The two companies made the announcement Friday, saying the combined organization would be able to reduce costs as they work to become profitable and battle with regulators across the country to remain legal.
Florida struggled with fantasy sports last legislative session, ultimately letting die a measure that would have explicitly legalized online fantasy play.
A 2006 federal law banned online gambling but specifically exempted fantasy sports, paving the way for the creation of the niche industry that’s since exploded in popularity.
The companies have have raised millions of dollars through investors and sponsorship deals, but state attorneys general, lawmakers and regulators have questioned whether their online games — in which players pick teams of real-life athletes and vie for cash and other prizes based on how those athletes do in actual games — amount to illegal sports betting.
The companies said in their statement that the merger, which still requires federal approval, would help them more efficiently lobby policymakers for a “standard regulatory framework” for the relatively new industry, which grew out of the traditional season-long fantasy sports competitions played by millions of Americans.
The deal, which has been rumored for months, has raised questions among analysts about whether the merging of two companies that represent about 90 percent of the daily fantasy sports market would violate federal anti-trust laws.
Larger companies like Yahoo, ESPN, and CBS Sports dominate the broader fantasy industry, but are relatively small players in daily fantasy.
The combined company is expected to be co-headquartered in New York and Boston under the agreement. DraftKings is currently based in Boston and FanDuel in New York.
— Capital correspondent Jim Rosica contributed to this post.