Federal Courts Call Foul on Daily Format Fantasy Sports Games

Fantasy sports have grown in popularity over the past two decades, evolving into a $1.6 Billion industry.  However, the legality of such games, especially with governments cracking down on online poker and sports betting worldwide, has come into question.  The traditional format of fantasy games, a season-long endeavor where a player builds a “team” of their favorite professional stars and gain points based on their real on-field performance, has escaped government sanctions.  In 2006, the Unlawful Internet Gambling Enforcement Act (hereinafter UIGEA) established the legality of fantasy games because its winners are “not determined by the outcome of a single game or the performance of a single player.”    

 

The newest phenomenon in this emerging market is the daily fantasy game, run through websites such as FanDuel, where fantasy players get instant gratification rather than waiting an entire season.  Yet, the brevity of the challenge has led many to believe it is more similarly associated with illegal sports betting.  In daily formats, whether a player wins or loses is more up to chance and is comparable to “handicapping horse racing.”

 

In most daily games, such as baseball, a user could take advantage of advantageous matchups between pitchers and hitters and use their knowledge to win obscene amounts of money.  One such player, Peter Jennings, took advantage of the daily format fantasy games when online sports betting and poker websites were shut down by the government.  Jennings would routinely win “tens of thousands of dollars” in a weekend, and once won $150,000 after only betting $20. 

 

Daily fantasy format games seemingly have found a loophole in the UIGEA by way of their similarity to their season-long format cousins.   Because of the prevalence and growing popularity of fantasy sports not only in the United States, but internationally as well, the determination about whether daily format fantasy games equate to sports betting is an important one.  My question is whether the daily format game is really one that is based on luck (i.e. gambling) or a game that involves enough skill where it will not be considered sports gambling?  What are the problems with allowing sports betting over the internet in general?  Finally, if the courts declare that daily format fantasy games are legal; will the industry be monopolized by large sports websites such as ESPN or CBS Sports?

 

Source: NY Times

Picture: Playasonly.com

4 comments

  1. It seems that the line here is very thin indeed. I personally have not played any of these “daily” fantasy games, but I have participated for many years in season long fantasy leagues. There is a healthy combination of skill and luck involved in these season long leagues. However, if my understanding is correct, and the only thing that keeps season long fantasy leagues legal is the fact that the outcome is not determined by a single game, or a single player, I am having trouble seeing how that it is the case with the daily games. If a roster is set to compete for merely one round of games, a single game or single player could absolutely play a large part in determining the winner of these match ups. These daily game companies are lucky to be associated with the season long leagues that have survived due to the loophole, however, I do not think that a federal court will find this association to be enough. The reason that the likes of ESPN and CBS have not yet jumped on this wagon is probably because they feel that way too.

  2. Personally, I see no difference between season long leagues and daily leagues. In order to win, and win consistently, there is still a good amount of skill that is involved. If I read your post correctly, it seems that the more skill that is involved, the more likely it is that the activity will not be considered illegal gambling. In that sense, the daily games are the same as the season long leagues because they all require skill and planning and obviously some luck. The only difference is that the daily leagues are condensed into a 24 hour period instead of a six month season. Otherwise, in my opinion, they’re exactly the same. As an example, most season long leagues allow you to change your lineups daily (specifically, I’m talking about fantasy baseball leagues). So every day you, as the team owner, make choices and set your team. How you do that day, combined with how you do every other day, determines the outcome of your season. The more days you do better than the competition, the better your chances of winning at the end of the year. It’s the same with daily leagues, only instead of having to wait until the end of the season for the payoff, you get it at the end of the day. I don’t see why that is so different from season long leagues, that is should necessitate different legal treatment.

  3. I believe that daily format games available on Fan Duel are games that involve enough skill for it to not be considered illegal sports gambling. In my opinion, the idea of the daily game is no different than a season long fantasy sports league. As mentioned by Mr. Verga, in season long fantasy leagues, “owners” are still allowed to tinker their lineup and adjust it based on match ups for that week/game. As mentioned, the only difference between the season long leagues and the daily leagues are that the owner gets instant satisfaction and another chance to be successful in a fantasy season when their season-long league does not go as planned. I would argue in many cases, daily format games involve even less luck than a full season of fantasy where perhaps you can get lucky with a free agent or late draft pick. Over the course of a typical fantasy season, consistency of your players throughout each game/week will most likely lead to a successful season. However, in the daily games, consistency is not necessarily the best strategy and more analysis on the match ups may be required, rather than plugging in those consistent players on your roster in a season long league.

    If the courts do declare that the daily format fantasy games are legal, I do believe that the typical fantasy sports leagues such as ESPN, CBS, or Yahoo would have a monopoly in this area as they provide more features (and convenience if a person uses the same website as their season long leagues) that could be more attractive to those interested in playing.

  4. I agree with Mr. Verga’s and Mr. Naber’s comments. These daily format fantasy leagues do not, based on my understanding, appear to be the same kind of “gambling” as online poker. Regardless of the format; daily, season, etc. there will be some luck involved. For example, a receiver may get targeted more than usual by his quarterback that day because he is “hot.” However, where the daily and season format differ from other forms of “gambling” is that the gambler will focus on statistical analysis and past performance to determine how he/ she will place his/ her bets. For example, Aaron Rodgers is usually a safe bet because of his proven ability as a quarterback. Understanding different offenses and defenses and how they stack up against each other while simultaneously looking at individual players within those offenses and defenses to determine who will perform well based on past match-ups is not the sort of thing I think of when I think of “online gambling.” That is why it is hard for me to consider these daily format fantasy games to be in the same league as online poker.

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