DraftKings and FanDuel antitrust claims

Sports betting and legal analysts recently said that a "Hail Mary" letter petition requesting that the Federal Trade Commission look into DraftKings and FanDuel's anti competitive actions has almost no validity.

United States Senator Mike Lee (R-Utah) and Sen. Peter Welch (D-Vermont) wrote a letter to FTC Chair Lina Khan, which they tweeted out as well. The letter discussed how DraftKings and FanDuel have "arguably acted as one company."

Lee opined that as more Americans struggle with the impact of this industry on society, we cannot allow online gambling companies like FanDuel & DraftKings to violate antitrust laws.

On typical volume, FanDuel parent company Flutter's stock was down while DraftKings' stock was down after Lee’s actions. Though contacted by several media outlets, neither company publicly commented.

The letter implies that despite their unsuccessful merger proposal, which was canceled in 2017, DraftKings and FanDuel have collaborated. The following year saw the legalization of sports betting in the US, and widespread expansion and public acceptance.

The only source cited in the letter is an article from March 2024 on law.com; no original news sources are cited. It asserted that authorities' efforts to restrict or outlaw “pick 'em” DFS games in certain jurisdictions are being driven by the Sports Betting Alliance.

Lee stated that the risk of addiction is significantly higher in a new industry like sports betting than in most others, and effective enforcement of antitrust law protects consumers, which are the end users of the service -- the actual bettors.

DraftKings faces negligible risk, according to Jeffrey Stantial of Stifel. Stifel does not anticipate that the accusations will have a significant negative impact on either business.

Stantial believes that there is no validity to the claims and argues that both operators would have adopted DraftKings' proposed tax surcharge as rational behavior.

Stantial brought up the doomed premium that DraftKings had announced would be imposed on consumers in high-tax jurisdictions. Shortly after FanDuel said, like several other US bookmakers, that it would not be enacting a comparable levy, DraftKings canceled the plans.

Robinhood poses little risk, and Stantial does not anticipate that traditional sports betting will be significantly disrupted if Robinhood decides to enter the market.

After offering odds for the US presidential election, Robinhood CEO Vladimir Tenev hinted at the company's potential entry into the US sports betting industry. He pointed out that the business will probably continue using the events contract system, which would exempt it from state-by-state licensing requirements.

Even if Robinhood entered the sports betting market late, its more than 24 million funded consumers and sizable cash reserves could help the business grow. Stantial, however, believes that traditional betting carries a low risk.

“Regardless, we see fairly limited direct market share risk to incumbent traditional vig-based online bookmakers given vastly different offerings & limited viable breadth of markets for the exchange model,” Stantial said. “A well-capitalized, liquid betting exchange could put pressure on traditional bookmaker overrounds, though also providing additional means to hedge outcomes exposure and a pricing signal to help refine odds (as exchanges can take on more sharp action).”

Source:

“Stifel: ‘Zero Validity’ To Anticompetitive Claims Against DraftKings, FanDuel” , Matthew Waters, legalsportsreport.com, December 10, 2024.