Long ago, fantasy sports involved the player playing the role of team owner/coach/manager. You drafted real players to put together your team and depending on how your players performed in the real world, they matched up against other teams in the fantasy league.
Then it became a daily exercise in how the players performed, thus the name Daily Fantasy Sports (DFS). As with traditional fantasy sports games, players compete against others by building a team of athletes from a particular league or competition while staying under a salary cap.
The latest iteration of DFS has touched off some alarms because it seems to come too close to prop bets in states with legal sports betting. The DFS operators—Underdog Fantasy, Prize Picks, and Betr Picks to name a few—like to say nay.
Sportsbooks like FanDuel and DraftKings agree with regulators on this. FanDuel’s Senior Director of State Government Relations Cesar Fernandez minced no words about how he felt about these companies during a panel at the National Council of Legislators from Gaming States summer meeting, according to SBC Americas.
“There are companies today posing as fantasy sports operators, and they are running illegal sportsbooks,” he said at the meeting.
The irony is that FanDuel and DraftKings got their start as DFS companies. And one day, sports betting may be a thing of the past, scratched in favor of online gaming, says Jeremy Levine, CEO of Underdog Fantasy.
On August 9, Levine responded with an open letter, accusing FanDuel and DraftKings—who control the marketplace by a wide margin—as the prime movement behind the crackdown.
“When the Supreme Court later permitted states to legalize sports betting, DraftKings, FanDuel, and their lobbyists went to work. But this time they wrote laws designed to make it hard for innovators to break into the brand-new sports betting industry. The strategy worked and they had a near instant monopoly, capturing nearly 80 percent of the U.S. sports betting market,” Levine wrote.
Levine said Underdog and similar companies threaten their hold.
“They’ve seen our company, and others, produce superior products, more exciting user experiences, and begin to challenge them for sports fans’ attention, and they’re scared that we will challenge their market positions. Frankly, they should be scared.”
Levine said the trajectory is clear: Go from DFS to sports betting and sports betting to online casinos.
“They see sports betting as a stepping stone to having digital slot machines in every American’s pocket. Where they once may have cared about sports and sports fans, their recent efforts show that they have long-since turned their attention solely to the bottom line.”
Levine told Legal Sports Report that his company operated within the letter of the law as referenced by three items of the Unlawful Internet Gambling Enforcement Act.
- A game based on skill;
- Use predictions on two or more athletes from different teams; and
- Have the outcomes based upon those athletes’ accumulated statistics in real- world contests.
“Every single one of our contests meets that simple definition. The laws they wrote say fantasy sports is far broader than just salary cap,” he said.
States such as North Carolina, Arizona, Indiana and Alabama determined the companies fell within the law.
The NC Courage and DFSoperator PrizePicks formed a partnership. Meanwhile, Betr sportsbook launched a DFS product called Betr Picks in North Carolina, among other states.
Since May, four states with fantasy sites have offered games mimicking player prop-style bets, New York among them.
PrizePicks, live in 31 states, and Betr Picks, which launched in North Carolina, take a distinctly different approach to daily fantasy than DraftKings and FanDuel.
In new scenarios, the player competes against “the house” instead of other players. But Wyoming, Maine and Ohio have scrutinized this approach.
They concluded the method, which involved a player parlay-style, was too close to traditional sports betting. Ohio’s DFS laws disallow “proposition selection,” defined under state law as a fantasy contest where players choose “whether an identified instance or statistical achievement will occur, will be achieved, or will be surpassed.”
Neither PrizePicks nor Betr Picks operate in Ohio.
North Carolina does not formally allow or disallow DFS, nor will it regulate it, at least for the time being.
The legislation said, “Nothing in this article shall apply to fantasy or simulated games or contests in which one or more fantasy contest players compete and winning outcomes reflect the relative knowledge and skill of the fantasy contest players and are determined predominantly by accumulated statistical results of the performance of individuals, including athletes in the case of sporting events.”
While disqualifying fantasy sports as a form of sports betting, the definition of fantasy sports provided, namely a contest where a single player could compete using “relative knowledge and skill” to determine “the performance of individuals, including athletes, ”allows space for prop-style fantasy sites, like PrizePicks and Betr Picks.
None of this precludes regulators from questioning whether it is also a form of sports betting.
As Dustin Gouker, a consultant for Catena Media, NCSharp’s parent company, wrote in the gaming industry newsletter the Closing Line, “In the Venn diagram of sports betting and fantasy sports, these products are in the overlapping sections. But just because you’re both doesn’t mean you only get treated as fantasy.”
The North Carolina Lottery Commission recently hired a sports betting director and is in the early stages of drafting regulations for sports betting. NCSharp will watch if the DFS prop style bets pass muster.
Michigan regulators have already targeted DFS because of its similarities to sports betting.
The Michigan Gaming Control Board recommended DFS regulations to prohibit “proposition selection or fantasy contests that have the effect of mimicking proposition selection.” The proposed rules speak to the single-player DFS pick’em contests offered by companies like PrizePicks and Underdog, as opposed to traditional DFS multiplayer lineup contests offered by DraftKings and FanDuel, according to LSR.
Underdog has not operated in Michigan since 2022, when the state created DFS licensing requirements. Boom Fantasy and PrizePicks offer the pick’em contests which resemble prop betting by Michigan’s proposed rules. Michigan is one of the few states that applies a similar tax rate to both industries. Regulations require approval from the state legislature before they go into effect.
Both companies consider their games legal under the federal UIGEA skill-based carveout for fantasy sports, while regulators in states like Ohio and Maryland have classified those games as de facto sports betting. Neither company operates in those states.
Wyoming sent the Underdog and PrizePicks a cease and desist letter when regulators discovered the similarities to sports betting. New York and Massachusetts are taking a close look at the similarities.
