Uneven Playing Field: Regulatory Capture Threatens Monopolization in Online Gaming

Since the onset of daily fantasy sports (DFS) in the 2010s, the market has seen dramatic growth. Today, over 50 million Americans participate in DFS, demonstrating strong consumer demand for online sports gaming. In recent years, DFS has seen dozens of new entrants that have diversified product offerings and formats. 

Now, dominant players like FanDuel and DraftKings, who were once pioneers in DFS, are exploiting their market position to kill their new competition through unfair lobbying and legal pressure. Most recently, in Arkansas, the Department of Finance and Administration sent cease and desist letters to two upstart DFS companies, PrizePicks, and Underdog, claiming they are offering unlicensed sports betting in The Natural State. Reportedly, the regulator did not even speak to the companies before sending the letter.

These tactics have a clear goal: remove competitors from the market. That would inevitably mean higher prices, less choice, and less innovation, threatening the varied ecosystem that has emerged to give consumers what they want.

Gaming regulators have a relatively simple mandate: protect consumers from fraud, ensure healthy competition, and enforce the rules equally among all market participants. The popularity of new fantasy sports contests suggests that people want more choices. If regulators enable—or worse, abet—the attempts of FanDuel and DraftKings to crush competition, it not only violates the principles of antitrust, it is a dereliction of their duty as regulators. The actions of Arkansas and other states suggest that many state gaming regulators have been captured by DraftKings and FanDuel—acting as their agents rather than impartial market cops.  

There are also concerning signs of anti-competitive coordination between DraftKings and FanDuel, with groups like the Sports Betting Alliance and the Fantasy Sports Alliance pressuring states on behalf of major players to clamp down on upstarts. While companies are generally prohibited from colluding and coordinating, these trade associations could be serving as a mechanism to circumvent those rules. This apparent interference to block new entrants raises serious antitrust issues that merit investigation by state attorneys general and federal antitrust regulators at the Department of Justice and Federal Trade Commission

Recent market entry and new DFS formats are responding to consumer demand for more options and fresh thinking. Heavy-handed over-regulation at the apparent behest of dominant incumbents serves no one except those incumbents’ bottom lines. Regulators should resist being co-opted into creating an uneven playing field and should instead scrutinize anti-competitive lobbying and coordination efforts.

The fantasy sports industry needs parity where innovation can flourish, not over-regulation protecting monopolies. Dominant players should have to compete on product quality rather than using backroom influence to eliminate their competition. It's past time that regulators investigate mounting signs of collusion and take action to protect consumers from the stagnation and price hikes that inevitably flow from monopolization.