Since October of 2015, the U.S legislation surrounding daily fantasy sports (DFS) has started to tighten. While the establishment of UIGEA (Unlawful Internet Gambling Enforcement Act) in 2006 originally exempted daily fantasy sports from the category of ‘illegal gambling’, considering DFS a skill-based game and thereby making it completely legal to practice nationally. However, due to the restrictions of state laws, individual states retained the right to determine themselves whether DFS, and indeed all fantasy sports, is a game of skill or a game of chance, just like other sports betting. Towards the end of 2015, several states started to make the shift towards declaring DFS a game of chance, and therefore rendering it illegal practice according to UIGEA in that particular state.
Since then, throughout 2016, there’s been somewhat of a domino effect. As it currently stands, nine states in total have declared DFS a chance-based game, the nine states being: Arizona, Nevada, Hawaii, Washington, Idaho, Montana, Alabama, Delaware and Louisiana. This has been of significant impact on fantasy sports operators like Draftkings and FanDuel, which will be merging their two separate companies by the end of 2017. Draftkings and FanDuel have both decided to block access to their sites in these nine states, making it impossible for citizens of the states to engage in fantasy sports gaming as offered by these two major operators.
There’s been some outrage regarding the above mentioned events. Draftkings and FanDuel, together with the Fantasy Sports Trade Association, are currently locked in legal contestations with several states in order to fix the situation. Their intense lobbying might very well work, because what these states seem to be overlooking is that DFS gaming can be a significant contributor to the state’s annual income.
According to a report, over 57.4 million Americans and Canadians were playing DFS and traditional fantasy sports in 2015 alone. 20% of the U.S population took part in it in some way: 18% of those were adults, and 32% were teens. What this reflects is that fantasy sports is becoming more popular, not less. The fantasy sports industry has experienced an exponential growth over the past few years. In 2006, there were 18 million DFS players. In 2008, that number jumped to 29.9 million, and by 2011 it was 35.9 million. In 2016, as mentioned, the last recorded number was 57.4 million. It seems that the DFS industry is growing, even with the hit to the American economy. A recent article on Casinos.co suggests that this might be due to a doubled focus on the Canadian market. The article on fantasy sports mentions how Canada has always been more ambiguous on fantasy sports legislation, which is very likely what makes it so attractive to the DFS industry.
Wherever there are big numbers in following, there are always big numbers in money. The growth is exponential not only in players, but also in the money they spend. In 2012, money spent on DFS per player was about $5 and $60 on traditional fantasy sports. In 2016, players spent on average $318 on DFS and $184 on traditional fantasy sports. 64% of these players said that as a result of getting into fantasy sports, they started getting into live sports as well. Basically, this reflects that the fantasy sports industry is making millions every year, and according to the statistics of engaged teens, they’re only going to be making more as time goes by. This is all money lost in taxation to the nine states.
Besides that, it is legally required of every player that they declare their winnings made from DFS and any type of fantasy sports. They must also pay taxes on those. Once again, this is all money lost from the gross income per annum. European entities like the English Premier League have long recognized the financial benefits of regulating betting and fantasy sports. They’ve established their own legal sportsbook, and are still profiting from it.
While it is important to regulate and keep things like fantasy sports gaming and sports betting more generally in check, it is hardly advisable to effectively ban them completely from states. Major operators like Draftkings and FanDuel will likely just find other markets to sink their roots into, as the Casinos.co article talks about. So, what is this crackdown on fantasy sports essentially? A legislative victory, or a missed economic opportunity? We’ll let you decide.