A “Hail Mary” petition asking the Federal Trade Commission to investigate anticompetitive practices by DraftKings and FanDuel has “zero validity,” Stifel analysts said in a Monday note.
On Friday, US Sen. Mike Lee (R-Utah) tweeted out a letter penned by himself and Sen. Peter Welch (D-Vermont) to FTC Chair Lina Khan about how DraftKings and FanDuel have “arguably acted as one company.”
“We can’t allow online gambling companies like FanDuel & DraftKings to violate antitrust laws, especially as more Americans grapple with the effects of this industry on our society,” Lee said Friday.
The stocks for both companies were down Monday, with DraftKings down 4% and FanDuel parent Flutter down 3.2%, on normal volume. Neither company commented when reached by LSR.
Accusations in letter
The letter suggests DraftKings and FanDuel have worked together despite their failed proposed merger, which was called off in 2017. Legal US sports betting launched the following year.
The letter only cites one source, a March 2024 law.com article that does not cite any original news sources. It claimed the Sports Betting Alliance is behind the moves by regulators to limit or ban pick ’em DFS games in some states.
“Effective enforcement of antitrust law protects consumers — something that is especially important in a new industry like sports betting where the risk of addiction is far greater than most industries,” the letter said.
‘Negligible risk’ for DraftKings, FanDuel
Stifel’s Jeffrey Stantial does not expect much of a fallout for either company from the allegations.
“We see zero validity to the claims, and argue that rational duopoly behavior would have seen both operators adopt DraftKings’ proposed tax surcharge,” Stantial said. “Coupled with likely forthcoming transition in FTC leadership, this suggests to us negligible risk of enforcement against FLUT/DKNG resulting from the petition.”
The surcharge mentioned by Stantial was the ill-fated surcharge DraftKings said it would apply to customers in high-tax states in August. DraftKings withdrew the plans shortly after FanDuel followed multiple other US sportsbooks in saying that it would not be implementing a similar tax.
Limited risk from Robinhood, too
Stantial also does not expect much shakeup for traditional sports betting should Robinhood decide to enter the arena.
Robinhood CEO Vladimir Tenev mentioned the possibility of entering the US sports betting market after the company offered odds for the US presidential elections. He noted the company would likely stick with the events contract scheme, meaning it would not be subject to state-by-state licensing.
Robinhood’s more than 24 million funded customers and substantial cash could help the company scale even with its late entrance into sports betting. Still, Stantial sees the risk to traditional betting as limited.
“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).”
LSR‘s Sam McQuillan contributed to this report.
