David Shapton, a partner at Akur Capital, has put this down to to the current uncertainty over how the real-money daily fantasy sports (DFS) market should be regulated.
DFS operator FanDuel announced it had closed $275m in Series E financing in July, with investment coming from investment firm KKR, Google Capital, Time Warner Investments Group and sports programming operator Turner Sports.
DraftKings, a competitor of FanDuel, confirmed later in the same month it had secured $300m in Series D financing, where the round was led by FOX Sports, while other investors included Major League Baseball, the National Hockey League and Major League Soccer.
Bills relating to the regulatory status of fantasy sports have either been introduced since then, or are set to be introduced, in various US states, including California, New York and New Jersey.
From what I understand, the current situation puts much of that investment on hold.David ShaptonThe Nevada Gaming Control Board revealed in October it had ruled that operators are not permitted to offer real-money DFS contests without holding a licence to operate a sports pool issued by the Nevada Gaming Commission.
Shapton spoke about the issue at the iGaming Entrepreneur Conference in London, and said that much of that funding will not materialise for the time being.
When asked by Gambling Insider about the riskiness for investors wishing to invest in DFS operators in light of various regulatory issues at this time, Shapton said: “The trickiest thing for the likes of FanDuel and DraftKings at the moment is their funding, because their businesses have been built in an arms race to take market share.
“From what I understand, the current situation puts much of that investment on hold. I don’t know precisely how much capital those two businesses have free and available right now, but from what we understand via advertisers and others, that capital is being reigned back in for a period of time until that situation is cleared up.
“One could look at this hiatus, if you like, as an opportunity for other daily fantasy sports innovators to try and gain a foothold in the market, particularly if they see a market opportunity outside of the US.”
It emerged last week that FanDuel has applied to the UK Gambling Commission (UKGC) for a licence to operate in the country, with UKGC’s website showing that FanDuel’s application status is “pending”.
Bloomberg reported FanDuel CEO Nigel Eccles as saying that FanDuel will not offer a traditional sports-betting product in the UK, but may develop a subscription-based service as opposed to a series of individual games where players pay entry fees to play in them.
It was announced in August that DraftKings expects to launch in the UK in the fourth quarter of this year after being granted a UK licence, with launches in other markets, including Europe, the Asia Pacific region and Latin America, planned for next year.
