The fall of DraftKings might come as quickly as its sudden rise. The latest reports show that the daily fantasy sports operator is asking its major league sports partners to allow it to pull back in terms of advertising. The company is facing legal obstacles in several states, with some states having already outlawed the company.
DraftKings has spent extremely large sums of money on signs, lounges, jumbotron ads, and television spots. The company reached agreements with players’ unions to have real sports superstars featured in their ads. Now because of the murky laws associated with daily fantasy sports, it could soon all come crashing down. Many people associate daily fantasy sports with illegal gambling.
Recently, DraftKings asked its partners of the National Basketball Association to delay roughly 10% of the company’s payments that had already been committed. The company also wants to cut back on advertising, requesting that its ads show up in arenas and on television less often. The move is clearly a desperate bid to save money that it does not have.
But there’s also another reason besides simply saving money. DraftKings is also likely trying to lower its profile. The company has been criticized for offering a form of illegal gambling, and many states are starting to shut down its services. It is probable that the company simply wants to try to fly under the radar. However, DraftKings has denied this, saying that it had planned all along to cut back on advertising at this point in the season.
DraftKings said in a statement, “We have good relations and are in good standing with all of our partner teams. We are always in dialogue with them, including now.”
As for the company’s legal woes, DraftKings has hired Boies, Schiller & Flexner LLP to represent it in court. It is very likely that the company could soon be subject to a long and expensive legal battle. Needless to say, the company’s entire business model will be at stake if and when this happens. It’s no surprise that the company would try to stock up resources for this legal endeavor.
Earlier this week on Tuesday, New York Attorney General Eric Schneiderman stated that daily fantasy sports are a form of illegal gambling. He ordered the website to stop accepting payments from people in New York. The company has also faced challenges in California, Massachusetts, Nevada and other states.
DraftKings has said that the company will fight Schneiderman’s ruling in court. Still, this looks like it could be the beginning of the end for DraftKings and daily fantasy sports.