A MERGER between Edinburgh-based fantasy sports specialist FanDuel and US rival DraftKings has been hailed as an “interesting prospect” by analyst Hargreaves Lansdown.
Speculation that the two biggest companies in the US daily fantasy sports market, which is believed to have as many as 41 million players, have held merger talks has surfaced across the Atlantic.
It comes as the two companies face regulatory challenges to their model in America, where some states have declared that daily fantasy sports are a form of gambling and illegal. The reports also emerged as FanDuel prepares to launch its first product in the UK in time for the English Premier League season.
Adam Laird, senior analyst at Hargreaves Lansdown, said a tie-up between FanDuel and DraftKings makes sense from a commercial and legal perspective.
“It’s quite an interesting prospect, really, from two of the largest players in this area,” he said.
“The online betting community in the UK is obviously very competitive, but these are two companies which have a huge position in the USA.
“Court cases and the legal challenges aside, these companies both have a huge proportion of that US daily fantasy sports market. So the merger has quite a lot of opportunities there for these two companies.”
Asked whether joining forces would better equip FanDuel and DraftKings to meet their continuing regulatory challenges, Mr Laird said a merger would “undoubtedly” give them a “much bigger arsenal to defend themselves”.
However, he flagged that the respective market shares held in the US by both companies meant that a merger may throw up competition implications. One report said the combined company would hold as much as 95 per cent of the daily fantasy sports market.
The regulatory challenges facing daily fantasy sports companies in the US led FanDuel suspend operations in New York in March while talks with legislators take place. The uncertainty it faces in the US is such that the company’s auditor, Deloitte, judged it to be a “material uncertainty” which cast “significant doubt” on FanDuel’s ability to continue as a going concern in its most recent accounts in May.
However several states in the US have already introduced fantasy sports bill under moves to regulate the sector, including Virginia, California, Indiana, Colorado and Tennessee. Moves are also afoot to introduce a daily fantasy sports bill in New York.
FanDuel, which is understood to have more than six million players in North America, has always maintained its games are based on skill and are not a form of gambling.
It declined to comment on the speculation.
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