In 2018, the U.S. Supreme Court overturned the ban on sports betting, opening the door to a rapid spread of legalized wagering across the land. Today we have sports betting in 35 states and the District of Columbia.
At this point, FanDuel and DraftKings control much of the market. An interesting point about the market leaders—they began their business as purveyors of fantasy sports. And their mantra was this: we’re not peddling gambling couched as fantasy. That they had to say something like that, kind of says otherwise.
The state of Colorado, which has a successful sports wagering market, is trying to address what fantasy means. In its simplest terms, players pay a fee to pick actual players and form a team. The results are based on the performance of the real players, which decides who wins and who does not. In the early years, the games covered an entire season before paying off.
But it’s since become more complicated than that, thus casting aspersions of actual gambling and not skill games. And it’s become daily, hence the term daily fantasy sports (DFS).
State regulators will sift through various proposals at an October 30 meeting, according to SBC Americas.
Colorado lawmakers legalized DFS back in 2016. But the existing regulations are not well spelled out. There isn’t even a good definition to describe fantasy games.
According to proposals, “authorized fantasy contests” should feature:
- An entry fee, a prize based on the statistics of multiple athletes.
- Patrons competing against other patrons. Contests that include parlay-style wagers that are stacked wagers on single athletes against fantasy contest providers shall be prohibited.
- Props-style fantasy contests feature at least two athletes from two different teams with the outcome of the contests based on cumulative fantasy points.
The language around parlay-style wagers is somewhat unclear on whether fantasy vs. the house is prohibited or only prohibited when dealing with a single athlete, which might be a topic that comes up at the meeting.
Operators must submit detailed information about the types of contests they’ll offer. Use of the word “free” in ads will also be banned. A self-exclusion list for patrons must be established and responsible gambling messaging with the 1-800-GAMBLER helpline is necessary.
Licensing fees will be $350 for small fantasy advertisers and $15,000 for larger operators. Both types of operators are required to register with the state.
New York and Michigan are taking similar steps. They also have legalized DFS. Maine banned pick’em games which resulted in Underdog shelving the prop-style markets…at least for the time being.
In addition, the Maine Gambling Control Unit (MGCU) fined Underdog $391,850 for offering illegal DFS games, MGCU Executive Director Milton Champion told LSR on October 24. The company has 30 days to appeal.
A spokesperson told LSR the company ceased pick’em products in Maine in the wake of Champion’s ruling.
The pick’em situation evolved at the end of May as the MGCU began investigating when they worked on sports betting rules. Champion told LSR sports betting will go live in November in Maine.
The agency filed a complaint July 11 as it investigated the legality of such products, in which players compete against the house instead of each other.
Underdog replied September 11 that the pick‘em products are “flexible fantasy contests” that allow “customers to select their own scoring parameters rather than being locked into an operator’s grid of fantasy points.”
Contests must involve more than one contestant and wagers cannot be made against the operator.
Underdog accepted a minimum of 482,771 wagers from 7,837 individuals in Maine. 4,781 won at least one wager with a total net revenue of $1.4 million for Underdog since January 2021. Champion compromised by fining $50 for each of the 7,837 pick ‘em participants.
“This is the first of its kind and is setting a precedent,” Champion told LSR. “It sets the tone going forward, but any other violations will be looked at separately.”
Underdog cooperated with the investigation.
“This is just an initial step in the administrative process, and we now have the opportunity to be heard by the state in the coming weeks and look forward to receiving a final decision that ultimately agrees with our interpretation of Maine law,” an Underdog spokesperson said.
The DFS industry has faced increased scrutiny. North Carolina banned pick’em too. So did Michigan and New York.
- Florida regulators issued a cease and desist to Underdog, Betr and PrizePicks in September.
- Wyoming sent a similar order in July.
- Underdog launched an adjusted Colorado pick’em product in August based solely on fantasy points following regulator feedback.
