The Reality Behind Daily Fantasy Sports

It’s an imaginary game that requires real-world skills. The game is Fantasy Sports. And with 41 million players, this game of pretend has dramatically changed the way that real-life sports are consumed. The Next Big Thing in the fantasy sports league world is powered by tech and is already on a meteoric rise, with pro leagues and players alike taking notice.

Daily Fantasy Sports (DFS), and the variety of games it offers, is constantly evolving as is the technology that fuels this new player on the fantasy sports field. DFS takes the elements of traditional season-long fantasy sports and compresses them into shorter time periods, whether it’s a week or a few days. While the concept of picking players and running contests based on year-to-date stats is a diversion that dates back to WWII, the daily version of fantasy sports has been around for merely five years. In that short time, industry leaders FanDuel (2009) and DraftKings (2012), along with up-and-comer Fantasy Feud (2012) have made their mark due, in large part, to sports fans’ desire for instant gratification. Why wait a session when you can cash in after only a few days?

“What’s happened with daily fantasy sports has affected everybody in the business, directly or not,” said Paul Charchian, president of the Fantasy Sports Trade Association, the leading trade group for the fantasy sports industry. “There has been more direct investment in our business in this brief window [referring to the launch of DFS] than in the entire history of fantasy sports up to then.”

On Dec. 2, the Philadelphia 76ers announced that DraftKings is the team’s official DFS partner, making them the first NBA partner of the U.S.-based DFS company. “DraftKings is on the cutting-edge of the industry, boldly moving their business forward while taking intelligent risks—philosophies that embody the work we strive to accomplish every day at the Sixers,” said Scott O’Neil, Sixers chief executive officer, in a recent press release.

The 76ers aren’t alone. The Los Angeles Lakers announced its partnership with FanDuel in November. As the official sponsor of the Lakers, fans will see FanDuel throughout Staples Center during home games, along with exposure on television broadcasts and on the web.

“The Lakers are excited to welcome FanDuel as a new partner. We look forward to aligning with FanDuel as they make their mark across the sports-entertainment industry as the leader in one-day fantasy sports leagues. We consider this a tremendous opportunity for collaboration and anticipate a long-standing relationship with FanDuel,” said Tim Harris, Lakers SVP, business operations/COO, in a press release.

With money flowing back and forth on a daily basis, it’s no wonder these investors are staking their claim. DraftKings typically takes a 6 to 9% commission on each contest, while FanDuel’s cut is 9 to 10%. This allows them to fund big-ticket prizes, such as the upcoming FanDuel Fantasy Football Championship that boasts $2 million for first place and $7 million in finalist cash prizes.

These large winnings beg the question: Is DFS gambling? According to the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA), fantasy sports is exempted from the bill because it is considered a skill and not left to chance like betting or wagering. The bill specifically carved out fantasy sports games, educational games, or any online contest that “has an outcome that reflects the relative knowledge of the participants, or their skill at physical reaction or physical manipulation (but not chance), and, in the case of a fantasy or simulation sports game, has an outcome that is determined predominantly by accumulated statistical results of sporting events, including any non-participant's individual performances in such sporting events. Hence, fantasy sports contest, being a game of skill, are in fact legal in the majority of U.S. states.”

Whether a game of skill or luck, the line remains blurry. But what’s clear is we’ve only just begun to see the impact of this booming industry on the sports landscape.

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