A shift in the playing field of fantasy sports is on hold as the merger between industry leading FanDuel and DraftKings has been temporarily halted by a federal judge. This news comes only days after the FTC announced Monday that it will seek to block the merger entirely.
Fanduel and DraftKings are the biggest names in daily fantasy sports (DFS). The fantasy sports industry, made popular in U.S office places and the show “The League,” is in many ways a separate industry than DFS. While season-long fantasy sports are often a friendly social game among friends or coworkers with small pots of money up for grabs, DFS players can vie for thousands and sometimes millions of dollars in an online market with complete strangers.
The major difference between season-long fantasy and DFS is in how money is involved. The potential to gamble huge amounts of money day in and day out creates an exciting and suspenseful gameday experience for fans across the country. However, it also brings with it heavy government regulation. By collecting and awarding large sums of money to millions of people in a short amount of time, and by being the best and biggest names in the industry, both FanDuel and DraftKings have to spend millions of dollars in an effort to lobby against and navigate through legal boundaries. Daily sports fantasy leagues are banned in 5 states while others, such as NY, highly regulate them due to the dangers of gambling.
Both companies allege a merger would help them reduce costs as they lobby for state laws recognizing their legality and fight off legal challenges in court. If this is true, a merger could, in addition to lowering the price, make DFS, through consolidated lobbying efforts, accessible to fans in states where it’s currently illegal.
The only certainty is that this merger would monopolize the “Daily Sports Fantasy” industry. DraftKings and Fanduel collectively account for more than 90% of the market. Together, they encompass over 5.5 million users who make daily and weekly bets.
As we know, monopolies have the ability to raise prices in the absence of market competition and no one can do damn thing about it. Just look at what your favorite NFL team is able to do with ticket prices. The FTC worries this merger will have the same effect.
According to Tad Lipsky, acting director of the FTC's Bureau of Competition, this merger will “deprive customers of the substantial benefits of direct competition between DraftKings and FanDuel,"
This leaves us fans wondering what would be the best-case scenario. Will a merger bring down prices for fans? Or is the FTC doing us a great service by blocking FanDuel and DraftKings from forming a monopoly in daily fantasy sports? At SFC, we’re keeping a close eye on this case to make sure sports fans don’t get screwed over. Let us know what you think and join our coalition today!