How Fantasy Sports Got Around Online Gambling Laws
A typical morning for college student Bryce Mauro means poring over baseball stats, trying to prepare for the 450 or 500 fantasy sports games he might play that day. If the players he picks do well in real-life, he wins. If they don’t, he loses, sometimes big.
Mauro, a junior at DePauw University in Indiana, will bet in a single day what many students will spend in an entire year on room and board. Last May, Mauro won $11,000 in just one afternoon. That night, he lost $6,000.
That type of record has made Mauro one of the most successful daily fantasy sports players in the nation. Over the last two years, Mauro says he’s earned six figures through fantasy games. Some call what he’s doing gambling. He calls it “investing.”
“It’s not gambling at all,” says Mauro in the below video, which was produced by FRONTLINE in collaboration with The New York Times. “I have a portfolio, I’m trying to diversify the portfolio by picking players every day … It’s like you’re given $1,000 to bet on the stock market in a day. It’s no different than that.”
Others don’t quite see it that way. They argue that the booming business of fantasy sports — which FRONTLINE will explore in a documentary coming Winter 2016 — is no different than other forms of online gambling that Congress set out to ban in 2006. The bill, which was hastily attached to homeland security legislation, was designed to make such betting more difficult by prohibiting web-based payments for illegal bets.
But a loophole in the law cleared a path for the type of fantasy sports games made ubiquitous by sites such as DraftKings and FanDuel to thrive. As a new Times investigation into fantasy sports and online gambling published on Thursday notes:
At the time, fantasy sports was a low-key competition in which bettors assembled their own teams, then watched how their players performed over an entire season. The legal exemption for fantasy sports was based on its definition not as gambling but as a game of skill. Today, fantasy sites offer daily contests, million-dollar prizes and bets on individual sports such as golf, mixed martial arts and Nascar races, magnifying the element of chance and making the exemption tougher to defend … The businesses of fantasy sports and online gambling are increasingly intertwined. Operators of online gambling sites have begun investing in fantasy sports, and some of DraftKings’ senior managers came from online gambling companies or were professional poker players. Some of fantasy sports’ most successful players are former poker players, too.
Million-dollar prizes are now increasingly common on both sites, but unlike casinos or racetracks, “fantasy sports continues to operate free of state or government regulation,” the report notes.
Asked whether fantasy sports needs regulation, Matt King, the chief financial officer of FanDuel, told FRONTLINE and the Times that he does not view fantasy sports as gambling.
“Our product is all about entertainment value,” said King.
Heightened government scrutiny could soon be on the way, though. Last week, the New York attorney general opened an inquiry into the two sites to determine whether some employees may have used inside information not available to the public to win lucrative cash payouts. The attorney general has given both companies until today to respond. The FBI has also opened an inquiry, according to reports.
But for now, at least, the business of fantasy sports is only expected to keep growing. This past weekend was the most successful ever for both sites, which received 7.1 million entries to their guaranteed prize pool tournaments, generating $43.6 million in entry fees. FanDuel alone is signing up 20,000 to 30,000 new players a day, according to King, while the industry as a whole is expected to generate around $2.6 billion this year just in entry fees. By 2020, that figure is expected to swell to $14.4 billion.
The worry, say critics, is that just as with gambling, the odds of winning it big are nowhere near the odds of losing it all. In a recent analysis published in The Sports Business Journal, for example, researchers found that 91 percent of daily fantasy profits during the first half of this year’s Major League Baseball season were won by just 1.3 percent of players.
“The only reason they don’t call it gambling is because the law tells them if they call it gambling, then they can’t do it,” Timothy Fong, co-director of the gambling studies program at the University of California, Los Angeles, told the Times. “Because it’s gambling.”