with a combined market share of 92%. Yahoo is their closest competitor. Although FanDuel dropped their Esports division, AlphaDraft two weeks prior, DraftKings still offers Esports Daily Fantasy. A lot of money has and will continue to go towards legal battles, lobbyists, and PR to keep the soon to be merged companies legal & maintain a positive public opinion after months of stories explaining how most everyone loses money and only a few people using algorithms & scripting are actually making money from Daily Fantasy sites (which are now against the sites’ rules.) Both companies were shut down in New York but got the ruling overruled and instead paid $6M each for deceptive and misleading advertising.

For a brief history of the Daily Fantasy world let’s go back to 2009.

Exploiting the Daily Fantasy Games safehaven loophole left in Bush’s 2006 Unlawful Internet Gambling Enforcement Act, (which prohibits banks from processing bettors’ credit card deposits with illegal betting operations,) Nigel Eccles launches FanDuel in 2009 using the law as his proverbial Icarus Wax wings to soar into a Billion plus evaluation.

That evaluation brings in hundreds of millions in funding, inspiring DraftKings to launch in 2012, bankrolls a $750M AD & Marketing campaign, bringing in 57M active users, producing $3B in transactions, bringing them so high, lawmakers, or the proverbial sun, begin to beat down on Daily Fantasy Betting with the full force of the law, melting their proverbial wings causing a freefall with 40 plus lawsuits siphoning off $268M in legal fees in 2015 and counting.

This potential merger allows both companies to stay in the air financially.

The questions that remain are how much longer can Daily Fantasy survive with limited state by state approval bottlenecking their revenue stream and continued legal fees? Will straight online sports betting ever be legal in the US? Is there too much money at stake for sports teams and media companies for them to let Daily Fantasy fail? And is Daily Fantasy the key in keeping viewership and engagement numbers up for sports and Esports? It’s not black and white so what are your thoughts?

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