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FanDuel CEO says no IPO until regulatory clarity: DFS sites targeted by patent troll?

TAGs: daily fantasy sports, fanduel, Nigel Eccles, patent troll

fanduel-ceo-no-pioThe CEO of daily fantasy sports operator FanDuel says he won’t push to take the company public until the regulatory landscape becomes clear.

Speaking to Bloomberg Business, FanDuel CEO Nigel Eccles (pictured) said plans for an initial public offering had been shelved because the ongoing push by US state and federal legislators to impose regulations on the DFS industry – not to mention all those criminal investigations – had created an unacceptable level of uncertainty in the minds of investors.

Eccles said that an IPO would only work if the company could show it was generating both growth and profits, and while the company has undergone significant growth this year, profits remain elusive. Eccles insists that FanDuel would be profitable were it not for its relentless TV ad spending over the past two months, which even Eccles admits went a little overboard. Eccles vowed to focus on less expensive digital advertising in the future.

That may solve the profit part of the equation, but the growth part is hard to argue at the moment, as both FanDuel and rival DraftKings just reported their third straight week of declining participation. Eccles maintains that the 13% decline in participation since the site’s Oct. 11 peak was a seasonal phenomenon and predicted that the coming weekend would be the biggest in the site’s history.

Eccles poured cold water on a potential Fanduel-DraftKings merger, which DraftKings CEO Jason Robins has publicly suggested would benefit both companies. Eccles says a merger would force his company to take on deals it has loudly criticized, including the one requiring DraftKings to spend $250m advertising with the Fox Sports Network. Eccles said he “can see why [a merger] would be attractive to [DraftKings]. I don’t know why they think it would be attractive for us.”

DRAFTKINGS, FANDUEL HIT BY PATENT INFRINGEMENT CLAIM
Meanwhile as if the multitude of class action lawsuits brought by DFS players and NFL players wasn’t enough, the Boston Herald reported that DraftKings and FanDuel are now being sued by Virtual Gaming Technologies Inc, which purports to be a Texas-based gaming systems developer.

The Herald reported that VGT has sued both DFS operators in a Texas federal court, alleging infringements on patents invented by William W. Junkin, who is described as “a pioneer in the interactive computer gaming industry.” According to Junkin’s LinkedIn profile, he was the CEO of a fantasy sports company named FantaSports in the 1990s and currently serves as the president of FantasySports.com, “a new web 2.0 fantasy sports platform.”

Junkin’s patents include an “interactive system allowing simulated or real time participation in a league” and an “interactive system allowing real time participation,” both of which date back to the 1990s. The suit alleges that Junkin’s technology is being used “without attribution or compensation” by both DFS operators as well as by “many of the world’s largest gaming companies.”

It’s worth noting that the US District Court for the Eastern District of Texas accounted for over 44% of all patent cases filed in the first half of 2015, most of which are filed by so-called patent trolls, according to the Electronic Frontier Foundation. The East Texas court has traditionally made it far more difficult for defendants to obtain summary dismissal of claims based on overly abstract ‘do it on a computer’ patents.

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