Two U.S. senators, Republican Sen. Mike Lee and Democratic Sen. Peter Welch, have requested that the Department of Justice (DOJ) and Federal Trade Commission (FTC) investigate the online sports betting giants DraftKings and FanDuel. The senators allege that these companies have breached regulations by working together to eliminate competition in the industry.
Allegations against DraftKings and FanDuel
On 5th December, Lee and Welch wrote a letter addressed to FTC Chair Lina Khan and Assistant Attorney General for Antitrust Jonathan Kanter, accusing FanDuel and DraftKings of engaging in joint activities. Both organisations are members of the Sports Betting Alliance, which the senators claim has been used to pressure businesses not to collaborate with rival betting platforms.
Since the Supreme Court removed the ban on sports betting in the U.S. in 2018, FanDuel and DraftKings have quickly become the most well-known names in the sports betting scene. In 2017, their proposed merger was thwarted by the FTC, which feared that the combined entity would monopolise over 90 percent of the daily fantasy sports market. Despite this setback, both companies have flourished independently, continuing to dominate the sports betting arena.
Now, the senators allege that DraftKings and FanDuel are acting as a duopoly despite the failed merger. They also claim that the companies have leveraged their significant influence with major U.S. sports leagues, commercial partners, payment processors, and vendors to stifle cooperation with other sportsbooks.
“After their merger to monopoly was blocked, it seems that FanDuel and DraftKings have arguably acted as one company, violating our antitrust laws,” wrote the senators.
The sports betting industry navigates a maze of federal and state regulations, such as the Sherman Act, which aims to prevent companies from engaging in unfair practices that hinder competition.
Recent challenges for DraftKings and FanDuel
This is not the first allegation against DraftKings. They are already involved in a controversial lawsuit with the NFL Players Association over unpaid fees for using players’ likenesses in NFTs, with $65 million in damages at stake. FanDuel recently settled a similar case with the MLB Players Association. These cases and ongoing lawsuits illustrate the urgent need for ethical practices in the industry.
Both companies have faced significant fines and lawsuits in several states. For instance, FanDuel was fined $10,000 in Massachusetts for violating college sports betting rules.
The FTC and DOJ are responsible for ensuring fair competition within U.S. markets. The result of their investigation could be severe penalties in the form of fines or restrictions on business activities against DraftKings and FanDuel. It could also lead to new regulations at an industry level to ensure such issues do not arise again in the future.
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