There’s a legal gulf between betting on sports and playing daily fantasy games that is apparently big enough to drive a wheelbarrow full of cash through.
Placing a bet on whether the Blue Jays beat the Yankees on a given day is against the law, unless you’re at a legal sports book in Nevada or elsewhere. But you can draft a squad full of major-league players for one day and pay to compete against another person in a one-day fantasy game that awards cash prizes. That is the model that has turned DraftKings and FanDuel – the two big guns in daily fantasy sports – into rapidly growing businesses.
A story in the Wall Street Journal this year estimated FanDuel, based in New York, was worth $1.275 billion. DraftKings, headquartered in Boston, has a valuation of more than $1.2 billion, according to Legal Sports Report.
And last month, Yahoo Sports announced that it, too, was getting into the world of daily fantasy sports, or DFS.
As we count down the days until the NFL season begins, it will become almost impossible for a football fan to avoid some type of exposure to the DFS world. Both DraftKings and FanDuel have marketing partnerships with numerous leagues and teams in various sports, as well as with ESPN, Fox Sports and other media entities.
The Buffalo Bills in April announced a marketing deal with FanDuel. The fantasy company will receive “both dynamic and static in-stadium signage, online media, hospitality and other branding initiatives throughout the year,” a Bills news release said.
“Our partnership with FanDuel is a natural fit for both the Bills organization and our fan base,” Bruce Popko, executive vice president of business development at Pegula Sports & Entertainment, said in the Bills’ release. “With the popularity of fantasy sports growing every day in the digital realm, we’re looking forward to amplifying their brand through our digital properties as well as in-game exposure, and know our fans will embrace their service.”
DraftKings recently announced a major marketing venture with ESPN. To get the attention of fantasy players heading into NFL season, DraftKings and ESPN are co-hosting a venture they call the $10 Million Guaranteed Millionaire Maker Fantasy Contest.
In Week One of the NFL season, DraftKings will award a grand prize of $2 million, with a second-place prize of $1 million. The cost is $20 to enter the one-week contest.
ESPN is teaming up with DraftKings to offer an additional $1 million bonus to an ESPN Football League Manager player who racks up the highest number of fantasy points in the DraftKings Week One Millionaire Maker. That player is to split the $1 million bonus with the other participants in his seasonlong ESPN fantasy league or leagues.
The ESPN/DraftKings bonus will be deposited into the winners’ DraftKings accounts. At that point, the money “is free to be withdrawn from the user’s account at any time,” a DraftKings spokesman told The News.
FanDuel also announced a contest for the NFL’s opening weekend, with $5 million in guaranteed payouts, $1 million to the first-place winner.
Yahoo’s DFS page so far includes only baseball, but it is expected to roll out its daily NFL product soon.
Daily fantasy sports seem to satisfy a bettor’s desire for “action,” while not falling into the realm of actual gambling.
How is it that daily fantasy sports are legal? According to a statement on DraftKings.com, “The legality of daily fantasy sports is the same as that of seasonlong fantasy sports. Federal law and 45 of the 50 U.S. states allow skill-based gaming.”
For those scoring at home, the five that prohibit skill-based gaming are Arizona, Iowa, Louisiana, Montana and Washington.
FanDuel.com also has a section addressing legality of its games.
“The laws relating to fantasy sports varies by state, however in the vast majority of them fantasy sports is considered a game of skill and therefore legal,” FanDuel says. “In most states a game of skill is classed as game where skill is the predominant factor in determining the winner.”
The Bills are one of 15 NFL teams that have partnerships with FanDuel. NBC Sports and the NBA each own a stake in FanDuel, which has marketing deals with 13 NBA teams.
According to CNBC, DraftKings’ list of investors includes Fox Sports, Major League Baseball, the National Hockey League and Major League Soccer. DraftKings also has partnerships with 27 MLB teams, with NASCAR and Ultimate Fighting Championship.
Why do sports teams and leagues embrace these deals? In addition to the money they are paid by DraftKings and FanDuel, fantasy sports help build fan loyalty and engagement.
If you happen to be a Yankees fan and the Bombers play on Saturday afternoon, you might not care about that West Coast matchup later that night between the Pirates and Padres. Unless, of course, you have a stake in the game because you have Pittsburgh and San Diego players in your daily fantasy baseball lineup.
“When people play Draft Kings’ fantasy products they tend to watch more games, they tend to be more into the statistics and doing research on the games,” DraftKings CEO Jason Robins told CNBC last week. “Even when a game is a blowout, its fun down to the last moment because fantasy statistics are still being accumulated.”