The daily fantasy sports industry stands at a critical crossroads, with market leaders DraftKings and FanDuel facing renewed scrutiny over potentially anti-competitive practices. A recent letter from U.S. Sens. Mike Lee and Peter Welch to the Federal Trade Commission (FTC) has brought fresh attention to concerning behavior for consumer welfare in this rapidly growing market. On Tuesday, the Senate Judiciary Committee will hold a hearing to go deeper on these concerns.
The senators’ allegations of interference with sports league partnerships, marketing deals and payment processors represent a troubling escalation in what appears to be an effort by DraftKings and FanDuel to undermine competition It is particularly unfortunate, considering these companies’ origins as innovative disruptors who once championed market openness and competition.
The transformation of DraftKings and FanDuel from industry pioneers to forces that could be undermining a competitive marketplace mirrors a familiar pattern in digital markets. Having secured their position through innovation and aggressive growth, they may be pulling up the ladder behind them, preventing new entrants from gaining a foothold in the market they helped create.
The comprehensive nature of the alleged interference makes these concerns potent. By reportedly creating obstacles across multiple critical business relationships – from league partnerships to payment processing – DraftKings and FanDuel appear to be building a multilayered moat around their market power. If proven, this strategy would both harm consumers and suffocate potential competitors before they can establish themselves.
The historical context makes these accusations even more striking. When DraftKings and FanDuel first emerged, they successfully argued that daily fantasy sports were games of skill rather than gambling, securing crucial legal victories in Illinois and New York. Those rulings provided the foundation for the industry’s growth and legitimacy. Now, having benefited from relaxed regulation, they appear to be working to restrict the same market access they once demanded.
The FTC has already showed it is willing to look into this market. In 2017, the agency moved to block a proposed merger between DraftKings and FanDuel that would have given the combined entity control over 90 percent of the paid daily fantasy sports market. The allegations suggest that while a formal merger was prevented, the companies, working together, may be undermining consumer welfare and market competition in other ways.
With 15 percent of U.S. adults participating in fantasy sports, the stakes for consumers are significant. New entrants trying to challenge the status quo face an increasingly difficult path, not because they need more innovative products or consumer appeal but because they may be cut out of the fundamental business relationships and appropriate regulatory environment necessary to operate effectively.
The senators’ letter to the FTC represents more than just another regulatory complaint; it signals a potential turning point for an industry that touches millions of Americans. The integrity of the daily fantasy sports market – and potentially other digital marketplaces – may depend on how policymakers and regulators respond to these serious concerns. The odds are long, but one can bet that regulators would pressure DraftKings and FanDuel to cut the shenanigans and focus on serving consumers.