One year after taking over the fantasy football world, DraftKings and FanDuel are reportedly running out of cash and can't pay their vendors

High-profile daily fantasy companies DraftKings and FanDuel are dealing with severe cash flow problems and are months behind paying vendors, The New York Times reported on Sunday.

According to Joe Drape of the Times, the two companies are nearing a settlement with New York attorney general Eric Schneiderman in which they will acknowledge false advertising and pay between $8 and $10 million.

Last year, both companies spent hundreds of millions of dollars on ads that promised pay-outs for everyday fans, though the Schneiderman’s office found that 94% of users lost money as a result of the “sharks and minnows” problem.

But because of problems with cash flow, Drape reports, the two companies have asked to pay their settlement fees in monthly installments.

From the NYT:

“DraftKings and FanDuel are so short of cash, according to the two people familiar with the negotiations, that they have asked Mr. Schneiderman’s office if they can pay the final settlement in installments, and they have conceded that they are having difficulty meeting their day-to-day obligations.”

The problems don’t stop there. Drape added that FanDuel has laid off more than 60 people, while both companies are behind on payments to vendors.

From the Times:

“Within the past three weeks, the New York-based FanDuel has laid off more than 60 people, and both companies have acknowledged that they are months behind in their payments to vendors, especially to the array of public relations and lobbying firms that they have employed across the nation to persuade individual state legislatures to legalise daily fantasy games — the most critical component of rebuilding their business.”

Rumours have swirled since the summer that the two companies are trying to merge, and although the companies have denied the speculation, Drape reported that they are trying to merge “as soon as possible.”

FanDuel offered the following statement to Business Insider:

“While we can not comment on the details, we can confirm that we have been in ongoing settlement negotiations with the New York Attorney General’s office. They have been tough but fair and we hope to reach an acceptable resolution.”

DraftKings was not immediately available for comment.

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