Daily Fantasy Sports – Skill or Luck?



You may or may not have heard of what happened on the opening of football in the 2017/2017 season, but for some people in the United States, it felt as though the world was ending.

What could have possibly happened to warrant these reactions? ESPN’s Fantasy Football app crashed on the biggest day of the year. Fantasy Football and Daily Fantasy Sports have taken the nation by storm. The platforms that allow betting on sports games, mostly football, have become a pastime and profession for many Americans. Like all activities surrounding betting, drama, confusion and legal issues has followed Daily Fantasy Sports through its explosion into American life. Background Online sports betting games range from season long big money to daily exchanges of 25 cents. Fantasy Football is a season long game where there is a team of coworkers or friends who put money in a pot and play throughout the whole season. At the end of the season the persons whose teams played the best win the money. Daily Fantasy Sports are apps/websites where people can place daily bids ranging from $0.25 to thousands of dollars while competing against other players on the site. The two most successful Daily Fantasy Sports (DFS) companies are DraftKings (DK) and FanDuel (FD). Both companies raised huge rounds of investment in 2015 (DraftKings’s $426 million and FanDuel’s to $363 millionvaluing them both at over 1 billion dollars in 2015. This type of sports betting has seen a dramatic increase in participation over the last few years. Players range from the young college student to people with advanced degrees in mathematics, all attempting to place the right bets off of the information provided to see a return. At its peak (summer 2015), a DFS “get-rich-now” commercial aired every 90 seconds on TV.

Throughout the weeks leading up to the 2015/2016 NFL season, DK and FD spent more money on advertising than the entire American beer industry. This year there is more demand for these sites and their games is higher than ever before, but is DFS is legal? The Controversy  The big question surrounding DFS is whether or not it is gambling. The definition of gambling is playing games of chance for money. Last year the Gaming Control Board of Nevada ruled DFS was gambling and wanted DK and FD to apply for gambling licenses to operate legally within their state. Nevada Gaming Control Board chairman A.G. Burnett told ESPN “We have found that [an entry in a daily fantasy sports contest] is a wager and obviously, it’s on a sporting event, and DFS companies are in the business of accepting those wagers”. Proceeding this, New York’s Attorney General ruled that people playing DFS within the state are participating in illegal gambling and banned the apps within the state. These sites claimed to be 100% legal because they are “skill gaming“. Congress passed a bill (the Unlawful Internet Gambling Enforcement Act of 2006) stating that gambling online which involves skill is not illegal. Some studies show that DFS is a game of skill, proven by the fact that 91% of the winnings are won by 1.3% of the players. These players are very well researched and part of a small, exclusive group equipped with intricate statistical modeling and automated tools. These tools can manage hundreds of entries into one contest and identify the weakest opponents. Here is a breakdown of the players from cnbc.com fantasy_players When asked about these elite players, Nigel Eccles, chief executive of FanDuel, stated “We don’t make any apologies that it’s a game of skill, and you might go up against the best in the industry. Some of the people are really good.” In other words, players are making well researched guesses about how players are going to act and play, not hoping for 5s on the next deal because it is raining outside and you’ve got your lucky socks on. In October of 2015, users in online forums inquired on whether a DraftKings employee might have used DK information about lineups to win $350,000 in a competing contest on the FanDuel site. The information detailed the percentages of entrants who selected certain fantasy players raising issues on the transparency and fairness of the two platforms. ESPN, CNN and FOX have all invested in some type of daily fantasy sports for advertising on their TV Networks. The NBA has an equity stake in FanDuel, MLB in DraftKings and 28 of the 32 NFL teams have advertising deals with FD and DK. Here is a DraftKings advertisement at the NFL ANC Championship Broncos vs. Patriots game in 2015.

Jan 24, 2016; Denver, CO, USA; General view of Draft Kings logo on an advertising LED screen during the Denver Broncos game against the New England Patriots in the AFC Championship football game at Sports Authority Field at Mile High. The Broncos defeated the Patriots 20-18 to advance to the Super Bowl. Mandatory Credit: Mark J. Rebilas-USA TODAY Sports
Jan 24, 2016; Denver, CO, USA; General view of Draft Kings logo on an advertising LED screen during the Denver Broncos game against the New England Patriots in the AFC Championship football game at Sports Authority Field at Mile High. The Broncos defeated the Patriots 20-18 to advance to the Super Bowl. Mandatory Credit: Mark J. Rebilas-USA TODAY Sports

Other investors range from from Comcast to Google to private equity firms to Jerry Jones and Robert Kraft (two of NFL’s most influential owners). A congressional subcommittee began examining the daily fantasy sports industry in their hearing “Daily Fantasy Sports: Issues and Perspectives”, which could lead to further discussion on sports-betting laws in the United States. Rep. Frank Pallone (D-N.J.) stated after the hearing “The biggest thing for me is that I would like us to legalize sports betting, I am hoping this panel and the statements that were made about why it doesn’t make sense to allow (sports betting) to go underground and run by organized crime would lead us to some kind of legislation. The point is allowing sports betting to be legal in states like New Jersey who want it. That’s what I was hoping this would contribute to, primarily.” Here is where every state stands on daily fantasy sports currently. The Bills There are currently 31 bills pertaining to Daily Fantasy Sports in the US. These bills range from legalizing Daily Fantasy Sports to defining DFS a skill game to regulations on DFS. Here is a map of all of the current bills covering DFS in the US.

Virginia passed the Fantasy Contests Act, SB646, making Virginia the first state in the nation to impose state-led oversight of the industry. The bill requires fantasy sports sites to pay the state a $50,000 registration fee and implement policies to verify that all participants are 18 years of age or older. It also requires the company’s operating funds to be segregated from player funds and bans employees of fantasy sports sites from competing in public fantasy sports contests.

New York passed A10736 which amends the state’s current gambling laws to include “regulated interactive fantasy sports contests with an entry fee”. It also restricts players under the age of 18 from participating, ensures the accurate odds of winning are represented in all advertisements, enables players to permanently exclude themselves from future games at any time and identifies the highly experienced players (sharks) on the platform.

In Illinois, any type of gambling is illegal. Their Attorney General, Lisa Madigan, stated that the law “clearly declares that all games of chance or skill, when played for money, are illegal gambling in Illinois”. They now have a bill aimed at legalizing DFS.

Indiana passed SB339 which sets a minimum age of 18 for players. It prohibits the use of college and high school sports results in a daily fantasy sports contest. Tennessee signed HB2254 which creates an advisory task force to review games of skill, including, but not limited to, online fantasy football, and recommends any necessary statutory revisions to the consumer protection and criminal laws that should be made to protect consumers when paying to participate in a game of skill.

Daily Fantasy Sports is an American pass time bringing together two things that many Americans love, sports and the prospect of winning. The trend we’re seeing is the states recognizing the money to be made off of this game of skill betting system is almost too good to pass up and the want to take away underground crime betting providing better regulation. What are your thoughts on the game? Do you think it is a game of skill or classic sports gambling? Where do you think it is going?


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