The two leading daily fantasy sports websites have employed an impressive marketing push. Their commercials and advertisements overload our televisions during every commercial break from our favorite weekly sitcom or while we gather to watch our favorite sports teams. It seems like their expensive push is working as hundreds of new customers are signing up every week. Aside from new fantasy league participants, the commercials are also garnering attention from state officials, Congress, and this week, the New York Attorney General. It seems as though it’s all fun and games until the law is broken.
How does it work? In fantasy sports, users put together their own teams based on real-life players. The outcome of the game is determined by how each player performs, accumulating points based on real-game performances. So unlike regular sports gambling, where you purely bet on the outcome of games, the law is classifying fantasy sports as a form of game where actual skills matter to win.
The way the websites operate is that you, as the participant, put money into an online account, which you are then allowed to use as your entry fees to participate in dozens of different contests. You can choose from a variety of sports including the NFL, NBA, NHL, PGA, and even NASCAR. Additionally, you have the discretion to select what type of contest you participate in on that particular day or week. You then choose, or draft, individual players to be on your fantasy team and based on their individual performance in their respective sporting event, your team may or may not win money as a result. DraftKings and FanDuel insist that achieving success centers around skill and not chance. The billion dollar companies stress that fantasy sports is about statistics, probability, trend analysis and patterns. Many users draft their lineups looking for gameday matchups to exploit and they claim research and number crunching gives them an edge, thus making it a game of skill, and not gambling.
Sports betting is illegal throughout most of the United States, as currently only four states allow sports betting. Another handful of states have made it known to DraftKings and FanDuel that their “alleged illegal behavior” is not welcome in their respective states. Federal law criminalizes gambling business that is done in violation of state law, and the penalties include jail time, fines, and potential for the seizure of assets. So, many people are wondering how are websites like DraftKings and FanDuel legal? Both advertise and market themselves as games of skill, opposed to games of chance, and thus fall under an exception to the gambling law created under the 2006 Unlawful Internet Gaming Enforcement Act. Most states have no laws that specifically address fantasy sports but do have gambling laws that might dictate whether they’re legal or not. Many permit betting on contests that depend more on skill rather than on chance. Two states ban betting on games materially affected by chance, while a few others prohibit betting if chance is a factor at all, no matter how minor or insignificant.
That’s a debatable idea. But regardless of which side you sit on, daily fantasy sports sites are completely legal under current laws — and will continue to flourish, racking up hundreds of millions of dollars in revenue.
What’s next? Lawmakers all over the country expect the fantasy sports industry to make a push for clear legislation. The distinction between what is a game of skill vs what is a game of chance is controversial and needs clarification. This could lead Congress to take up the issue and modify the current law.