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FanDuel: reality check for fantasy games firm

Terry at ExchangeThere was a packed house at Dynamic Earth last month when two of Scotland’s most talked about company leaders agreed to a rare speaking engagement together.

Grilled by home-grown entrepreneur Chris van der Kuyl, the so-called “unicorn” bosses, Nigel Eccles of FanDuel and Skyscanner’s Gareth Williams, fielded questions on their growth and aspirations.

What Mr van der Kuyl, chairman of Entrepreneurial Scotland, didn’t ask Mr Eccles was how and why FanDuel was being dragged into a range of controversies in its main market.

Readers of Daily Business will be familiar with how FanDuel, which began life in Edinburgh just eight years ago, has raised millions of dollars to fuel its rapid growth in the lucrative US fantasy sports sector. It is now co-headquartered in New York and pays out billions in prize money to fans who cannot get enough of the biggest craze sweeping America.

The rise of FanDuel and its big rival DraftKings has also drawn the attention of the anti-gambling lobby and in particular a US congressman who has called for an inquiry to investigate whether fantasy sports breach online gambling laws.

This led to one television channel banning FanDuel’s advertising – announced on the day that Mr Eccles was telling his Edinburgh audience (below) that his company was among the top five US television advertisers. There is some nervousness over the issue at ESPN, owned by Disney.

The latest controversy surrounds allegations that an employee of DraftKings used inside information to win a six-figure prize on a FanDuel game. Americans familiar with sharp practices on Wall Street have dubbed this a form of “insider trading”.

Both companies have denied any wrongdoing but they have banned employees from using information in this way.

Entrepreneurial Scotland Eccles Williams Van der KuylFor Mr Eccles, the drip-drip of negative headlines will be regarded as a constant reminder that the rapid growth of the sector and the company could quickly evaporate if the legislators and television executives start to get tough.

There is increasing talk that fantasy sports will be subject to tighter regulation.

Anti-gambling campaigners say the law is a mess and that allowing fantasy games companies to opt-out of the legislation by claiming they are selling games of skill is a nonsense as they require no more skill than studying the form of horses at the racetrack.

Mr Eccles, who enjoys rock star status among Scotland’s business community, declined to comment when Daily Business asked him about all of the above after his address at Dynamic Earth.

He also played down speculation about a flotation. No wonder. With these continuing doubts surrounding fantasy sports he would have to prove to any potential investor that there are no big obstacles in the way of further growth and that the company’s $1 billion valuation – which defines a unicorn – is not a fantasy figure.

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