The bookmaker said discussions are under way to “create a combined business to target the prospective US sports betting market”.
“Discussions are ongoing and there is no certainty as to whether agreement will be reached, or as to the terms or timing of any transaction,” Paddy said in a stock market announcement.
No financial details of the transaction were given.
The move comes just days after the US relaxed its gambling laws, providing an opening for the likes of William Hill and Paddy.
The US Supreme Court on Monday struck down a federal law which bans gambling on individual sporting events. States will now be able to choose individually whether to legalise sports betting.
FanDuel, founded in Edinburgh, is backed by the likes of Kohlberg Kravis Roberts, Google Capital and NBC Sports Ventures.
It is a major player in the US fantasy sports market, where players pick teams and compete against others for cash prizes.
On Monday, following the Supreme Court decision, FanDuel said: “The Supreme Court’s decision, which paves the way for states to legalise sports betting, creates an enormous opportunity for FanDuel as our platform, brand and customer base provide a unique and compelling foundation to meaningfully participate.”
In the UK, Paddy and other bookmakers are bracing for the impact of imminent state intervention in the sector.
The Government is expected to cut the maximum stake for fixed-odds betting terminals (FOBTs) to £2, with betting firms set for a profits hit as a result of the change.
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