After months of speculation, legal appeals, government opinions and hype, the planned merger between Daily Fantasy Sports giants DraftKings and FanDuel has officially been scrapped. Of course in a world where you can bet on anything, the odds were never good for the two DFS companies that control more than 90% of market share. On gambling sites, the odds were 21 against the merger ever happening as most people realized two things. First is that the government is very anti-DFS at the moment, which we will get to in a moment. The other problem is, of course, that you don´t have to be a brilliant economist or legal expert to realize that a merger of the two giants would most definitely create a company with near monopolistic power because of lack of any significant competition.
The financial situation at FanDuel and DraftKings was ultimately what led to the decision. Both companies have serious financial problems, with DraftKings having lost over $600M in its´ brief four-year existence. A New York Post article which researched the two companies also revealed that both companies are seriously behind in paying their legal bills, lobbying firms and suppliers. Aside from the legal costs of the merger, both companies are also fighting multiple legal battles against multiple states in regards to their operations. The two companies have also been forced to spend a large amount of money in many individual states to lobby lawmakers against enacting new laws to regulate or prohibit DFS gambling.
Ironically the merger was something that the CEOs of both companies scoffed at less than a year ago. In many instances, the companies were calling each other bad businesses even late into 2016 and taking jabs at the choices each other were making. In many cases, both companies were taking short-term financial gains at the expense of having a sustainable business model. The most interesting part is what happens next as these companies were bitter rivals before attempting the merger, and now they have opened their books up to each other, there could be considerable fireworks as they once again start marketing against each other.