The Current State of the Fantasy Sports Industry

The Current State of the Fantasy Sports Industry

If you’re one of the more than 59 million people in the United States and Canada who play fantasy sports each year, the idea of fantasy sports needs no introduction. To briefly summarize for those unfamiliar with the concept, fantasy sports are competitions where people select combinations of players from real-life professional teams and win or lose based on the individual performances of those players.

Fantasy sports have exploded in popularity over the past couple decades. In 1997, an estimated 1 to 3 million people played fantasy sports. In 2007, that number was over 19 million, and it’s tripled between then and now. Fantasy sports have never been more popular, and their popularity and ubiquity in American and Canadian entertainment continue to expand.

Daily Fantasy Leagues

Daily Fantasy Leagues

To understand the current state of the fantasy sports industry, it’s necessary to understand the concept of daily fantasy leagues, and how they’ve become the hottest thing in fantasy sports.

Traditionally, fantasy sports were played over the course of a season. Each participant would draft a team of players before the season began, and then over the course of that professional sport’s regular season would accumulate statistics and/or victories. At the end of the season, a winner would be declared.

Daily fantasy sports works differently. In daily fantasy sports, each day (for a sport like baseball) or week (for a sport like football) is a new chance to draft or select a team, and the outcome of the contest would be only based on players’ performance on that day or week. Daily fantasy sports offered instant gratification, and also pair perfectly with another activity many people engage in: Wagering.

Daily fantasy sports occupy much of the same niche was traditional sports gambling. And a number of daily fantasy sports websites sprang up over the past decade allowing people to bet and win real money playing fantasy sports.

For reference, go back to 2007, when the number of people playing fantasy sports was 19 million. 2007 is the year when the first daily fantasy sports site went up. The reason 2007 is significant is because 2006 was the year when the Unlawful Internet Gambling Enforcement Act was passed into law in the US. The UIGEA was a response to the online poker industry, and was designed to destroy that industry, which it more or less did. However, the language of the UIGEA explicitly stated that daily fantasy sports were permissible. With that license, daily fantasy sports as a gambling vehicle were able to take off.

And take off they did, as daily fantasy sports are now a 3-billion-dollar industry. Daily fantasy sports sites FanDuel and DraftKings advertise during the largest American sporting events, and daily fantasy sports has become ingrained in the routines of sports fans everywhere.

Legal Trouble on the Horizon

Legal Trouble on the Horizon

With all the success and prosperity, however, comes increased scrutiny. In many ways, daily fantasy sports find itself in a similar position as online poker in the early to mid 2000s. With all that money being wagered on daily fantasy, elements within government which don’t support gambling take notice.

Over the past year or so, some states have made participating in daily fantasy sports sites with real money prizes illegal. Currently, the list includes Texas, Illinois, Georgia, Nevada, Alabama, Idaho and Hawaii. Daily fantasy sports is on shaky ground with a number of other states, and a recent ruling by a Massachusetts state commission stating that daily fantasy sports is online gambling is not a good sign.

It’s entirely possible that the Federal government decides to wade into the debate. If they do so, it’s hard to imagine why they would view daily fantasy sports as fundamentally different than online poker, which was regulated out of existence just 11 years ago. Both are contests containing aspects of both skill and luck, and both are entities where a small group of experts win most of the money while the majority of casual players lose money.

Reasons for Hope

Reasons for Hope

There are two things that suggest that daily fantasy sports may not share the fate of online poker. The first is one of perception. Poker has long been associated with seediness and illegality in American culture. Poker players were often viewed as criminals and hustlers.

Fantasy sports, in contrast, is viewed as the kind of activity one might participate in with office mates, a benign and harmless thing. And daily fantasy sports has been actively courting professional sports leagues, specifically the NFL, which would potentially give them more lobbying power were Congress to get involved in regulating their industry.

The other reason for optimism is that there are indicators that America is growing softer on the concept of legal gambling, especially sports betting. In fact, tech giants like Microsoft are making plans to tap into this market in the event that the government signals a go-ahead. It’s not unprecedented for a Western country to have a more liberal stance toward gambling than the US does. Look no further than Great Britain.

If sports gambling is normalized and legalized, then daily fantasy sports – and fantasy sports as a whole, by extension – stand to reach even greater heights than they currently occupy.