DraftKings value may have been affected by the constant legal challenges affecting the daily fantasy sports industry as the company raised about million in investments in a recent drive, significantly less than other investment cycles.
The Boston Globe, citing unnamed sources, said the company—one of the two largest DFS sites along with FanDuel—had only raised about $70 million from investors. Those investors did not assign a fixed valuation to the company in this funding round, which happened in the past few months, according to the newspaper’s sources.
But the paper said that the new round of investment had led 21st Century Fox Inc. to cut the value of its previous $160 million investment in DraftKings by about 60 percent, according to the sources.
Fox had reported to federal regulators that it reduced the value of its roughly 11 percent stake in Draft-Kings by $95 million “based on information concerning DraftKings’ current valuation in a recent financing transaction,” but declined to provide more detail.
It was not clear if Fox was among the investors in the new $70 million round. Fox and DraftKings declined to comment to the Globe.
In a pair of previous investment rounds last summer, DraftKings collected about $500 million. The company, along with FanDuel, then conducted a marketing blitz before the start of the NFL season which helped call attention to the industry and contributed to the legal battles the industry is now facing in several states.
DraftKings’ previous investors include Boston financial giant Wellington Management, the Kraft Group, Major League Baseball, the National Hockey League, and the owners of the New York Knicks, New York Rangers, Los Angeles Dodgers, and Dallas Cowboys.
Mutual funds owned by John Hancock Financial and Hartford Financial Services Group Inc. recently reported that they cut the value of their stakes in DraftKings’ August financing round by about 15 percent, from $7.67 per share to about $6.52 per share, according to the Globe.
In another development, DraftKings announced a deal to acquire mixed martial arts and combat sports fantasy website Kountermove.
Terms of the deal were not disclosed. Kountermove has about 30,000 registered users, who will now be transferred to DraftKings dedicated MMA platform, according to reports.
“We had been looking for opportunities to grow our presence in combat sports, so it was a very logical fit for us to come together,” DraftKings founder Matt Kalish said in a press release. “Any time you can come on and compete against another group of people in bigger games, the idea of coming together is really an added experience for everybody to be a part of it.”
DraftKings already has a partnership with MMA promoter the Ultimate Fighting Championship, but that deal reportedly expired at the end of 2015.
State Developments
It was also a relatively quiet week for the industry for state-by-state efforts to legalize daily fantasy sports.
In West Virginia, the state Senate passed a bill deeming daily fantasy sports legal. It now moves to the state’s House of Representatives.
The bill says state law doesn’t prohibit offering or participating in fantasy games, or impose fines or criminal penalties, according to the AP. DFS sites must also tell participants about prizes before they start playing and assures games aren’t based on the spread or score of one team, or the individual performance of one player in one event.
And Hawaii, which has one of the strongest anti-gambling bans in the United States, is considering making an exception for fantasy sports, which many people don’t consider to be a form of gambling, although several states attorneys general do.
A bill before the Senate and House would legalize fantasy sports such as FanDuel and DraftKings. It would require operators who offer cash prizes to register with the state and submit to an annual audit. They would be required to not allow minors to play and to have rules against insider gambling.
Operators would pay a $25,000 registration fee annually.
Rep. John Mizuno, co-author of the bill, told U.S. News & World Report: “We’re all realists here; people gamble everywhere. So if we can regulate it properly and benefit from it — get some of the proceeds to help our most needy — then at the end of the day it’s a win-win.”
The gaming drought in the Aloha State might be followed by a downpour as several bills have been introduced besides Mizuno’s including a proposal for a lottery whose proceeds would help homeless people.
Mizuno said that the recent interest in the largest jackpot in history for Powerball just happened to coincide with the beginning of the legislative session.
“Everything collided to have the perfect opportunity to bring this issue up,” he said.
Recent surveys show that opinion in the state has moved from strongly anti-gaming to a majority supporting a lottery and casino ships operating offshore.
Critics say that a lottery could be regressive, harming some of the poor people that it would purport to help.
Dianne Kay, president of the Hawaii Coalition Against Legalized Gambling declared “We’d like to keep Hawaii like a tropical paradise rather than a gambling destination.”
Mizuno sees some controversy surrounding the lottery, but less so about fantasy sports.
Meanwhile, An Indiana legislative public policy committee is reviewing state Senator Jon Ford’s Senate Bill 339, which would regulate daily fantasy sports websites and establish consumer protections for players. Currently there are no regulations in place regarding daily fantasy sports websites in the state.
Ford’s bill would make it illegal for anyone under 18 to play the games. Also, it would exclude professional players, coaches or referees from betting on the games. Another provision would exclude college games from the websites.
Ford said unlike casino games of chance, daily fantasy sports are based on skill. “A game of skill like daily fantasy sports is based off public information statistics that are out there, so it’s really who can crunch the numbers, the best will win, where a game of chance like poker or roulette will have a systematic chance built into the game,” he said.
The House voted down a similar bill, but Ford said he believes legislators will be open to his new measure.
In Missouri, Governor Jay Nixon said he wants lawmakers to tax daily fantasy sports and regulate the industry like gambling in his recent “state of the state” address. Nixon said taxing daily fantasy sports could raise millions of dollars for education. Several states, including neighboring Illinois, have declared daily fantasy sports betting is illegal.
State Rep. Scott Fitzpatrick filed a bill that would legalize daily fantasy sports wagering. He said he does not consider fantasy sports to be gambling, but rather a game of skill. Fitzpatrick added he is considering several amendments, including one proposing a tax and another requiring players to be at least 18 years old.
In the Senate, state Senator Kurt Schaefer filed a bill that does not tax or regulate the industry as gambling but would include standardized guidelines. “Since it is generally over the internet, it’s going to be more effective if you’ve got kind of a national standard that each state is able adopt if they so choose, rather than going state by state. Some form of regulation is appropriate to make sure that it’s not being abused and participants are appropriate ages. There’s some legitimate issues about people underage getting their parents credit card and getting online. I don’t look at everything out there as some way for the state to get more money,” Schaefer said.
Finally, the Wall Street Journal reports that DraftKings and FanDuel, along with the industry group the Fantasy Sports Trade Association have spent about $10 million to lobby for the industry in at least 34 states. That includes hiring 78 lobbyists, compared to a total of four lobbyists a year ago.
