FANDUEL, the fantasy sports business that was founded in Edinburgh a decade ago, has failed in a bid to have a legal challenge to its proposed merger with rival DraftKings heard in a Boston court.
The deal, which was announced last November, has been put on hold following a challenge by American consumer protection agency the Federal Trade Commission (FTC), which claims that the merger would create a “near-monopoly” that “likely would substantially lessen competition” in the fantasy sports market.
Both FanDuel and DraftKings have filed court papers that strongly refute those claims and at the end of last week asked District of Columbia federal judge Ketanji Brown Jackson to transfer the case to the District of Massachusetts court in Boston.
The firms had argued that it would be more convenient to have the case heard in Boston rather than Washington DC because DraftKings is headquartered in Boston and FanDuel chief executive Nigel Eccles is based in New York.
They also said that as a class action has been brought against them in Massachusetts it would make sense for both cases to be heard by the same judge.
The class action, which was filed last year and includes claimants from 26 states, contains over 20 consumer-protection allegations against FanDuel and DraftKings including insider dealing, false advertising and bonus fraud.
As the FTC case centres on competition law Judge Brown Jackson dismissed the argument that Massachusetts district judge George O’Toole should preside over both.
The hearing for the competition case, which has been scheduled for November, will therefore take place in Washington DC, where the FTC is based.
That means there will be no movement on the merger until then, although if the FTC gets its way the deal will be blocked completely.
The government body said it is opposed to the deal because it would eliminate “price and non-price competition” given that FanDuel and DraftKings have “competed ferociously in the market since 2012”.
If the merger did go ahead the combined company would control around 95 per cent of the US daily fantasy sports market, which sees players compete based on the real-life performance of sports players that they have put together in fantasy teams.
This is the latest legal hurdle being faced by the companies, which in addition to the class action have had to contend with numerous states across the US ruling that the games they offer constitute gambling and as such are illegal. Some states, including Massachusetts and New York, have since revoked bans on their activities.
At the time the merger between FanDuel and DraftKings was announced the companies said part of the rationale was so they could join forces to better fight such challenges.
“By combining and streamlining resources, FanDuel and DraftKings can work more efficiently with state government officials to develop a standard regulatory framework for the industry,” they said in a statement.
Although FanDuel, which was founded by Mr Eccles and his wife Lesley Eccles, is headquartered in Edinburgh the vast majority of its customers are based in the US.
Given the popularity of fantasy sports in the US the company decided to focus exclusively on that market at launch, but has since expanded into the UK.
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