DraftKings Inc. recently raised about $70 million from investors, according to two people briefed on the terms, a sharp drop from the company’s previous investment rounds as it fights regulatory battles across the country.
Investors did not assign a fixed valuation to the company in this funding round, which happened in the past few months, said one person. Neither person was authorized to discuss the financing deal publicly.
But the new investment round prompted 21st Century Fox Inc. to cut the value of its $160 million investment in DraftKings by about 60 percent, the people said.
Fox reported to federal regulators on Monday that it reduced the value of its roughly 11 percent stake in Draft-Kings by $95 million “based on information concerning DraftKings’ current valuation in a recent financing transaction,” but declined to provide more detail.
It was not clear if Fox was among the investors in the new $70 million round. Fox and DraftKings declined to comment Friday.
Boston-based DraftKings collected about $500 million in a pair of investment rounds that were completed within weeks of each other this summer. The latter investment round, in early August, was worth about $200 million and valued the company at about $2 billion.
The money helped DraftKings compete with its chief rival, New York’s FanDuel Inc., as the two companies spent heavily on advertising in a drive to attract new customers during the NFL season.
iSpot.tv, a company that tracks commercial airings, has estimated that DraftKings spent about $156 million on TV ads last year, airing 25 different ads more than 46,000 times. From late August to mid-September — the period around the start of the NFL season — DraftKings ran more TV commercials than any other advertiser in America, iSpot.tv said.
That flood of marketing spending was followed by a surge in regulatory scrutiny that has hampered the industry’s growth prospects and prompted the companies to hire prominent legal advisers.
The most serious challenge is in New York, where Attorney General Eric Schneiderman has asked a judge to ban DraftKings and FanDuel. The companies are fighting that lawsuit, and have embarked on a lobbying push to secure regulatory laws in several states that would explicitly allow daily fantasy sports to operate.
Fantasy sports contestants assemble mythical rosters of real-life athletes, scoring points based on those players’ actual statistics. In daily fantasy sports, the variety popularized by DraftKings and FanDuel, those contests can span just one day or one week’s worth of real-life games.
That short turnaround dramatically increases the number of games that are played and the number of players who pay entry fees, which are recycled as cash prizes that can exceed $1 million.
Some states have said fantasy sports contests aren’t clearly addressed by local gambling laws. In Massachusetts, Attorney General Maura Healey is finalizing a broad set of consumer protection regulations that would ban players under 21 and restrict the companies’ advertising practices, among other steps.
DraftKings also has expanded to the United Kingdom, potentially giving it access to a new pool of paying players in a country that has much more liberal gambling laws than the United States.
But the domestic legal questions have threatened to restrict the flow of money into daily fantasy sports companies.
Vantiv Inc., a company that processes player entry fees and prize payouts, said it plans to drop daily fantasy sports clients at the end of February. Two large banks, Citigroup Inc. and Bank of America Corp., have blocked their customers from paying for daily fantasy contests in New York amid Schneiderman’s lawsuit.
In court filings, DraftKings has said being shut out of the New York market would be “devastating” to its business and cause it to lose the support of key investors and business partners. The company has said it collected about $100 million in entry fees from New York players in 2015.
DraftKings’ previous investors include Boston financial giant Wellington Management, the Kraft Group, Major League Baseball, the National Hockey League, and the owners of the New York Knicks, New York Rangers, Los Angeles Dodgers, and Dallas Cowboys.
Fox isn’t the only investor that has reassessed its stake in DraftKings in recent months. Mutual funds owned by John Hancock Financial and Hartford Financial Services Group Inc. recently reported that they cut the value of their stakes in DraftKings’ August financing round by about 15 percent, from $7.67 per share to about $6.52 per share.
Curt Woodward can be reached at email@example.com. Follow him on Twitter @curtwoodward.