The UK operator said discussions with Fanduel, which hands cash prizes to players who pick successful fantasy sports teams, were ongoing and that there was no certainty any deal would go ahead.
No financial details of the transaction were given.
The move comes just days after the U.S. relaxed its gambling laws, providing an opening for the likes of William Hill and Paddy.
It comes as the American Supreme Court overturned 1992 legislation that banned sports betting in most USA states. It offers exchange sports betting and pari-mutuel betting products, fixed odds games betting, online games and casino, and business-to-business services, as well as peer to peer games, including online bingo and poker. It is backed by the likes of Kohlberg Kravis Roberts, Google Capital and NBC Sports Ventures.
FanDeal and another rival, DraftKings, held merger talks but plans were called off after the US Federal Trade Commission opposed the deal.
Paddy Power-Betfair confirmed the talks two days after the U.S. Supreme Court struck down a 1992 federal law prohibiting states from authorizing sports wagering.
FanDuel got its start at the 2009 SXSW Interactive festival - right there in that backyard - when our founding team made a decision to focus their efforts on changing the game in fantasy sports.