Daily fantasy sports giants FanDuel and DraftKings are on the verge of completing a megamerger, according to multiple reports, that would cut the companies’ redundant legal, regulatory and marketing costs, but would likely draw the attention of antitrust regulators, experts say.
“It will allow both companies to pare back, to eliminate duplication in both of their companies,” said Daniel Wallach, a gaming attorney. “They’re fighting multiple battles in state- houses across the country, other civil litigation … They’re basically competing with each other for the same customer base.”
A merger between Boston-based DraftKings and New York’s FanDuel could be announced as soon as this week, according to reports from Bloomberg, ESPN, the Wall Street Journal and others.
The merger talks, reportedly pushed by investors of both companies, have heated up as the two companies continue to fight the same legal cases and regulatory battles in states across the country.
And while they’re both spending money on the same side, the companies have their sights — and marketing dollars — trained squarely on each other’s users.
“The lobbying and litigation expenses on a national basis have diverted a significant amount from their budget,” Wallach said.
Still, the companies have been working together recently. In the Bay State, where daily fantasy was legalized and regulated by Attorney General Maura Healey, the companies have hired the same lobbyists to shepherd legislation and regulations, but both have an army of lawyers to deal with a civil class-action suit.
DraftKings and FanDuel together dominate the daily fantasy sports industry, holding more than 90 percent of the market.
That, experts said, will likely cause antitrust regulators to take a close look at a merger.
“A merger between the top two companies in any marketplace, there’s going to be significant antitrust scrutiny from the regulators,” said Andre Barlow, an antitrust attorney.
Even if a deal is approved, the antitrust process could take as much as a year, meaning DraftKings and FanDuel would have to continue competing with each other by law.
The new company would not only have to convince regulators to sign off, but figure out how to put their past differences aside and work together.
“There’s a lot of animosity and disrespect for the other company and the way they do business,” said Jeremy Levine, chief executive of Draft, a small DFS company, who sold another DFS company to DraftKings. “The companies hate each other.”
