Amid a major "insider trading" scandal that has rocked the multibillion-dollar daily fantasy sports industry, investors are wondering whether the FanDuel IPO date will be affected. No official FanDuel IPO date has been set, but many believe a deal could take place in 2016.
FanDuel and rival DraftKings both released statements Monday in defense of their businesses and integrity.
The statements were released after a DraftKings employee admitted to unintentionally releasing data before the start of the third week of NFL games. The DraftKings employee, who happens to be a midlevel content manager, won a whopping $350,000 on FanDuel that same week.
"It is absolutely akin to insider trading," Daniel Wallach, a sports and gambling lawyer at Becker & Poliakoff, told The New York Times. "It gives that person a distinct edge in a contest."
The incident has raised serious concerns about the legitimacy of the daily fantasy sports industry, which is growing incredibly fast...
Some 56 million people in North America play fantasy sports, according to STATS Inc. estimates.
About $18 billion is spent annually on fantasy sports, according to CNNMoney. In comparison, $140 billion is wagered on traditional sports. Roughly $70 billion is shelled out for lotteries.
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Wealthier sports fans are also more likely to play. About 16% of people with incomes of $50,000 or more play fantasy sports. Meanwhile, only 10% of people who earn less than $50,000 participate.
The scandal has angered small- and big-pocketed betters, as well as politicians.
While Congress hasn't tackled the issue, a number of state legislatures have. Arizona, Iowa, Louisiana, Montana, and Washington have all made the practice illegal. Elsewhere, wagering on fantasy sports is not considered gambling because it is "a game of skill."
FanDuel, as well as DraftKings, have since banned employees from playing daily fantasy sports.
Still, the timing of the scrutiny is awful and could lead to a delay in the FanDuel IPO date...
FanDuel IPO Date Could Happen in 2016
A FanDuel IPO could be one of 2016's largest initial public offerings. The company is already valued at roughly $1.3 billion.
One of the fastest growing companies in the world, FanDuel has raised $363 million since its 2009 founding. The most recent round of funding occurred in July 2015.
The company has not provided specifics on a FanDuel IPO date. But CEO Nigel Eccles said in late 2014 an initial public offering could take place within the next two or three years.
In damage control mode, FanDuel issued the following statement Tuesday:
"Based on everything we know thus far, there is no evidence indicating that the integrity of FanDuel's contest was in any way compromised, or that non-public information was used for unfair advantage. That said, the incident has raised questions about the trust-based relationship we have with our players so just relying on what we know right now isn't enough. That's why we're taking the following steps."
Those steps include:
- Banning employees from playing on any daily fantasy site;
- Hiring former federal judge and U.S. Attorney General Michael Mukasey to conduct an internal review of the company; and
- Creating an internal advisory board that will provide on-going advice, recommendations, and guidance to ensure that FanDuel always takes every step possible to ensure the site's and its games' integrity as it continues to grow.
While the scandal represents a major hurdle for the company, a 2016 FanDuel IPO is still a possibility. And regardless of the final FanDuel IPO date, the deal will be one of the year's biggest.
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Related Articles:
- The Wall Street Journal: Critics Raise Heat on Sports-Fantasy Sites DraftKings, FanDuel
- The New York Times: Scandal Erupts in Unregulated World of Fantasy Sports
- ESPN: FanDuel Permanently Bans Employees from Playing DFS for Money amid Inquiry