DraftKings, FanDuel call off daily fantasy sports merger

The two leading daily fantasy sports companies DraftKings and FanDuel scrapped their proposed merger on Thursday, about a month after federal regulators sued to block it.

The Federal Trade Commission — along with the attorneys general of California and the District of Columbia — had opposed the merger because, they said, it would create a company controlling more than 90 percent of the U.S. market for paid daily fantasy sports.

A federal judge late last month temporarily halted the merger, pending an administrative trial scheduled for Nov. 21.

Markus Meier, acting director at the FTC's Bureau of Competition, said the decision was a "clear win" for consumers.

"For years, the vigorous competition between DraftKings and FanDuel has spurred innovation and favorable pricing," he said. "If this merger had been allowed to go through, those benefits would likely have been lost."

Neither company directly addressed the federal government's concerns in brief statements Thursday. Their CEOs said they were moving forward separately in the best interests of their customers, employees and investors.

FanDuel CEO Nigel Eccles said his company still believes the deal would have increased investment and product development, benefiting consumers and the broader industry.

DraftKings CEO Jason Robins, in a separate statement, instead touted his company's rapid growth, a possible signal that the once-bitter rivalry between the two companies has resumed.

"We have a growing customer base of nearly 8 million, our revenue is growing over 30 percent year-over-year, and we are only just beginning to take our product overseas," he said.

Daily fantasy sports are online contests that challenge players to build rosters of real-life athletes in order to vie for cash and other prizes based on how those athletes do in actual games. The games grew in large part from a 2006 federal law that banned online gambling but created a specific niche for fantasy sports.

Founded in 2012, Boston-based DraftKings is the younger of the two companies but has grown to become the largest daily fantasy sports company in terms of entry fees and revenues. FanDuel, which was founded in Scotland in 2009, is the second largest.

The companies announced their merger last November after a high stakes advertising war that brought regulatory scrutiny and legal challenges down on the industry, which some consider as essentially selling illegal online sports betting.

The announcement was somewhat surprising given the companies had been diligently filing legal briefs ahead of the upcoming court case as recently as this week, said Jeff Ifrah, D.C.-based lawyer who writes about internet gambling.

"So you have to wonder, why quit now?" he said. "Why not wait until the outcome of the hearing and make the decision to scrap the merger then? What was the risk?"

But given the legal and legislative battles the two companies have poured resources into in recent years, it isn't surprising they both balked at the prospect of fighting another costly legal case, said Daniel Barbarisi, author of "Dueling With Kings," an inside look at the industry's rise and fall.

He suggested DraftKings is in the better position to weather whatever comes next.

"If the two companies have to go back to war, I'd put my money on DraftKings," Barbarisi said. "Through the merger process, DraftKings operated as if the merger was no guarantee. It raised money and continued to push the envelope and grow the brand. FanDuel didn't raise money, and its new initiatives weren't as aggressive. That has left DraftKings in the stronger position now that the time to play nice is over, and they have to compete for market share again."