FTC Eyes DraftKings and FanDuel for Collusion

• As a bipartisan issue, Senators Mike Lee and Peter Welch wrote to the Federal Trade Commission asking for an investigation into DraftKings and FanDuel – two sportsbook operators who control over three-fourths of the US betting market.
• The sportsbooks faced a similar request a decade ago in reference to daily fantasy sports.
• With the massive closures of sports betting sites in 2024 and the cost of licensing fees, do the Senators have a point to where no other betting apps can compete?

SALT LAKE CITY – Late last week, Senators Mike Lee and Peter Welch asked the Federal Trade Commission and Justice Department to investigate DraftKings and FanDuel over on the possibility of the companies coordinating against competitors.

This antitrust probe into DraftKings and FanDuel evokes a striking parallel to the early days of daily fantasy sports (DFS), when these platforms dominated the market and faced significant legal and regulatory scrutiny. The controversy stemmed from accusations of anti-competitive practices and questions about their influence on the industry.

Back in the mid-2010s, DraftKings and FanDuel were the titans of DFS, growing at an explosive rate. Their proposed 2016 merger was blocked by the Federal Trade Commission (FTC) on the grounds that it would create a monopoly, eliminating competition in the DFS space.

Even without merging, the two companies held overwhelming market power, drawing accusations of collusion and anti-competitive behavior.

Words From DraftKings’ CEO

Fast-forward to today, and legalized sports betting across the U.S. is seeing similar concerns resurface as together both companies hold about 77% of the market.

For bettors, fewer competitors in the market could mean worse odds, higher fees, and fewer sportsbook promotions, as competition drives customer-friendly practices. The success of smaller platforms and innovative options depends on a fair marketplace, free from anti-competitive behaviors.

Jason Robins’ comments at the Craig-Hallum Online Gaming Conference offered a nuanced take on the future of smaller sportsbooks in the US. While he expressed optimism about the potential for smaller operators to sustain profitability by carving out niches, the reality suggests a more challenging landscape.

Despite his vision of a “path forward,” many small sportsbooks have either shut down, been acquired, or exited specific states due to the high costs of operation and the dominance of market leaders like DraftKings and FanDuel.

Operators such as Betway, Sports Illustrated, and Unibet highlight the uphill battle smaller competitors face. Additionally, PointsBet’s US business sale to Fanatics and the withdrawal of brands like SuperBook and WynnBet from certain states emphasize the increasing difficulty of maintaining a foothold in a saturated market.

The duopoly of FanDuel and DraftKings has created an environment where smaller sportsbooks face significant barriers to growth.

Issues In The Industry

Robins’ statement that smaller operators can “keep going” as long as they are profitable underlines a harsh truth: profitability for many small sportsbooks has proven elusive. The financial burdens of high state taxes, customer acquisition costs, and technological investments have led to numerous closures and consolidations.

Even larger operators like Penn Entertainment have struggled to grow their share despite significant investments, such as its pivot to ESPN Bet.

While Robins suggested that smaller operators could succeed by focusing on profitability and long-term growth, the track record for these companies paints a different picture.

• DraftKings’ journey to profitability was aided by its stronghold in daily fantasy sports, allowing it to build a robust customer base before transitioning to sports betting. Smaller operators lack such foundational advantages.
• DraftKings’ ability to acquire SB Tech and develop proprietary technology is a luxury most small operators cannot afford. Penn Entertainment’s costly transition from Kambi to its own platform demonstrates how resource-intensive such moves are.

Robins’ optimism about smaller operators finding niches also overlooks how the market dynamics favor larger players. DraftKings and FanDuel have leveraged their economies of scale to offer higher-margin bets like parlays and same-game parlays, which now dominate the US betting landscape.

Moreover, high state taxes compound these challenges. While Robins advocated for reasonable tax rates in states with legal sports betting to help legal operators compete with the black market, smaller sportsbooks are disproportionately affected by these financial pressures. DraftKings’ attempt to pass costs to customers through a controversial surcharge highlighted the strain even top operators feel under such conditions.

While Jason Robins highlighted a potential future where smaller sportsbooks could survive and even thrive by adopting a disciplined, long-term approach, the reality suggests otherwise. The wave of market exits and consolidations points to the immense challenges of competing in a market increasingly dominated by a few major players.

For smaller sportsbooks to succeed, they must overcome significant structural disadvantages—something easier said than done in the fiercely competitive and resource-intensive world of US sports betting.

News tags: Betway | Craig-Hallum Online Gaming Conference | DraftKings | ESPN BET | Fanatics | FanDuel | Federal Trade Commission | Jason Robins | Justice Department | Kambi | Mike Lee | Penn Entertainment | Peter Welch | PointsBet | SB Tech | Sports Illustrated | SuperBook | Unibet | WynnBET