On Oct. 5, the Seattle Seahawks played the Detroit Lions on ESPN’s “Monday Night Football.” The game hinged on a late fumble by Lions receiver Calvin Johnson, who lost the ball just before he scored what would have been a go-ahead touchdown. It bounced into the Seattle end zone and (with some help from a Seahawks defender) out of bounds. Under the NFL’s rules, that made it Seattle’s ball, with a three-point lead and less than two minutes left. Game over.
Not just for the Lions, though. Even though the Seahawks never recovered the fumble, it was classified as a turnover by the software powering DraftKings, one of the two dominant daily fantasy sports sites that have exploded onto the NFL scene this year. So it also swung the outcome of the site’s Millionaire Maker contest, winning the week’s $1.2 million top prize for a user calling himself ChipotleAddict. If there were no fumble recovery credited to Seattle, a different bettor would have won the $1.2 million top prize.
That contest took place just as allegations about the security of data and employees’ access to it started to rock the daily fantasy sports industry. Before that, it had been largely smooth sailing for daily fantasy operators, which sprung up in the wake of a carve-out for fantasy sports in the 2006 Unlawful Internet Gambling Enforcement Act. Because it involves making picks based on studying past performance and future projections, daily fantasy sports isn’t gambling. That is what the chief executives of DraftKings, FanDuel and other daily fantasy sites would like you to believe.
But no matter how the law sees it, it’s almost impossible to identify daily fantasy as anything but a way to bet on sporting events from a casual perspective. And if you agree with that assessment, it brings up the obvious issue that daily fantasy is treated very differently than any other type of gambling in the United States. Most forms of gaming are generally highly regulated, limited or considered illegal on a state-by-state basis.
If you’re not familiar with daily fantasy, it’s not a hard concept to grasp. It’s a lot like its season-long cousin that tens of millions of Americans play during NFL season (as well as during baseball, basketball, hockey, even soccer seasons). You pick some players and your fantasy team scores points based on the performance of those players. Your players scoring touchdowns or piling up yardage results in points. If you pick the right players, you can win cash.
The big difference between daily fantasy and the older season-long version is frequency. There are thousands of contests that you can choose to enter on a variety of sites, with entry fees from 25 cents to thousands of dollars. Those buy-ins are how daily fantasy sites make money; they take a percentage of each entry fee. The biggest contests routinely pay out millions of dollars.
Does it sound like gambling, on its face? Gambling can be defined as wagering money on an uncertain outcome — like, say, a last-minute fumble that wins a player more than a million dollars. Sure sounds like daily fantasy fits the bill.
That’s not to say daily fantasy isn’t legal in the United States, although authorities in a few states are making that argument. The aforementioned carve-out from the 2006 federal law paves the way for states to determine the legality of daily fantasy sports. DraftKings and FanDuel — both valued at more than a billion dollars now — pay some lawyers pretty good money to tell them they can operate in 45 states as a “game of skill.” (However, a federal grand jury in Florida is now reportedly looking into daily fantasy companies; several fantasy companies actually operate in fewer than 45 states.)
But jurisdictions outside of the United States and Canada have identified daily fantasy as gambling. To wit, DraftKings has applied for and received a gaming license to operate in Britain, where sports betting is legal and very popular. (It has not started taking wagers across the pond, however.)
This also isn’t an argument against daily fantasy sports being a skill game. The best players in the world will almost always be winners over a large enough sample size; there are daily fantasy pros that make six figures annually. At the same time, some skill can be found in almost every form of gambling, as long as there is a decision that can be made. Good poker players will beat lesser players over the long haul. Skillfully setting a blackjack hand will reduce a casino’s edge.
Over small sample sizes, or single contests, though, there is a lot of variance in daily fantasy results, and no guarantee that skill trumps chance. What the casual fantasy player is doing — betting a few bucks in the hopes of winning millions — is certainly gambling.
The legal repercussions of calling fantasy sports “gambling” is why we’ve heard DraftKings chief executive Jason Robins and FanDuel chief executive Nigel Eccles take turns saying daily fantasy is a skill game, over and over, akin to things like chess, spelling bees or races, as ridiculous as some of those comparisons sound. For example, an amateur chess player will likely never beat a grandmaster; a hastily constructed fantasy lineup will beat a pro’s lineup some percentage of the time. Even pros can put together what appears to be an optimal lineup, but a bad bounce here or an untimely injury there and the best roster of fantasy players — at least on paper — can be blown up. With the sites classified as skill, not gambling, some leagues have gone all-in on daily fantasy: At last count, Major League Baseball, the NBA, the NHL and Major League Soccer all had equity in either DraftKings or FanDuel.
But get outside of the daily fantasy executive suites and you can find plenty of rational people calling DFS gambling:
- Most mainstream media outlets have identified daily fantasy as a betting product, routinely using gambling terms to describe it. Look at The Washington Post, the New York Times and the Chicago Tribune.
- Gaming executives like MGM Resorts chief executive Jim Murren have called out the daily fantasy industry on more than one occasion. He once said, “I don’t know how to run a football team, but I do know how to run a casino, and this is gambling.”
- New York Attorney General Eric Schneiderman, in opening an inquiry into DraftKings and FanDuel, called them “totally unregulated gambling venues.”
- Even some daily fantasy pros can identify it as gambling. Cory Albertson, one such pro, wrote in a Wall Street Journal op-ed: “Let’s cut to the chase here: Playing daily-fantasy sports games for money is gambling.”
The latest to classify daily fantasy as a form of betting? The National Council on Problem Gambling just last week published a resolution about daily fantasy, including statements like this: “NCPG believes fantasy sports contest participants are at high risk to, and do, develop gambling problems.”
Executive Director Keith Whyte says his group has gotten feedback from people in the gambling treatment community that there’s been an increase in problems related to daily fantasy as the sites — and the potential prizes — have gotten bigger. And the symptoms are just like other types of gambling — losing lots of money over a short period of time and becoming obsessed with playing.
“Perception of skill is a big factor in the development of addiction; we see it in things like poker, and we see it in fantasy,” Whyte says. “Especially for the addict, it becomes, ‘The longer I play, the better I get, so I should play more, and especially if I am losing money, the only way to win that money back — and the only way I feel good — is to keep gambling.’ ”
Some daily fantasy advertising reinforces the possibility of problem gambling. In one commercial, a player claims, “It’s like the best adrenaline rush ever!” Another says, “After I played FanDuel the first time, I was hooked!” And it’s those ubiquitous advertisements — DraftKings and FanDuel have combined to spend hundreds of millions of dollars this year on TV commercials — that have drawn scrutiny. That includes from Congress, which appears poised to hold hearings on the industry.
The danger of getting hooked to a skill game with no money on the line would be pretty minimal. But daily fantasy allows users to put money on statistical performances of sporting events, almost at any time they want. That sure sounds a lot like gambling to those of us who don’t have a vested interest in the daily fantasy industry. And if everyone thinks it’s gambling, daily fantasy sites may not be able to keep the government out of their business for much longer.