Daily fantasy sports (DFS) leaders DraftKings and FanDuel confirmed late last week that the two market power players are merging. Together, the unified company is expected to control more than 90 percent of daily fantasy revenues in the United States.
The merger will first need the approval of the Federal Trade Commission, which will analyze whether the formed DFS monopoly is in the best interest of consumers.
But should DraftKings and FanDuel be permitted to merge, the new conglomerate would be better funded and equipped to continue DFS legalization efforts. As of today, a dozen states have passed daily fantasy laws, and 13 have introduced DFS legislation.
Though DFS was once heavily partnered with poker, most notably DraftKings’ marquee sponsorship of the World Series of Poker, today the emerging industry tries to stay clear of gambling associations.
DraftKings and FanDuel argue that the results of the contests depend on skill and therefore does not constitute gambling. That is of course an opinion not shared by all gaming observers.
Skill Still Debated
The rise of DFS in 2014 and 2015 was significant, as television commercial breaks became inundated with DraftKings and FanDuel advertisements. But over the past 12 months, DFS operators, specifically the two in question, have struggled as legal battles came one after the other.
Nevada, the undisputed leader in all things gambling in the US, has classified daily fantasy sports as gambling. The Silver State says operators need to first obtain a gaming license before commencing contests there. DraftKings and FanDuel have both refused, as it would signal a concession on their part that their product is indeed grounded in gambling.
Poker, also a game where skill plays an inherent role, is legal for play online in only three states. Proponents of internet poker argue similar points to DFS, that its foundation of skill makes it less about luck than other casino games.
In 2012, a federal district court judge agreed.
“While players’ actions are influenced by chance events, their decisions are based on skill,” Eastern District of New York Judge Jack Weinstein declared in a 120-page ruling. “By bluffing, for example, players can overcome the power of chance and win a hand.”
Winning Emerging Market
Numerous state attorneys general have questioned the legality of DFS, but the industry has still managed to convince state lawmakers to pass legislation to authorize the online games. Should the two DFS leaders be permitted to merge, their voice will presumably only get stronger.
Internet poker proponents haven’t been so convincing. That’s unfortunate for the state lawmakers who argue they’re supporting DFS to regulate operators, protect consumers, and generate new tax income.
All three points are arguments shared by online poker backers. And unlike DFS, which is thought to be struggling fiscally, revenues are blossoming for interactive poker networks in New Jersey.
In the Garden State, online operators pulled in $2.39 million in poker rake and fee in October, a 25 percent win year-over-year. And through 10 months in 2016, internet poker is up more than 12 percent.