The emergence of daily fantasy sports


Logue graphic courtesy of James Feng

Scott Lenz, Lead Sports Editor

It’s hard to listen to the radio or watch television, especially during sports games, and avoid seeing a commercial for DraftKings and FanDuel. Less than a year ago this form of Esports was almost unknown by the general public. The unprecedented rise of daily fantasy sports this 2015-16 NFL season has brought with it questions about integrity and legality.

Unlike most fantasy sports, which involve season-long competitions, daily fantasy sports (DFS) are played on a week-to-week basis. Similar to the state lottery system, DFS draws in players through the allure of winning millions of dollars, but faced none of the same government regulations until the fall of 2015. The DFS market consists mainly of two billion-dollar companies, DraftKings and FanDuel that have taken the sports world by storm. Each company has invested heavily in advertising through television, billboards, and sponsorships. These two organizations have signage in 16 NFL stadiums, and the NBA, NHL, and MLB have all received equity in one or both of the companies in exchange for advertising.

The rise of DFS hasn’t occurred without bumps in the road. In October, a DraftKings employee won $350,000 by finishing in second place in a FanDuel competition, sparking controversy over possible insider information. Although an FBI investigation cleared the companies of any wrongdoing, it still brought the integrity of the contests into question. DraftKings and FanDuel immediately restricted employees from entering competitions on other DFS sites. The companies seemed to be unscathed by the incident with the number of players increasing each week.

Since the establishment of DFS, companies have asserted that their contests do not constitute gambling because they involve skill. In October this claim faced its strongest threat yet when New York Attorney General Eric Schneiderman declared that DFS is a form of gambling, and is therefore illegal in the state. This represents a blow to both the future of DFS and their earnings because New York had the largest population of participants in the United States prior to Schneiderman’s ruling. More states are expected to follow New York’s decision as they look to either outlaw the sport or find a way for states to tax the winnings.

If DraftKings and FanDuel are unable to reach a compromise with the state and federal governments it could mean the end of daily fantasy sports. Although these major DFS companies seem poised to fight New York’s ruling through the court system, the constraints of gambling seem to favor the outlawing of daily fantasy. DFS has continued to assert that betting on players to win money involves skill, but even with conceding that point the government can still make it illegal. In most states it’s not legal to place bets on sports teams even though choosing the right teams involves a high amount of skill.

The psychological impact of gambling also plays a large role in the decision to outlaw DFS. Recent clinical studies have proven that the addictive aspects of placing bets in a game such as poker or roulette are also present in daily fantasy. Critics of DraftKings and FanDuel have pointed out that their promises of million dollar payouts are misleading and impact human decision making in a similar way to the allure of winning “free” money at a casino. Most players on these sites does not benefit monetarily from entering competitions, in fact the average participant loses money.

The future of daily fantasy sports is currently up in the air. Even through all of the controversy surrounding DFS, the general public has voiced their support for the sites by continuing to play. If the New York government holds strong on its decision and is supported by many other states, it could make the collapse of DraftKings and FanDuel even faster than their rise.