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By Brent Kendall

20 June 2017

The Wall Street Journal

WASHINGTON — The Federal Trade Commission on Monday said it would file an antitrust lawsuit that seeks to block the proposed merger of fantasy sports companies DraftKings Inc. and FanDuel Inc., alleging the deal would harm consumers who play daily fantasy contests.

The rival companies each offer daily games in which consumers pay to assemble virtual sports teams made up of real athletes that do battle against other virtual teams. The “managers” of winning teams that amass the best statistics take home cash prizes. The companies make money through entry fees.

The five-member FTC is currently short-handed, with only two sitting commissioners, one Republican and one Democrat. Both supported the lawsuit. The state of California and District of Columbia are joining with the FTC to challenge the merger.

The commission argues the merger would deprive customers of substantial benefits that are produced by DraftKings and FanDuel competing against one another for business.

“We are disappointed by this decision and continue to believe that a merger is in the best interests of our players, our companies, our employees and the fantasy sports industry,” the companies said in a joint statement. “We are considering all our options at this time.”

When they announced the merger in November, the CEOs of the two privately held companies, DraftKings’ Jason Robins and FanDuel’s Nigel Eccles, said combining the companies would allow them to innovate more by freeing up money. That, they said, would further efforts to entice more players of season-long fantasy sports leagues and more fans in general to play on their sites.

A few years ago, daily fantasy sports was one of the country’s hottest businesses. It allows players to draft virtual teams that typically compete against one another in a single day, rather than over an entire season as with traditional fantasy leagues. The industry was once forecast to hit $18 billion in revenue by 2021. That forecast has been slashed — as of late last year standing at around $5.3 billion by 2021 — reflecting in part greater-than-expected user burnout and the loss of entire markets because of state regulations.

Several state attorneys general have launched regulatory and legal probes, saying the sites violate state gambling laws. The companies, which deny any wrongdoing, have also faced civil lawsuits from consumers, as well as investigations by the Justice Department. The companies have lobbied heavily to try to persuade state legislatures to explicitly legalize the activity.

DraftKings and FanDuel account for the vast majority of daily fantasy sports players, which they estimate to number around five million. An attorney for FanDuel said when the deal was announced that he expected it to undergo an antitrust review. He argued that daily sites are one part of a broader fantasy sports universe that includes season-long leagues.

The FTC said Monday that season-long sports leagues wouldn’t preserve competition because consumers of paid daily fantasy sports are unlikely to view the season-long contests as a meaningful substitute.

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AP

BOSTON (AP) — Federal regulators are challenging the planned merger of FanDuel and DraftKings, saying the combination of the two largest daily fantasy sports sites would create a company controlling more than 90 percent of the market.

The Federal Trade Commission announced it will file a complaint — along with the attorneys general of California and the District of Columbia — seeking to temporarily stop the deal, pending an administrative trial scheduled for Nov. 21.

Combining the onetime rivals would “deprive customers of the substantial benefits of direct competition,” Tad Lipsky, acting director of the commission’s Bureau of Competition, said.

DraftKing’s Jason Robins and FanDuel’s Nigel Eccles, the CEOs of the two companies, said they’re disappointed by the FTC’s decision and are weighing their options.

That includes filing their own legal maneuver to block the FTC’s efforts, Robins and other DraftKings founders said in a message to employees.

“Please don’t let this regulatory setback distract you. DraftKings is poised for growth, whether or not we merge with FanDuel,” the company executives said. “In the days ahead, it will be business as usual as we prepare for the start of the NFL season.”

Daily fantasy sports contests are online games in which players build rosters of real-life athletes and vie for cash and other prizes based on how those athletes do in actual games. They grew in large part from a 2006 federal law that banned online gambling, but created a specific niche for fantasy sports.

DraftKings and FanDuel have argued their merger doesn’t violate antitrust laws because the two companies represent a niche within the larger, multibillion dollar fantasy sports market in which ESPN, Yahoo and other major corporations have long dominated.

The FTC doesn’t appear to share that view, concluding the two companies are “each other’s most significant competitor.”

“It all comes down to how you define the relevant market, and that’s where they fell short,” Daniel Wallach, a Florida attorney who specializes in gambling and sports law, said of the two companies. “I’m not convinced they’ll do any better in a federal court.”

The FTC said it also isn’t convinced other fantasy sports companies could provide sufficient competition if the merger went through and that consumers are unlikely to view other products, including the traditional, season-long fantasy sports competitions played by millions of Americans each year, as a meaningful substitute for the contests offered by the two companies.

More than two-thirds of daily fantasy sports companies have shuttered, changed focus or joined with competitors, the Fantasy Sports Trade Association has said. That’s left DraftKings and FanDuel as the largest remaining operators.

DraftKings, which was founded in 2012, is currently the largest in terms of entry fees and revenues. FanDuel, which was founded in Scotland in 2009, is the second largest.

Read more here: http://www.heraldandnews.com/sports/regulators-challenge-merger-of-fantasy-sports-sites/article_81f53c82-bfad-5bbe-86f7-3223cfa97be2.html

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By: Darren Rovell
ESPN

The Federal Trade Commission announced Monday that it would seek to block the merger between the two leading daily fantasy sites, FanDuel and DraftKings.

The regulatory body said it would file a suit, together with California and Washington, D.C., in an effort to temporarily stop the two, who own 90 percent of the daily fantasy business, from combining into what its officials believe would be an illegal monopoly.

“The proposed merger would deprive customers of the substantial benefits of direct competition between DraftKings and FanDuel,” said Tad Lipsky, acting director of the FTC’s Bureau of Competition.

The companies agreed to merge in November after the expensive effort to reign supreme (an estimated $750 million in marketing was spent by the two companies in fall 2015) and political battles with states as to whether daily fantasy was to be considered gambling.

“We are disappointed by this decision and continue to believe that a merger is in the best interest of our players, our companies, our employees and the fantasy sports industry,” said DraftKings CEO Jason Robins and FanDuel CEO Nigel Eccles in a joint statement. “We are considering all our options at this time.”

The trial, the FTC notes, would commence on Nov. 21.

Read more here: http://www.espn.com/chalk/story/_/id/19679893/ftc-try-block-fanduel-draftkings-merger

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Lawstreetmedia.com

By Josh Schmidt | June 19, 2017

Just a few years ago, it seemed like you couldn’t watch a sporting event without seeing advertisements for daily fantasy sports leagues like Draft Kings or Fan Duel. Before the 2015 NFL season these companies spent nearly $500 million on advertisements, but after consumer concerns arose, they cut their advertising budgets.

After multiple lawsuits against the industry, the companies are fighting for their existence amid accusations that they fall under the same legal category as traditional online gambling.

A new study from Rutgers University on gambling in New Jersey concludes that daily fantasy sports (DFS) users exhibit highly similar habits as those who engage in traditional forms of gambling. It also finds that there is a high crossover between the two activities. This is bad news for an industry that has tried to distance itself from gambling in order to win lawsuits and continue operation. The study’s authors wrote:

A majority of activities listed in this study are historically classified and widely accepted as ‘gambling,’ because they involve spending money on activities with an uncertain outcome and the possibility of winning or losing that can result in harm. However, other activities elude precise classification and are largely context and jurisdictiondependent.

The key distinction for these companies is whether their games are based on skill, not chance. This stems from the Unlawful Internet Gambling Enforcement Act (UIGEA) passed by Congress in 2006, which makes a distinction between the two forms of gambling and outlawed only games that require no skill.

Fan Duel, which opened in 2009, was the first major daily fantasy sports company before Draft Kings, its main competitor, opened in 2011. First, they experienced massive growth and profits before running into legal problems.

These companies, and their users, must prove to the courts that they are winning massive amounts because of skill and hard work, not pure luck like traditional gambling games.

Those who argue that DFS is skill-based believe it’s clear the games aren’t random because of the overwhelming success of experienced players. While normal gambling games such as roulette or slots don’t favor someone with experience, these games show that the most winners have dedicated themselves to the craft.

While many users casually play the games, others have dedicated themselves to the game, and some manage to earn six-figure payouts in just one month.

In fact, 1 percent of players win around 91 percent of the profits from DFS sites, according to a study by gambling expert Ed Miller. Miller argues this is evidence of a surplus of skill exhibited by the top bettors, whom he refers to as “sharks,” who feast on the “minnows,” which are novice gamblers who lose over 50 percent of their investments.

On the other hand, those who argue the game is just gambling cite evidence that knowledge of the actual sports doesn’t help win the game. Instead, it’s just about algorithms, gaming the system, and luck, they argue.

Even former Florida governor and presidential candidate Jeb Bush called it, “day trading without any of the regulation” during one debate in the 2016 campaign. The lack of oversight is yet another reason many hope for government intervention in the industry.

In recent years, the industry has faced lawsuits across America while states such as Nevada and New York barred them and defined them as gambling. In 2015 both states booted daily fantasy sports companies from their states.

But in late 2016, New York and Nevada compromised with the companies.

New York’s ban was particularly impactful because the Fan Duel headquarters is located in the Big Apple. However, Governor Andrew Cuomo later signed a law in classifying DFS as a “game of skill,” which allowed them to continue business in the state.

Meanwhile, Nevada decided that the companies need a gambling license to operate, but only one company – USFantasy – has applied and received a license as of last November, according to the Legal Sports Report. The policy means that daily fantasy sports is considered gambling in the state, allowing DFS companies to operate under the same regulation as traditional gambling. However, given the industry’s efforts to identify itself as a game of skill, many DFS companies have been unwilling to participate with a gambling classification.

In Texas, state Attorney General Ken Paxton issued an opinion last year equating DFS with illegal gambling, which prompted lawmakers to craft a bill formally classifying DFS as games of skill. State Rep. Richard Peña Raymond, a fantasy football lover himself, decided to sign onto the bill after speaking with constituents who worried about government interference, he told the Texas Tribune.

So while the Rutgers study finds that DFS users also tend to engage in traditional gambling–and are susceptible to similar gambling and drug-related problems–many states are working with these companies to continue operation.

The new study doesn’t necessarily mean that legal changes are coming down the road, but it furthers research that will help inform future decisions. The legality of DFS is a complex issue that must weigh the economic benefits of gambling for local taxes and the negative impact that it can have on individuals and their families.

Read more here: https://lawstreetmedia.com/blogs/sports-blog/online-gambling-daily-fantasy-sports/

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Reuters

June 19, 2017 12:34 PM ET

The U.S. Federal Trade Commission said on Monday it will seek to stop the merger of DraftKings and FanDuel, because the combined company would control more than 90% of the U.S. market for paid daily fantasy sports contests.

The FTC, along with the attorneys general of California and the District of Columbia, will file a complaint in federal district court seeking a preliminary injunction to stop the deal, the antitrust regulator said.

The two companies announced the deal in November 2016 as a merger of equals.

Between them, the two companies have 95% of daily fantasy sports, according to data from Eilers and Krejcik Gaming. DraftKings and FanDuel have argued that they compete against larger, more powerful companies in the broader fantasy sports business, like ESPN and Yahoo.

Modern fantasy sports started in 1980 and have mushroomed online. Participants typically create teams that span an entire season in professional sports, including American football, baseball, basketball and hockey.

Daily fantasy sports, a turbocharged version of the season-long game, have developed over the past decade into a multibillion-dollar industry.

Participants draft teams for a single game, enabling fans to spend money on contests with a frequency critics compare to sports betting.

Read more here: http://fortune.com/2017/06/19/ftc-draftkings-fanduel-antitrust-merger/

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By Jim Puzzanghera

Los Angeles Times

June 19, 2017

Federal and state officials on Monday moved to block the merger between DraftKings Inc. and FanDuel, arguing the combination would harm competition by locking up 90% of the daily fantasy sports market in the U.S.

The Federal Trade Commission said it would file suit seeking a court injunction to stop the deal, joined by the attorneys general of California and the District of Columbia.

“This merger would deprive customers of the substantial benefits of direct competition between DraftKings and FanDuel,” said Tad Lipsky, acting director of the commission’s competition bureau.

DraftKings, based in Boston, is the largest daily fantasy sports company based on entry fees and revenues, the FTC said. FanDuel of Scotland is No.2.

Customers pay a fee to select a lineup of professional athletes, then compete for daily prizes based on their on-field performance. DraftKings and FanDuel compete to offer the best prices, largest prizes and greatest variety of contests, the FTC said.

In a joint statement, DraftKings Chief Executive Jason Robins and FanDuel Chief Executive Nigel Eccles said they would “work together to determine our next steps.”

“We are disappointed by this decision and continue to believe that a merger is in the best interests of our players, our companies, our employees and the fantasy sports industry,” they said.

Other fantasy sports contests involving competitions over an entire professional season are not likely to be “a meaningful substitute for paid daily fantasy sports,” the commission said.

The FTC voted 2-0 to authorize its staff to seek a temporary restraining order and preliminary injunction in federal court.

Some state officials have complained that the competitions amount to illegal sports betting and have banned them. California has not banned them.

In January 2016, the California state Assembly approved a bill licensing daily fantasy sports sites to operate in the state, but the legislation was never taken up by the state Senate.

Read more here: http://www.latimes.com/business/la-fi-fanduel-draftkings-merger-20170619-story.html

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By Kelly O’Brien

Boston Business Journal

Jun 19, 2017

The U.S. Federal Trade Commission voted on Monday to block the merger of daily fantasy sports rivals DraftKings and FanDuel, arguing that the combined company would control more than 90 percent of the market and lead to “anticompetitive effects.” The decision confirms reports from last week that FTC staffers had concerns over the merger.

The FTC, along with the attorneys general in California and Washington, D.C., will file a complaint in administrative court seeking to block the deal. An administrative trial is scheduled to begin Nov. 21.

“This merger would deprive customers of the substantial benefits of direct competition between DraftKings and FanDuel,” said Tad Lipsky, Acting Director of the FTC’s Bureau of Competition, in a statement. “The FTC is committed to the preservation of competitive markets, which offer consumers the best opportunity to obtain innovative products and services at the most favorable prices and terms consistent with the provision of competitive returns to efficient producers.”

Jason Robins, CEO of Boston-based DraftKings, and FanDuel CEO Nigel Eccles released a joint statement on the news:

“We are disappointed by this decision and continue to believe that a merger is in the best interests of our players, our companies, our employees and the fantasy sports industry. We are considering all our options at this time. As we work together to determine our next steps, we would like to thank DraftKings and FanDuel players, partners and employees for their patience, support, and continued loyalty.”

As expected, the decision hinged on how federal regulators defined the market that DraftKings and FanDuel operate in. If daily fantasy sports providers were considered to be competing against season-long fantasy sports providers, then DraftKings and FanDuel would control a small share of a market full of large players like Yahoo and ESPN.

Ultimately, officials decided that “consumers of paid daily fantasy sports are unlikely to view season-long fantasy sports contests as a meaningful substitute for paid daily fantasy sports,” according to an announcement summarizing the forthcoming FTC complaint. The complaint will also argue that other competitors are unlikely to arise in time to prevent a combined DraftKings and FanDuel from becoming a near monopoly.

DraftKings and FanDuel announced plans to merge in November, after they spent a year pouring millions of dollars into aggressive competing ad campaigns that drew the attention of regulators in multiple states who questioned whether daily fantasy sports games amounted to gambling. In March 2016, Massachusetts Attorney General Maura Healey released a series of rules and restrictions applying to daily fantasy sports operations.

Funding has continued to flood into DraftKings in the interim, however. The company, which has more than 350 employees, raised more than $100 million from Eldridge Industries LLC in March. Eldridge Industries owns a number of media properties and DraftKings CEO Jason Robins has hinted at a vision for expanding the company’s sports media offerings.

The FTC is usually led by five commissioners, but three of those slots currently sit empty, leaving the decision up to one Republican, elevated to Acting Commissioner by President Donald Trump in January, and one Democrat. Both voted to file the complaint and to seek a preliminary injunction against the merger.

Kelly O’Brien covers startups, venture capital and tech in Greater Boston.

Read more here: http://www.bizjournals.com/boston/news/2017/06/19/feds-vote-to-block-draftkings-fanduel-merger.html

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By A.J. Perez

USA TODAY Sports

June 19, 2017

The prospects for the planned merger between daily fantasy sports giants DraftKings and FanDuel dimmed Monday as the Federal Trade Commission announced intentions to oppose the union.

The FTC plans to seek an injunction in federal court to prevent the merger of the two companies, which control about 90% of the daily fantasy sports market. The complaint will come in a joint filing with the backing of the attorneys general of California (Xavier Becerra) and the District of Columbia (Karl Racine), the FTC said in a statement.

“This merger would deprive customers of the substantial benefits of direct competition between DraftKings and FanDuel,” Tad Lipsky, acting director of the FTC’s Bureau of Competition, said in a news release. “The FTC is committed to the preservation of competitive markets, which offer consumers the best opportunity to obtain innovative products and services at the most favorable prices and terms consistent with the provision of competitive returns to efficient producers.”

DraftKings and FanDuel announced plans to merge in November after both companies incurred massive lobbying and legal fees as New York and other states challenged the legality of daily fantasy sports.

“The FTC’s action is effectively the death knell for the proposed merger,” Daniel Wallach, a sports and gambling law attorney, told USA TODAY Sports. “While the companies will certainly challenge the agency decision in federal court, they are unlikely to prevail.”

FanDuel CEO Nigel Eccles and DraftKings CEO Jason Robins said in a joint news release that they are “considering all our options at this time.”

“We are disappointed by this decision and continue to believe that a merger is in the best interests of our players, our companies, our employees and the fantasy sports industry,” the statement said.

Read more here: https://www.usatoday.com/story/sports/fantasy/2017/06/19/ftc-seek-injunction-block-draftkings-fanduel-merger/408836001/

 

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By Andy Rosen, GLOBE STAFF
The Boston Globe
JUNE 19, 2017

Federal regulators will attempt to block the merger between Boston-based DraftKings and rival FanDuel, throwing into jeopardy a combination of the two giants of the emerging daily fantasy sports industry.

The Federal Trade Commission said it would sue to stop the deal, arguing that the resulting company would control more than 90 percent of the American market for paid daily fantasy sports contests. The attorneys general of California and Washington, D.C. also joined the challenge.

The companies had argued that they competed more broadly with more established providers of fantasy sports games, like ESPN and Yahoo, but the FTC wrote in its complaint that DraftKings and FanDuel “are each other’s most significant competitor.”

DraftKings and New York-based FanDuel said in a joint statement that they “continue to believe that a merger is in the best interests of our players, our companies, our employees and the fantasy sports industry.”

“We are considering all our options at this time,” the statement said. “As we work together to determine our next steps, we would like to thank DraftKings and FanDuel players, partners and employees for their patience, support and continued loyalty.”

In an internal memo to employees, DraftKings co-founder and chief operating officer Paul Liberman said the company intends to ask a federal court to issue an injunction against the FTC’s action.

Liberman said the legal options for DraftKings and FanDuel include “going to court to make our case about the benefits of the proposed merger.”

“Please don’t let this regulatory setback distract you,” Liberman wrote. “DraftKings is poised for growth, whether or not we merge with FanDuel.”

Andy Rosen can be reached at andrew.rosen@globe.com. Follow him on Twitter at @andyrosen. Dan Adams can be reached at daniel.adams@globe.com. Follow him on Twitter @Dan_Adams86.

Read more here: https://www.bostonglobe.com/business/2017/06/19/draftkings-merger-with-fanduel-challenged-federal-agency/Y05r8Ly6NXU1FmC6PMHZiP/story.html

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By William Gayde
TechSpot
June 15, 2017

Fantasy sports have exploded onto the market as a pastime for sports fans that don’t want to wait out a whole season. The two top sites, FanDuel and DraftKings, currently hold 80 percent of the market in the daily fantasy sports industry. That has many legal experts at the US Federal Trade Commission worried since the two giants have been planning a merger since last November.

The two sites, with their flashy marketing campaigns and high-profile sponsorships, operate in a legal gray area. By most definitions and according to most legal scholars, what they offer to their customers is a form of sports gambling. This has traditionally been heavily regulated by the government and growing number of states have banned them from operating. Thanks to some legal loopholes and lobbying teams though, FanDuel and DraftKings have been able to largely avoid this gambling classification and regulation.

As that “game of skill or game of chance” debate continues to rage on, the FTC is approaching a completely different issue. If you look at DraftKings and FanDuel’s market as daily fantasy sports, then the deal is almost certainly a violation of antitrust laws and will likely be shot down. If you instead apply the merger to the entire fantasy sports market, which also includes other companies like ESPN and Yahoo Sports, then the deal has a much better chance of going through. Both FanDuel and DraftKings have recently unveiled season-long fantasy leagues in the hopes of competing with those larger markets.

The FTC will likely vote whether or not to sue later this week. President Trump has yet to fill three of the five seats on the FTC Commission, so a blocking vote would require agreement between both members.

Read more here: http://www.techspot.com/news/69722-ftc-may-block-merger-fanduel-draftkings-over-anti.html

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