Any potential deal would create a business to target the prospective United States sports betting market.
A U.S. Supreme Court ruling on Monday paved the way for states to legalise sports gambling after it struck down a 1992 federal law that had barred gambling in most places.
"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", the group said in a statement.
In early morning trading, Paddy Power shares gained 0.8% at 7,825p. JPMorgan Chase lifted their price objective on shares of Paddy Power Betfair from GBX 8,420 ($117.43) to GBX 8,690 ($121.20) and gave the company a "neutral" rating in a research report on Friday, January 12th.
Paddy Power bought Fanduels rival Draft for $48m past year and the FTSE 100 firm also has an online casino and horse betting exchange in New Jersey.
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FanDeal and another rival, DraftKings, held merger talks but plans were called off after the US Federal Trade Commission opposed the deal.
The BBC reported that New York City-based FanDuel incorporated was established in 2009 and that its around 400 employees provide aficionados with a myriad of Major League Baseball (MLB), National Football League (NFL), National Hockey League (NHL) and National Basketball Association (NBA) fantasy sport gaming markets.
FanDuel grew to become one of two Scots unicorns, with a $1 billion valuation, alongside Skyscanner. Deutsche Bank reiterated a "buy" rating on shares of Paddy Power Betfair in a research report on Friday, March 9th. Earlier today, the company itself confirmed the rumoured deal, saying that it is now in merger talks with FanDuel.
The news follows a US Supreme Court ruling on Monday that paved the way for states to legalise sports gambling and Paddy Power Betfair's entry into the US fantasy sports market a year ago with the acquisition of DRAFT for up to $48m. The deal would "create a combined business to target the prospective US sports betting market".
Modern fantasy sports started in 1980 and have exploded online through a faster, daily version of the season-long game where participants draft teams for a single game, enabling them to spend money on contests more frequently.