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DraftKings, FanDuel reportedly in talks to merge

Talk of possible tie-up comes amid questions about the legality of the daily fantasy sports sites.

Scott Olson, Getty Images

DraftKings and FanDuel, the two biggest daily fantasy sports sites, are said to be huddling over a possible merger as they confront scrutiny over the legality of their operations.

Investors in the two privately held companies are pushing for a partnership of some type, Bloomberg reported Monday, citing anonymous sources described as familiar with the situation.

The daily fantasy sports industry has experienced huge growth in recent years, generating an estimated $2.6 billion in entry fees in 2015 alone, according to Eilers Research. But that rapid growth has led to questions about how such contests, which offer cash prizes to contestants who compete in abbreviated daily versions of the traditional season-long fantasy sports leagues, might be violating state gambling laws.

As a result, DraftKings has agreed to stop accepting paid entries in nine states, while FanDuel has closed up shop in 10 states.

About a year ago, the two companies had venture capital valuations of more than $1 billion each, Bloomberg reported. Since their operations came under regulatory scrutiny, those valuations have been cut in half, the news outlet reported.

DraftKings and FanDuel declined to comment.