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Two members of the United States Senate have sent letters to the Federal Trade Commission (FTC) and the Department of Justice (DOJ), requesting formal investigations into allegations of antitrust law violations against DraftKings and FanDuel. While such investigations have not yet begun, the situation has the potential to affect the landscape of online casino gaming in the US.
DraftKings and FanDuel have a dominant combined market share in online sports wagering across the US. That duopoly seems to underlie the call for an antitrust investigation. Their stranglehold isn’t quite as tight when it comes to the online casino vertical, where they are in a three-way race with BetMGM.
Nonetheless, the companies’ sports betting and online casino products are so tightly entwined that what affects one is bound to impact the other. Punitive actions by the DOJ or FTC against DraftKings and FanDuel could also cause the two companies to make changes in how they allocate resources between the products. For instance, actions narrowly targeting sports betting marketing spend could induce the companies to spend more on promoting their online casinos instead.
Lee, Welch make case for investigations
The senators behind the letter are Mike Lee (R-Utah) and Peter Welch (D-Vermont). Lee shared screenshots of the letter on his X account on Friday, Dec. 6.
The letter makes the case for the investigations, stating that DraftKings and FanDuel “expanded their dominance by leveraging their positions in fantasy sports to become online sports betting giants.” The letter does not give specific instances of when DraftKings and/or FanDuel have put pressure “on business partners to not work with” competitors.
Lee and Welch are correct about the combined market share of DraftKings and FanDuel when it comes to online sports wagering, though.
Michigan as an example of the US gambling market
Michigan is a solid indicator of the market for regulated online gambling because it consists of multiple licensees, has strong interest with local casinos and sports teams, and has a decent population demographic mix. The numbers from October 2024 for online wagering show DraftKings’ and FanDuel’s presence in Michigan.
During that month, DraftKings and FanDuel combined accounted for nearly seven out of every 10 dollars bet on sports. DraftKings and FanDuel also accounted for the same portion of dollars that licensed Michigan online sportsbooks held onto in October 2024.
The same dominance does not translate to regulated online casino play in Michigan, though.
In October 2024, DraftKings Casino and FanDuel Casino were two of the top three brands in Michigan in terms of taxable revenue. BetMGM Casino had the second-highest total for the month, falling just about $10,000 off FanDuel’s lead but finishing over $16 million ahead of DraftKings.
If you add in the revenue from DraftKings-owned Golden Nugget online casino for the month, it’s a competitive three-horse race in Michigan. BetMGM’s place near if not at the top has been a common occurrence in the state for online casino win.
The combined win from DraftKings, FanDuel, and Golden Nugget accounted for around 47.7% of the statewide win total for online casinos in October 2024. While DraftKings and FanDuel do not have the same control over the tremendously more lucrative (compared to sports betting) online casino market in the US, that might not matter for Lee and Welch’s concerns.
Investigations could focus on sports wagering
To date, neither the DOJ nor the FTC have announced any investigations. With an incoming change in administration and the confirmation process to play out yet, it could be some time before officials make decisions on Lee’s and Welch’s request.
If investigations proceed, there will be a high standard for taking action against DraftKings and FanDuel in terms of paring down their online sportsbooks. Legal precedents for the US federal government regulating e-commerce to protect competitive interests are few and still developing.
Fines are possible along with demands for DraftKings and FanDuel to cease any actions that courts deem anti-competitive. While breakups of DraftKings’ and FanDuel’s sports betting operations are theoretically possible, that’s an extraordinary step that the US government has rarely taken.
Such a shift in DraftKings and FanDuel’s sports betting businesses may inspire the two companies to double down on their online casino products.
Spurring investment into online casino platforms
DraftKings and FanDuel already prize their online casino products. It was the main motivation for DraftKings to acquire Golden Nugget online gaming and FanDuel parent company Flutter stresses that its expectation for FanDuel is to be the top online casino operator in the US.
That’s understandable given how much more lucrative and reliable online casino revenue is compared with sports betting. Additionally, the ceiling is much higher in terms of growth, as just 11% of the US population has access to a regulated online casino platform where they live in 2024.
A devaluation of the sports betting vertical for DraftKings and FanDuel could push them even harder into lobbying for online casino expansion, marketing those products in existing jurisdictions, and acquiring competitors. In other words, antitrust actions against their sports betting businesses might just accelerate DraftKings’ and FanDuel’s existing plans.
