DraftKings Seals $150 Million in Funding Amid Legal Battlesby
VC co-founded by owner of Washington Capitals joins investors
Daily fantasy sports site still faces regulatory hurdles
Fantasy-sports company DraftKings Inc. closed $150 million of new funding Thursday in an oversubscribed round that included Revolution Growth, the venture firm co-founded by sports magnate Ted Leonsis, according to Chief Executive Officer Jason Robins.
The fresh capital builds upon previous funding from investors including the Kraft Group, which owns the New England Patriots, Madison Square Garden Co. and a venture arm of Major League Baseball. Washington-based Revolution joined in this round and added partner Steve Murray to DraftKings’ board. Leonsis is majority owner of the National Basketball Association’s Washington Wizards and the Washington Capitals of the National Hockey League. Revolution also is an investor in Sportradar, a Swiss sports data startup.
Fortune reported earlier citing people familiar with the funding for DraftKings that the $150 million was raised at a lower valuation than a prior $2 billion value for the closely held fantasy-sports site. DraftKings raised funds at a valuation of more than $1 billion in July 2015. Revolution declined to comment on valuation. DraftKings spokeswoman Sabrina Macias didn’t immediately respond to an e-mail seeking comment.
Boston-based DraftKings and its New York-based competitor FanDuel Inc. have faced legal battles over whether their fantasy sports sites constitute illegal gambling. The two companies have disputed that charge, saying their websites offer games of skill rather than chance, and have made headway with regulators, most recently gaining approval to operate from New York State legislators. The regulatory roadblocks have nonetheless halved valuations within the past year, a person familiar told Bloomberg in June.
The new funding will help boost DraftKings as it heads into football season, its busiest time of year. Despite the recent win in New York -- the largest U.S. market for daily fantasy sports, according to a 2015 poll -- the state’s Attorney General Eric Schneiderman plans to pursue claims about false advertising and consumer fraud, posing further regulatory risk.
In a statement, Murray said Revolution seeks out companies that can disrupt multibillion-dollar industries like sports, adding the firm can help DraftKings in areas where “sports and policy intersect.”
Revolution is “a tremendous new partner,” Robins said in a statement, with “an entrepreneurial outlook and spirit of innovation that meshes perfectly with the culture of our company.”