Federal and state officials on Monday moved to block the merger between DraftKings Inc. and FanDuel, arguing the combination would harm competition by locking up 90% of the daily fantasy sports market in the U.S.
The Federal Trade Commission said it would file suit seeking a court injunction to stop the deal, joined by the attorneys general of California and the District of Columbia.
"This merger would deprive customers of the substantial benefits of direct competition between DraftKings and FanDuel," said Tad Lipsky, acting director of the commission's competition bureau.
DraftKings, based in Boston, is the largest daily fantasy sports company based on entry fees and revenues, the FTC said. FanDuel of Scotland is No.2.
Customers pay a fee to select a lineup of professional athletes, then compete for daily prizes based on their on-field performance. DraftKings and FanDuel compete to offer the best prices, largest prizes and greatest variety of contests, the FTC said.
In a joint statement, DraftKings Chief Executive Jason Robins and FanDuel Chief Executive Nigel Eccles said they would "work together to determine our next steps."
"We are disappointed by this decision and continue to believe that a merger is in the best interests of our players, our companies, our employees and the fantasy sports industry," they said.
Other fantasy sports contests involving competitions over an entire professional season are not likely to be "a meaningful substitute for paid daily fantasy sports," the commission said.
The FTC voted 2-0 to authorize its staff to seek a temporary restraining order and preliminary injunction in federal court.
Some state officials have complained that the competitions amount to illegal sports betting and have banned them. California has not banned them.
In January 2016, the California state Assembly approved a bill licensing daily fantasy sports sites to operate in the state, but the legislation was never taken up by the state Senate.