DraftKings has come a long way since its foundation in 2012. The daily fantasy sports company is considered one of the two most popular in the industry next to FanDuel and with over $1.5 billion of prize money paid out, the betting organization has acquired a lot of fans over the years.
However, recently there have been a lot of headlines about the struggles the company is going through, one of which is its involvement in the eSports industry.
Was DraftKings’ eSports foray bad timing?
According to a recent article by dailydot, DraftKings has apparently dropped sponsorships from major eSports organizations. The organizations mentioned are Cloud9, Team SoloMid, Counter Logic Gaming, compLexity Gaming, mousesports, and SK Gaming, which are among the most popular ones in the scene.
That partnership, which started in September last year, was supposedly a multi-million dollar deal and was brokered by sports management agency WME|IMG and was similar to the way DraftKings has partnered with key figures in other professional sports. Now that this “cooperation” has come to an end, the DraftKings logo has been removed from each teams’ jerseys and websites.
The question at hand is whether DraftKings entered the eSports scene too soon or was it just bad timing.
Persistent legal issues cast long shadow
DraftKings entered the competitive gaming industry in September of last year, which happened alongside the League of Legends World Championship held in October and was the company’s first dip into the universe of eSports betting.
Looking at the eSports industry itself, which, according to market research company SuperData, is worth $748 million and had a viewership of 188 million in 2015, it made perfect sense to expand the company’s business to the “spin-off” daily fantasy eSports market and capitalize on its growth.
But DraftKings has had some major setbacks lately, with multiple states (Georgia, Illinois, New York, Arizona, Iowa, Louisiana, Montana, and Texas) ruling that daily fantasy sites are illegal gambling – and Nevada declaring daily fantasy sports to be gambling that requires a license – which consequently also applied to the company’s operations in the eSports betting industry.
This has resulted in unexpected financial issues for the company, a potential reason for pulling back its cooperation with major eSports organizations.
The company also ran into some trouble with Citigroup Inc. in the beginning of February, which blocked transactions by New York state residents. Some other financial service companies have also blocked transactions from daily fantasy sites, saying that the reason for the move was “uncertain regulatory and judicial environment around these operations,” and that they are “monitoring the situation closely.”
Additionally, a recent Yahoo Finance article stated that ESPN has dropped its exclusive advertising partnership with DraftKings. The reason behind this move is apparently a cost-cutting measure initiated by DraftKings, the report said, as an attempt to shift resources toward fighting its mounting legal battles.
Judging from all of the above, it is clear that until the legal issues around the topic are clarified, the company could keep running into trouble.