FanDuel is a web-based fantasy sports game and the largest daily fantasy sports company in the daily fantasy sports industry. The model consists of traditional season-long fantasy sports leagues being compressed into a free and/or paid daily, and occasionally weekly, game of skill. As of April 2016 most U.S. states consider fantasy sports (including daily fantasy sports) a game of skill and not gambling. It was launched by Hubdub, a web-based prediction market game company, on July 21, 2009, after taking in $1.2 million in venture capital funding from Pentech Ventures and Scottish Enterprise. In 2010, FanDuel held its first "FanDuel Fantasy Football Championship (FFFC)." The event consisted of 10 users who won entry into the event by winning a qualifying league throughout the NFL season. First place was awarded $25,000 and the total prize pool was $40,000. On January 30, 2013, FanDuel announced that it had closed an $11 million Series C funding round. The round included new investor Comcast Ventures (the venture capital affiliate of Comcast Corporation), along with previous investors Piton Capital, Pentech Ventures, Bullpen Capital and serial investor Richard Koch. In September 2014, the company announced $70 million in Series D funding. The round was led by Shamrock Capital Advisors with participation from NBC Sports Ventures and KKR. Previous investors Bullpen Capital, Pentech Ventures and Comcast Ventures also participated. In July 2015, FanDuel announced a Series E funding round of $275 million leading the company to be valued at over a billion dollars. Shortly after announcing the fundraise, FanDuel acquired sports analytics company number Fire. In September 2015, FanDuel acquired the e-sports focused DFS service AlphaDraft.
FanDuel is using a marketing strategy that was adopted in the 1900s by a small drugstore in North Dakota, Wall Drug. The Wall Drug Marketing Strategy, taught in almost every marketing textbook and college marketing classes, is all about showing the consumer an overwhelming amount of advertisements until it is so engrained in their minds that they act. FanDuel has been showing so many commercials on television that ispottv, a company that tracks the amount spent on television commercials and the amount of commercials shown, has FanDuel listed as number one in market spending. This marketing strategy is directly related to the considerable amount of revenue FanDuel has made. Up until the legal trouble that FanDuel encountered, it was one of the fastest growing companies in America. FanDuel and DraftKings spent a combined $150 million on TV and internet advertising in the third quarter of 2015 which included the beginning of the football season. In the late summer of 2015 before the start of the NFL season there was on average a commercial every 90 seconds.
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There is controversy regarding whether or not daily fantasy sports constitutes gambling. In most US states, fantasy sports (including daily fantasy sports) is generally considered a game of skill and therefore not considered gambling. However, some states, such as Arizona, Montana, Louisiana, Iowa and Washington, either use a more restrictive test of whether a game is one of skill or have specific laws outlawing paid fantasy sports. Despite not being considered as gambling in most states, in 2015, the NCAA banned student athletes from participating in daily fantasy sports, while the NFL limited the amount of money its players could win from DFS. Many states have ruled that FanDuel and DraftKings do not operate within the state’s gambling laws. As of May 4, 2016, any residents of Arizona, Iowa, Louisiana, Mississippi, Montana, Nevada, New York, Washington and Idaho are not allowed to register on their sites. The most recent of these being Idaho. The Attorney General Wasden said, “The concern I have is that the paid daily sports offerings provided by these companies constitute gambling under Idaho law, however, they are still allowed to offer free-to-play contests, but most users are registered for the chance to win big. Texas will be the next state to make a decision. FanDuel voluntarily stopped offering its services in the state in May 2016, but DraftKings is still moving forward with court hearings. With the loss of Texas, and most recently Idaho, FanDuel now operates in only 75% of the U.S. population.
FanDuel has been the target of accusations over insider trading in the daily fantasy sports industry. In October 2015 The New York Times reported that en employee of DraftKings inadvertently released data before the start of the third week of NFL games and won $350,000 on the FanDuel website. It was later released that DraftKings employees have made $6 million on the FanDuel website. DraftKings has stated that the employees could not have used their information to make decisions about FanDuel lineups, but data shows that DraftKings employees have won 0.3% of the $2 billion of prize money that FanDuel has given out. Also, 91% of the player profits at DraftKings and FanDuel were won by just 1.3% of players on the website. FanDuel and DraftKings have since prohibited their employees from playing in contests for money on rival websites.
