Fantasy Sport Firm FanDuel Warns Of Threat From US Regulations
One of Scotland's leading technology companies has alerted it may not have the ability to continue as a going concern due to legal challenges in its American market.
FanDuel was set up in Edinburgh, where much of its technology is developed.
Its headquarters were relocated to New York to make it more of an American company in attracting a large US and Canadian market for dream sports.
It has become one of the two giants of that sector, together with US-based Draft Kings.
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They supply an innovation platform for fans of the 4 primary American sports to choose fantasy groups from genuine players, and follow their performances. Changes are permitted from day to day, which assists drive more traffic than fantasy teams which are repaired for a season, and there are substantial prizes available.
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The dream sports companies have actually come under pressure from civil cases in addition to state regulators and lawmakers, with reliable ban on the online games as being based upon chance rather than ability.
Facing action from legal authorities, FanDuel has actually had to unwind its activities in Texas from the start of this promotion code month and in New York State for the previous 2 months.
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Recently, members of the US Congress in Washington DC began an examination into the market. And with unpredictability about its legality, the companies have faced barriers from at least one payment processing company that are an important conduit to their revenue.
The audited accounts have simply been and state that the legal difficulties called into question the continued solvency of the business.
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So far, the limitations on its activities have only affected states which represent less than half of its income. Attorney generals in a number of states have recommended that dream sports are unlawful, 5 state legislatures have passed laws to clarify the legal position, with more anticipated.
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But auditors alert that if there is a rise in the share of the marketplace blocked by legal doubts, "such a possibility represents a material unpredictability that casts considerable doubt on the group's ability to continue as a going concern".
Substantial funds
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FanDuel "considers itself to be running legally, is presently protecting its position and therefore the directors have affordable expectations that the group has sufficient resources to continue for the foreseeable future."
The accounts say it is making contingency plans, consisting of a cut in variable costs, likely to include marketing, advertising and prize money, as well as delaying some operating expense payments.
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The most current accounts cover the 18 months to the end of June last year, before a blizzard of marketing and promo last fall accentuated the scale of business, and started the legal challenges.
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During that time, FanDuel had turnover of $87.7 m (₤ 61m), up from $12m (₤ 8.3 m) in the preceding 12 months.
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The variety of active players increased from 253,000 during 2013 to 1.25 m to the middle of 2015.
Between January 2014 and June 2015, it paid $102m (₤ 71m) in "service charge", and invested greatly on a strong fight to develop market share.
There was an operating loss for the 18 months to last June of $77.7 m (₤ 54m), up from $10.3 m (₤ 7m) throughout 2013. It continued to raise substantial funds through providing equity, and remains in discussions on more investor fund-raising.
Facing the danger of being shut down by guideline and law, the company has actually cut its cash balances from around $274m (₤ 190m) in the middle of in 2015 to less than $48m, which it says should be appropriate to keep it trading for an additional 12 months - presuming it succeeds in its legal defence.