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FanDuel is weighing whether to drop its merger with DraftKings

A challenge by the U.S. government has the company evaluating its next steps, CEO Nigel Eccles told Recode.


FanDuel is considering whether to walk away from its proposed merger with DraftKings in light of a decision by the U.S. government to challenge the deal in court.

During an interview on Tuesday, FanDuel CEO Nigel Eccles told Recode that his company is still “evaluating options,” and when pressed whether the two daily fantasy sports sites might abandon their plans or fight federal antitrust regulators, he replied: “All of those things are still on the table.”

FanDuel and DraftKings find themselves at a critical juncture after the Federal Trade Commission last month voted to block a deal that — in the estimate of federal competition regulators — would have given the combined entity more than 90 percent of the market for daily fantasy sports bets. Those contests allow web users to draft fictional rosters of athletes and wager on their performance each week.

For their part, FanDuel and DraftKings tried to stress to the FTC that they serve a much broader marketplace — not just daily fantasy sports, but weekly and yearly contests, including more casual leagues offered by sites like ESPN and Yahoo. But the FTC disagreed with that assessment and, on a 2-0 vote, it moved to challenge the deal on grounds that it would harm consumers and companies alike.

FanDuel and DraftKings can now choose to fight the federal government, amend the deal in some way or cancel their merger entirely. For now, though, the clock is ticking: An initial scheduling conference is slated to occur before an administrative judge at the FTC on July 14.

Asked about the future of the deal, a spokeswoman for DraftKings told Recode: “We are working as quickly as possible to determine the best course of action in the interest of our customers, employees and investors.”

A spokeswoman for FanDuel, meanwhile, declined to say if there is any fee or penalty if the two companies abandon their merger.

As they weigh whether to continue as independent companies, however, FanDuel’s Eccles stressed that his daily fantasy sports site is “still growing” — and is in good shape to take on its competitors, including its preferred partner, DraftKings.

On Tuesday, Eccles and FanDuel sought to promote their latest gambit — daily fantasy golf — with a mini-golf course set up on the seventh floor of Rockefeller Center. Amid the inflatable elephant and the ice luge and the water trap that dotted the course was Joe Montana, the former quarterback for the San Francisco 49ers, who is an avid golfer and a longtime promotional face of FanDuel.

To Eccles, the launch of new bets focused on golfing tournaments comes during a period of “probably the fastest growth in the company’s history.” FanDuel has targeted other new sports in recent months — championship soccer and the WNBA — and plans to introduce new, season-long, friend-focused fantasy football leagues in 2017.

“We certainly feel that next year will be a break-even year for us,” Eccles said.

Behind the scenes, FanDuel has struggled on its path to profitability — including such diminished cash flow that the company had scrambled to pay the penalties levied by regulators. Those challenges prompted both FanDuel and DraftKings to pursue their merger in the first place.

But Eccles said the market had dramatically changed even since they announced plans for their now-troubled tie-up in November. FanDuel, at least, plans to spend less on marketing, and the industry in general faces fewer obstacles from state and local regulators. And while FanDuel did not provide numbers Tuesday, it did emphasize that revenue is increasing as it looks to capture an increasing share of an industry that had 57 million players last year.

“Daily fantasy sports is a subset of that bigger market, and our mission is to convince that 57 million that daily fantasy sports is a better way to play,” Eccles said. “If we can get 10 percent of that 57 million, then we have a huge business, so that’s our focus.”

Asked if FanDuel could accomplish that on its own, Eccles replied: “Absolutely.”

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