Marty Derbyshire DraftKings FanDuel merger blocked

[toc]The Federal Trade Commission has announced it is taking action to prevent the merger of daily fantasy sports’ top two sites.

It also said attorneys generals in California and the District of Columbia will be joining it.

The two sites, DraftKings and FanDuel, continue to accept players from California. This despite the absence of legislation confirming the legality of DFS. In November 2016, the two companies announced plans to merge.

The DraftKings and FanDuel monopoly

An anti-trust review was conducted. This week, the FTC announced a merged company would control more than 90 percent of the DFS market. Essentially, it would be a monopoly.

“This merger would deprive customers of the substantial benefits of direct competition between DraftKings and FanDuel,” Acting Director of the FTC’s Bureau of Competition Tad Lipsky said in a release.

The FTC and AG offices are now planning to file a complaint in federal district court. The complaint would be seeking a preliminary injunction to prevent the merger.

DraftKings and FanDuel respond

A joint statement from DraftKings CEO Jason Robins and FanDuel CEO Nigel Eccles acknowledged the FTC’s plan.

“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,” the statement reads.

“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.”

Plus, DraftKings has reportedly told employees it will ask a federal court to issue an injunction against the FTC action.

A spokesperson for California Attorney General Xavier Becerra released a statement. It claims the attorney general is concerned a virtual monopoly could negatively affect consumers and competition. Moreover, the statement says permitting this merger could make it difficult for start-ups to compete.

DFS in California

As the most populous state in the country, California represents the largest market for DFS. It is estimated DFS sites pull in as much as $20 million in revenue annually from as many as 120,000 active players in California.

California DFS players are responsible for more than 10 percent of all DFS contest entries across the country. This amounts to more than $200 million in annual entry fees.

The California Assembly became the first legislative body in the United States to approve a bill aimed at regulating DFS. However, there has been no activity at the Senate level in the more than 18 months since it passed in January 2016. The bill passed through the Assembly by a margin of a 62-1.

The bill would presumably legalize, regulate, and tax daily fantasy sports in California. It laid out the framework for licensing fees and a quarterly tax based on gross income. However, it did not specify what exactly the fee or tax rate would be.

The DFS and online poker connection

California lawmakers have been considering online poker legislation for the past decade. However, after the DFS bill passed through the Assembly, Native American casino operators suggested the state consider combining DFS and online poker legislation into a single measure.

They suggested this because they believe the issues share many of these same questions.

Marty Derbyshire
Marty Derbyshire - Martin Derbyshire is a veteran of the world of poker and gambling, having worked as a reporter, producer, and editor in the industry for more than a decade. He has traveled the globe interviewing high-profile personalities and contributes to a number of publications, including USPoker.com, PlayCA.com, and PlayNJ.com.