Daily fantasy sports (DFS) industry giant DraftKings, Inc. has acknowledged a recent report that Vantiv Entertainment Solutions, one of the company’s payment processors, is cutting ties.
The report was made by the New York Times on January 29, 2016. Vantiv not only provides payment processing for DraftKings but also for a number of DFS companies, including FanDuel, Inc., DraftKings’ leading competitor. Vantiv plans to end its business with all DFS clients by February 29, 2016.
The processing company’s decision to cut ties with DFS is related to the legal firestorm surrounding the gambling activity. In September 2015, DraftKings and FanDuel were accused of engaging in insider trading activities. Following the accusations, DFS business operations have faced challenges and scrutiny under the laws of many states. If a gambling activity is found unlawful in a particular state, those involved may be prosecuted under federal anti-gambling statutes, which carry heavy criminal and civil penalties, such as asset forfeitures. Payment processing companies are not excluded from prosecution. It therefore seems as though Vantiv Entertainment decided to back out now rather than waiting for the DFS situation to potentially heat up.