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ESPN first announced the deal with DraftKings last June. The Disney-owned sports network did not disclose financial details, but said that the partnership "makes DraftKings the official daily fantasy sports offering across ESPN’s platforms" and that it would include, "branding and promotional opportunities across multiple ESPN and DraftKings platforms including integration into digital properties and television programming."
You probably know what happened next: in October, a DraftKings employee, Ethan Haskell, won $350,000 in a contest on FanDuel, raising concerns about whether employees of these companies are able to take advantage of users. Both companies quickly barred their employees from playing on any daily fantasy sites.
Nevada's Gaming Control Board declared the contests that DraftKings and FanDuel offer to be gambling, and asked them to cease taking paid entries in the state until they applied for a gaming license—something they are unlikely to do. Attorneys general in New York, Illinois, Hawaii and Texas issued opinions that it is illegal gambling. New York Attorney General Eric Schneiderman has pursued the two companies with particular vigor. In contrast, attorneys general in Massachusetts and in Rhode Island have issued opinions that the contests are legal, but ought to be regulated.
As part of the ESPN deal, DraftKings reportedly had to commit upwards of $200 million per year in ad spend on the network. DraftKings is devoting a lot of money to fighting legal battles right now, which makes it likely that DraftKings was the one looking to get out of the commitment, and that ESPN obliged.