On Oct. 15, 2015, Assani Fisher discovered that he had to move from his home in Nevada. The former poker player was returning from a vacation that day, when the state’s Gaming Control Board ruled that daily fantasy sports (DFS), which is a rapidly growing spinoff of traditional fantasy sports, constituted gambling and was therefore illegal.
Fisher makes his living playing DFS. Up until then, he wagered anywhere from $15,000 to $300,000 per night on games, primarily on DraftKings and FanDuel, which are the two largest DFS websites. Fisher says the money that he made was so good that he wanted to move the next day, but it took him a week to find a place in San Diego. Today, he’s settled in Southern California, playing DFS and winning enough to be the seventh-ranked player in the world, according to RotoGrinders, which is a website that covers the DFS industry.
Fisher figured out a solution to his problem, but the DFS world is far from settled. The 13 experts whom we interviewed agree that DFS has to be regulated to assure the fairness and integrity of the contests. Unfortunately, no independent agency oversees DFS websites or makes sure that the contests are operated fairly and transparently. In other words, no one makes sure that DFS games aren’t stacked against players or even rigged.
Proposed legislation in multiple states and growing calls for mandatory regulation that’s overseen by governments or independent agencies might alter the landscape. Everyone who is involved—from superusers, such as Fisher, to a typical user who puts $5 into an account, loses it and never plays again—could be affected.
We believe that regulation is a necessary step for an industry that didn’t exist before 2007 and came to the attention of the majority of current players only in the past year. Most experts say regulation will benefit DFS players.
“The consumers are going to be the ones who win in the end, although it may be a rocky road getting there,” says Daniel Wallach, who is a Florida-based attorney who follows the DFS industry closely.
We believe that coming changes will make the industry more transparent and make the games more fair for the average user. However, superusers still will win most of the time.
SET IT UP. The idea of DFS is simple: You take traditional fantasy sports, in which players select athletes and earn points for their accomplishments (home runs hit, touchdowns scored, etc.) over the course of a season, and you shorten the timeframe. Instead of waiting months to determine a winner, DFS participants learn their fate on a daily basis.
Players pay an entry fee (anywhere from 25 cents to $5,300) and select a lineup while they stay under a predetermined salary cap. (For instance, superstar LeBron James costs more in a National Basketball Association [NBA] DFS league than does Boston Celtics role-player Jared Sullinger.) Then DFS players sit back and watch the day’s action. In a head-to-head matchup, the player who has the highest point total wins the jackpot, minus the rake, which is the amount (typically 10 percent of the jackpot) that’s paid to the DFS website to guarantee that it makes a profit. In a tournament, a certain percentage of top points-earners win shares of the jackpot.
FanDuel, which was founded in 2009, and DraftKings, which was launched in 2012, dominate the market with a combined 95 percent share. FanDuel and DraftKings each claims at least 1 million active paying users. Each reportedly collected at least $1 billion in entry fees in 2015. Each boasts billion-dollar valuations, which are fueled by the hundreds of millions of dollars in venture capital that each received. This venture capital has come from major sports leagues Major League Baseball (MLB), Major League Soccer, NBA and National Hockey League (NHL); individual NFL owners, such as Dallas Cowboys owner Jerry Jones and New England Patriots owner Robert Kraft; and media companies, such as Comcast Ventures, Fox Sports, NBC Sports and Time Warner Investments. (NBA, NHL and NBC Sports declined to comment for this article.)