Industry Updates

Daily Fantasy News Roundup: June, 2017

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This month’s daily fantasy roundup is dominated by one key piece of news that broke just hours ago: the FTC will challenge the proposed merger between DFS giants FanDuel and DraftKings. Rumors that the much-discussed merger was in trouble had been swirling for months, and now we have confirmation from the FTC itself that this most definitely is the case.

In other news, Vermont became the 12th state of the Union to formally legalize and regulate daily fantasy sports. The development in Vermont will change little on the ground because DFS operators were never forced to exit the state, but it does offer legal clarity for operators and basic consumer protections for players.

FTC and Two State Attorneys General Challenge the FanDuel and DraftKings Merger

Earlier today, the FTC confirmed the suspicions of many that the proposed merger between FanDuel and DraftKings is in serious trouble. An FTC press release published on Monday, June 19th states that the FTC and the attorneys general of California and the District of Colombia will be opposing the merger.

The press release states that the the two attorneys general and the FTC will jointly file a complaint in federal district court “seeking a preliminary injunction to stop the deal and to maintain the status quote pending an administrative trial.” The notice also states that the FTC has already filed an administrative complaint alleging that the proposed merger violates both the Clayton Act and the FTC Act.

This news is not much of a surprise given the speculation of late that something was wrong with the merger. Plus, it was always a near certainty that a proposed merger between two companies that control roughly 95% of the market was going to receive close scrutiny from the feds.

The FTC says it will publish public versions of each complaint as soon as possible, but has already offered a basic explanation of its rationale for filing the complaint:

  • Season-long fantasy sports are unlikely to serve as a realistic substitute for current DFS consumers. This leaves FanDuel and DraftKings in an utterly dominant position in the DFS market
  • Entry or expansion by other DFS operators is unlikely to offer “timely or sufficient competition to offset the anticompetitive effects of the merger
  • Purported increases in efficiency resulting from the merger are unlikely to offset the anticompetitive effects of the merger

Legal Sports Report obtained a joint statement from the CEOs of both companies:

Today, the Federal Trade Commission (FTC) announced it will attempt to block the proposed merger between DraftKings and FanDuel.

We are disappointed by this decision and continue to believe that a merger is in the best interests of our players, our companies, our employees and the fantasy sports industry. We are considering all our options at this time.

As we work together to determine our next steps, we would like to thank DraftKings and FanDuel players, partners and employees for their patience, support, and continued loyalty.

Vermont Passes DFS Legalization and Regulation Bill

Vermont became the 12th state to formally legalize and regulate daily fantasy sports after Governor Phil Scott signed into law new legislation on June 8th. The Vermont bill resembles legislation that has been enacted in other states as it lays out basic regulations, imposes a registration fee for operators and establishes a tax rate.

Bill S 136 looks like a win for the industry with reasonable regulations and minimal taxes and fees. DFS operators will only have to pay $5,000 to register with the state and then pay an 8% tax on gross revenues after that.

Regulations in the bill are similar to regulations that have been enacted in other states with DFS regulation. These include establishing a minimum age of 18 for all players, requiring the protection of confidential information, disclosing the number of entries accepted into each contest, prohibiting the use of computer scripts, segregate player funds from operational funds and so on.

The new bill also provides much-needed legal clarity in a state whose attorney general opined roughly a year-and-a-half ago that daily fantasy sports are likely in violate of state gambling laws. FanDuel and DraftKings never exited Vermont, but now they can operate with legal certainty.

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