Few visitors to this year’s World Series of Poker in Las Vegas will have failed to notice the high profile presence of one of the top sponsors, the daily fantasy sports provider DraftKings.
That makes a lot of business sense, given the long-known cross-over interest between poker and sports betting, although the DFS industry will be the first to argue that daily fantasy sports does not constitute gambling in terms of US law.
One of the striking elements in the rise of DFS activity has been the involvement of US national sports leagues, which have traditionally taken a vehemently anti-gambling position when it comes to online sports betting, and a similarly opposing stance on any sports betting not permitted by the Professional and Amateur Sports Protection Act.
Another piece of US federal legislation designed to ban online gambling in general, the 2006 Unlawful Internet Gambling Enforcement Act, specifically exempts fantasy sports as long as “…the prizes and awards are established in advance and the result is not based on a single score, point spread, team performance or individual performance.”
But that was signed into law almost nine years ago, when the fantasy sports scene operated on statistics over a season, a far cry from the daily fantasy sports scene that has evolved since with its billion-dollar budgets, widely promoted competitions and legal activity across all but nine of the US states.
Certainly the UIGEA’s lead author, now-retired Congressman Jim Leach, has since remarked that the UIGEA was never intended to exempt the daily fantasy sports which has developed from the original fantasy sports concept.
The involvement of the national sports leagues in today’s booming industry suggests that these bodies have embraced the argument that daily fantasy sports is not gambling, although there are many who argue otherwise.
Among them is MGM Resorts chief exec Jim Murren, who commented earlier this year at an earnings press conference that those who argue that daily fantasy games are not gambling are “absolutely, utterly wrong.”
“I don’t know how to run a football team, but I do know how to run a casino, and this is gambling,” he observed somewhat dryly.
At least one sports body – the National Basketball Association – has seen the potential of strictly regulated and controlled sports betting as an answer to the uncontrolled melee that currently generates billions in US bets through illegal sites.
NBA commissioner Adam Silver has been upfront with his opinion that sports betting will expand beyond PASPA, which restricts activity to just four US states…and his organisation signed a four year partnership deal with major DFS provider FanDuel late last year.
The attraction of the daily fantasy sports phenomenon is easy to see; mega prizes in massive online player competitions and strong multi-media promotional drives are delivering growing audiences in the young to middle aged demographics, and the returns are impressive.
The DFS industry trade body Fantasy Sports Trade Association claims that US fans spend an estimated $15 billion a year on fantasy sports, with the focus being on football and the NFL teams at around $11 billion.
That is more than the $10 billion overall annual revenue of the NFL itself, according to a Forbes estimate.
The number of Americans participating in DFS was estimated at 41.5 million and rising last year: back in 2006, when the UIGEA came into force, there were 18 million players.
Market leader DraftKings boasts that it will award a billion dollars in prize money this year as it continues to grow, and the company has just signed a three-year content deal with the giant ESPN sports media network, although it did lose out on a $250 million partnership agreement with Disney when the family entertainment company backed away from a rumoured deal (see previous reports).
DFS has been embraced by other sports bodies too; namely the NFL, NHL and Major League Baseball, who have allowed their team franchises to sign partnerships with leading DFS companies.
Fanduel recently announced deals with 13 NBA franchises, augmenting its 16 NFL franchise agreements, and DraftKings has secured partnerships with at least five NFL franchises.
Keeping up with the trend, the NHL recently signed a four-year partnership with DraftKings, which has also inked agreements with Major League Baseball.
Marketers are looking at new ways in which DFS can be engineered to create convergence with other forms of entertainment such as the relationship with poker through the World Series of Poker, and In Pennsylvania one politician, Rep. George Dunbar, is busy developing an intrastate bill that would allow state-licensed brick and mortar casinos to offer fantasy sports facilities.
Dunbar recently gave an example of the sort of scenario his bill could bring about, explaining to the Tribune Review newspaper that football fans in the state traditionally visit a casino prior to the game, and such an arrangement would enable them to create a fantasy team for the match, go and watch the game and then return to see how their imagined team had performed.
If the online gambling phenomenon over the past 20 years has taught the industry one thing, it’s that the success of a new concept inevitably attracts the attention of politicians and competition-averse traditional businesses, resulting in the complex mix of lobbying, legislation and exemptions that we see in the United States today.
If that premise is accepted, the continuing success of daily fantasy sports will carry similar consequences, probably in the not too distant future.