The FTC's reported concern is that once merged, the new firm would control over 90 percent of the fantasy sports market. "This merger would deprive customers of the substantial benefits of direct competition between DraftKings and FanDuel," said Acting Director of the FTC's Bureau of Competition Tad Lipsky in a statement.

Both companies have struggled against state and federal regulations over the years, butting heads with states like Texas, Washington and New York. Last year, both companies were hit with a $12 million settlement with New York in regards to alleged false advertising.

In a joint statement, DraftKings and FanDuel said, "We are disappointed by this decision and continue to believe that a merger is in the best interests of our players, our companies, our employees and the fantasy sports industry. We are considering all our options at this time." The final decision will be made in a trial set to begin in November.