Fighting Corruption: The New Regulations on Fantasy Sports
Last year you couldn’t watch a sporting event or any other type of sports-related TV program without seeing an ad for daily fantasy sports sites, most commonly FanDuel and DraftKings.
The advertising blitz has eased in recent months, however, as daily fantasy sites face scrutiny. Here’s a look at what daily fantasy sites are, why they’re subject to new regulations and what individual sates are doing about them.
How Daily Fantasy Sites Work
DraftKings and FanDuel are the daily fantasy sports sited that receive the majority of the publicity, but other companies run similar gambling games, including Yahoo.
Daily fantasy games are most common for pro football, baseball, basketball, hockey and soccer. There are free games available, but most require an investment in order to win money, starting as low as $1.
To participate, players create a roster of players from those who have games that day. A player’s team must fit under a “salary cap.” For example, if the salary cap is $100 (fake money) for an NBA contest, star players such as LeBron James or Stephon Curry might cost $45, while little-known players could be as cheap as $1.
Players must fill a certain amount of required roster spots to create an eligible team, selecting a combination of players that fit under the salary cap. The challenge is selecting players that out-perform their given value that day.
Scoring works like it does in any other fantasy sport—the better players perform across a number of statistical categories, the more points they accumulate for a daily fantasy team. The daily fantasy team with the most points receives the most money, and most games pay money from the pool to the top 50 percent of teams that day.
Why Daily Fantasy Faces Regulation
Daily fantasy games are under scrutiny for two reasons.
One of those reasons is akin to corruption or insider trading. Employees for daily fantasy sites who were familiar with the algorithms used to rank players were found playing similar games on other sites, in some cases winning huge amounts of cash.
The argument was that these employees had insider information that helped them perform well and win money.
That situation led ESPN to cut back on sponsorships from daily fantasy sites, while the sites made new rules saying employees were banned from playing daily fantasy games.
The other reason daily fantasy faces regulation is the question of whether they constitute gambling.
Gambling on sports is illegal in most states, and many consider daily fantasy gambling. In essence, players “bet” money by way of an entry fee, and they win money based on in-game results.
The daily fantasy sites argue that they offer games of skill rather than gambling. They say it isn’t a game of chance, but rather players must know a lot about a given sport to perform well, making it a skill-based endeavor.
What States Are Doing About It
Some states, such as New York, have flat-out banned daily fantasy sites like FanDuel and DraftKings from taking bets.
Other states have used daily fantasy as an opportunity to generate revenue by way of licensing fees.
For example, in March the state of Virginia became the first to enact such measures into legislation, requiring a $50,000 annual registration fee for daily fantasy sites.
Many more states are expected to follow suit with similar rulings, whether its banning for-pay games or rolling out a licensing fee for the gaming sites to pay in order to continue taking bets on daily fantasy contests.
The best piece of advice, both for daily fantasy players and sites running daily fantasy games, is to check state and local laws and perhaps consult with legal professionals before taking part.