Questionable validity
US investment bankers Stifel Financial Corp has put a sock in all the noise surrounding a federal petition against DraftKings and FanDuel by branding the claims as having “zero validity.”
negligible risk of enforcement.”
Stifel’s Managing Director Equity Research Jeffrey Stantial in a Monday note stated the petition by two US Senators calling on the Federal Trade Commission to investigate anticompetitive practices by the two brands had a “negligible risk of enforcement.”
The analyst’s insight pours cold water on the petition that one of its authors, Senator Mike Lee (R-Utah), publicly shared on X while tagging outgoing FTC Chair Lina Khan:
Along with Lee, Senator Peter Welch (D-Vermont) stated in the letter to the FTS that both gambling brands “arguably acted as one company.”
The senators believe more competition in the market is good for customers and that DraftKings and FanDuel “should be investigated for practices that could harm the sports betting industry and limit choices for users.”
On the back of this news, shares in both firms dropped Monday with DraftKings down 4% and FanDuel’s holding brand Flutter down 3.2%.
The accusations
Stifel analysts meanwhile picked apart the claims made by the petition to the FTA.
The letter written by the two senators infers that Boston-based DraftKings colluded with its New York counterpart via their Sports Betting Alliance (SBA) link. Lee and Welch allege the SBA was behind moves by regulators to ban pick ’em daily fantasy sports games in some US states.
According to Legal Sports Report, however, the claims made in the letter from the senators cites questionable source information. Stantial backed this up stating Stifel sees “zero validity to the claims.”
The analyst added that if the two brands were in cahoots, then “rational behavior rational duopoly behavior would have seen both operators adopt DraftKings’ proposed tax surcharge.”
DraftKings introduced a controversial surcharge on sports bet winnings in high tax states in August, but scrapped the idea after FanDuel and multiple other US sportsbooks refused to follow suit.
Small risk
Stantial believes the tenuousness of the claims will be aided by another key factor and lead to “a negligible risk of enforcement” against DraftKings or Flutter from the FTC.
The other key factor is the forthcoming transition in FTC leadership. Incoming US President Donald Trump has appointed Andrew Ferguson to take over the Chair from Lina Khan.
FTS “will operate with a lighter touch”
In his role as FTC head, Khan blocked billions of dollars worth of corporate takeovers and sued both Amazon and Meta over alleged anti-trust activity. According to CBS, the replacement of Khan at the commission likely means that the FTS “will operate with a lighter touch when it comes to antitrust enforcement.”