FanDuel and DraftKings, the two giants in daily fantasy sports, are dropping out of their plan to combine the two companies, weeks after a federal regulator announced it would attempt to block the deal.
In June, the Federal Trade Commission along with the attorneys general from California (Xavier Becerra) and D.C. (Karl A. Racine) said that they would oppose the merger because it would lead to an unfair advantage in the daily fantasy sports industry by giving the companies over 90 percent of the market share.
When the merger was proposed, many antitrust experts were skeptical that it would go through unless the companies could prove their businesses could not survive without combining.
After the FTC said it would seek to block the merger, the companies were left with two choices: go up against the government in an expensive legal battle or drop their proposal. They went with the latter.
“FanDuel decided to merge with DraftKings last November, because we believed that this deal would have increased investment in growth and product development thereby benefiting consumers and the greater sports entertainment industry,” FanDuel chief executive Nigel Eccles said in a statement Thursday. “While our opinion has not changed, we have determined that it is in the best interest of our shareholders, customers, employees, and partners to terminate the merger agreement and move forward as an independent company.”
DraftKings chief executive Jason Robins cited similar reasons in his statement for the joint decision and said his company has a customer base of nearly 8 million people and is growing more than 30 percent year-over-year. Robbins added that the company is only beginning to expand to overseas markets.
“This will allow us to singularly focus on our mission of providing the most innovative and engaging interactive sports experience imaginable, forever changing the way fans connect with teams and athletes worldwide,” he said.
When a judge imposed a temporary restraining order on the deal in June after the FTC’s announcement, DraftKings and FanDuel argued that they are part of a much larger fantasy sports world where large companies are capable of competing with the two, an individual close to the situation told The Washington Post last month.
The two companies were slated for an initial scheduling conference with an administrative judge on Friday according to the New York Post.
When it was launched in 2009, FanDuel was considered the first of its kind in the world of daily fantasy sports, where players form imaginary teams based on real-life players, competing to earn cash and prizes. DraftKings followed a few years later in 2012.
The scoring is usually determined by how the players perform in the real-life games they take part in that day. Most fantasy leagues are scored as weekly events in which winners are determined by how their roster performs for the entire week.
Before their attempted merger, the companies were spending large amounts of money on advertising to sway players into joining their site or to recruit them from the other.
In their short history, both companies also have had their fair share of bouts with authorities in several states that consider daily fantasy sports a form of gambling. The companies have argued the contests are determined by skill.
In 2015, New York Attorney General Eric Schneiderman opened an inquiry to investigate how the companies prevent fraud after a New York Times story revealed that a DraftKings employee had accidentally released information before the start of the week’s NFL games and won $350,000 on rival FanDuel the same week.