Major League Baseball and the NBA are in discussions to divest their financial interests in daily fantasy sports, but plan to remain partners with DraftKings and FanDuel, respectively, league sources told ESPN on Thursday.
Major League Baseball had been an investor in DraftKings since 2013, and in 2015 signed a multiyear sponsorship deal that made DraftKings the "official daily fantasy game" of MLB. The NBA took an ownership stake in FanDuel in November 2014.
The financial details of the deals were not disclosed, nor were the exit terms.
"This space is evolving and we saw the need to take a fresh look at the structure of our relationship," NBA spokesman Mike Bass said. "FanDuel has been, and will remain, a great partner. We have simply modified some of the components of our partnership."
In a statement to ESPN, MLB said, "While we have initiated discussions regarding potential changes to the structure of our relationship, we look forward to continuing our valued partnership with DraftKings. MLB and DraftKings will continue to collaborate on innovative approaches to enhance the fan experience."
A FanDuel spokesperson said, "FanDuel and the NBA will remain close commercial partners."
A DraftKings spokesperson said, "Major League Baseball was the first professional league to invest in DraftKings and their partnership over the last five years has been instrumental to our growth and success. Our ties to MLB are as strong as they have ever been."
Specific reasoning behind the change in relationship was not provided, but the separation does come while the leagues and the daily fantasy companies are awaiting a ruling from the United States Supreme Court that could open a path for states outside of Nevada to legalize traditional sports betting.
DraftKings and FanDuel, with their established customer databases, have expressed interest in the sports betting space. In late February, DraftKings hired a head of sportsbook to launch a sports betting vertical.
The NBA and MLB have been lobbying in more than a dozen of the states that are interested in legalizing sports betting and have received questions from legislators about their relationship to the daily fantasy giants.
"We're not going to be part-owner of a bookmaker," MLB lawyer Bryan Seeley said during an April 4 committee hearing on sports betting in Missouri.
Daily fantasy games began gaining popularity in 2012, providing a new twist on the traditional season-long games and bringing giant jackpots into the mix.
FanDuel was founded in 2009 and DraftKings was launched three years later. The two companies distanced themselves from the competition and at their peak were each valued at more than $1 billion. They raised hundreds of millions of dollars in investments and formed partnerships with the majority of U.S. professional sports leagues. Either DraftKings or FanDuel had marketing deals with 28 NFL teams at one point.
The industry ran into trouble in 2015, after DraftKings and FanDuel embarked on aggressive marketing campaigns leading up the NFL season. In a customer-acquisition battle, the two rivals combined to spend more on advertising than the entire American beer industry.
The meteoric rise of DFS came with backlash. Multiple state attorneys general opened investigations of the companies and their advertising. In New York, their most lucrative state, attorney general Eric Schneiderman issued a cease-and-desist order and ultimately levied a $6 million fine on each company for misleading advertising.
Information from ESPN's Ryan Rodenberg was used in this report.