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An electronic advertisement for DraftKings hangs on the side of Madison Square Garden, Wednesday, Jan. 6, 2016 in New York. Officials say a court could rule by mid-January in the legal spat between fantasy sports sites FanDuel and DraftKings over a state order to shut down their operations in New York. The companies have asked an appeals court to continue a temporary hold on Attorney General Eric Schneiderman's shutdown order. The companies argue their games are based on skill, not chance, and players pay entry fees in order to manage rosters like a general manager. But Schneiderman has countered that the games are highly dependent on factors out of their control, such as injuries or even the weather, and are thus ultimately based on chance. (AP Photo/Mark Lennihan)Mark Lennihan/Associated Press

FanDuel Reportedly in Talks to Buy DraftKings

Timothy RappJun 13, 2016

Daily fantasy sports giant FanDuel is reportedly in talks that would merge the company with DraftKings, according to Monday reports from Alex Sherman and Scott Soshnick of Bloomberg and Reuters' Liana B. Baker.

Sherman and Soshnick elaborated on the potential merger:

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Investors in DraftKings and FanDuel, which are privately held, have been pushing for a tie-up for some time, according to the people, who asked not to be identified as the discussions are private. The companies offer nearly identical products and spend a lot of money competing with each other; they also face the same legal challenges that threaten their business across the U.S.
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While eight states have affirmed the legality of daily fantasy sites, according to Ryan Rodenberg of ESPN.com, 10 states are contesting the legality of daily fantasy, and five states have banned it altogether. Sixteen other states have proposed legislation that would formally legalize daily fantasy sites, albeit with restrictions in some cases.

Per Sherman and Soshnick, FanDuel has ceased paid games in 10 states, and DraftKings has ended such games in nine states. While both sites maintain "their games are legal because they require skill, not just luck, and they have supported an expensive national lobbying effort to that effect," they have run into legal battles across the country, as states seek to establish protections and regulations for consumers. Each company's valuation has reportedly dropped from over $1 billion to approximately half of that in the process.

The biggest legal battle has come in New York, where Attorney General Eric Schneiderman and the two companies agreed to a settlement in March that shut down daily fantasy until September. According to Glenn Blain of the New York Daily News, "The deal is intended to give the state legislature time to pass legislation that would allow the sites to operate legally with oversight from the state."

It's unclear how any merger between FanDuel and DraftKings might affect any pending legislation.

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