What the rise of daily fantasy sports will mean for problem gambling

Fantasy sports is gaining popularity around the world – and it is now big business. Articles relating to the NRL and AFL SuperCoach competitions now appear weekly in the Daily Telegraph and the Herald Sun tabloids. Leading daily fantasy operators FanDuel and DraftKings spent more than US$200 million on TV commercials during the 2015 NFL season.

Fantasy sports come in all shapes and sizes. This ranges from typical formats – including fantasy football, baseball and basketball – to the more obscure fantasy bass fishing, movies (predicting box office successes), and Congress (based on achievements of members of the US Congress).

Fantasy sports began as a niche hobby for statistically inclined sports fanatics. But, with the internet, it has evolved into a multi-billion-dollar industry played by 16% of the US and Canadian population – or 57.4 million people in total.

How do fantasy sports work?

Participants select a virtual team of real-life players from a professional sporting code.

For example, an AFL SuperCoach team may include Sydney forward Lance Franklin, Collingwood midfielder Adam Treloar, and Carlton defender Sam Docherty in a squad of a given number of players, each with a price attached. Each team has a maximum “salary cap” to spend.

During each round of competition, players are awarded “fantasy points” based on their actual game performance statistics. The points may be, for instance, four for a tackle, three for a kick, or two for a handball. Participants are matched against others in their fantasy league, and winners are determined by the best-scoring combination of players per round.

What are daily fantasy sports?

Traditional fantasy leagues are conducted over an entire sporting season. They involve a small entry fee, or can be free to enter. But, in recent years, the format of fantasy sports has changed dramatically, with the emergence of a fast-paced variant: daily fantasy sports.

Daily fantasy sports is played over a single game or a round of competition. Participants pay an entry fee, and the top-performing participants win money from the prize pool once the operator has retained a small commission.

In the US, daily fantasy sports is a US$3.2 billion per-year industry. FanDuel and DraftKings have a combined market share of 95%.

Daily fantasy sports in Australia

Estimates suggest there are 1.65 million (traditional) fantasy sports participants in Australia. This suggests daily fantasy sports competitions are a natural fit to the Australian market.

Rax Huq and Ryan Fitzgerald launched Moneyball in February 2015, the first and largest daily fantasy sports platform in Australia. Since its inception, it has experienced between 50% and 70% year-over-year revenue growth.

However, Moneyball is no longer the only game in town. Multiple new daily fantasy sports companies have launched similar platforms, including Draftstars (a joint venture between CrownBet, Fox Sports, and Seven West Media). Sports betting company TopBetta has also moved into the Australian market after signing an advertising deal with Fairfax Media to promote its fantasy tournaments.

Is it legal?

In the US, it is illegal to place online wagers on sporting events. However, an exemption for fantasy sports has allowed the daily fantasy sports industry to develop.

Daily fantasy sports’ legality rests on an assessment of whether its outcomes are determined mostly by chance (gambling, therefore illegal), or the individual skillset of participants (contests, therefore legal). The Fantasy Sports Trade Association has left no doubt as to its position, devoting an entire page of its website to attesting “why fantasy sports is not gambling”.

It seems contradictory, however, that US law bans online poker – which includes a substantial skill element – but not daily fantasy sports.

Daily fantasy sports also constitutes gambling as it involves staking something of value on an event determined – in part – by chance in the hope of winning something of greater value.

But, as online sports wagering is regulated in Australia, the legal environment for daily fantasy sports operators here has been far less complex. Australian operators are licensed by the Northern Territory Racing Commission, and their operations are guided by the South Australian Responsible Gambling Code of Practice.

Potential for harm

As with traditional betting forms, excessive involvement in daily fantasy sports – spending more time and/or money on the activity than is personally affordable – will cause users problems that may also affect the people around them.

Early studies on this topic have found a link between fantasy sports involvement and gambling-related problems among US college students. Certain structural features of daily fantasy sports – like high bet frequency, short event duration, high maximum bet amount, and short payout intervals – multiply the potential for harm relative to the traditional fantasy format.

Daily fantasy sports websites also allow users to quickly populate the same team into multiple simultaneous contests. This theoretically allows them to spend thousands of dollars in a matter of seconds.

However, daily fantasy sports’ unique characteristics may serve as protective factors. The key motivations for participating in fantasy sports – fee and no fee – include socialising, entertainment and competition, rather than gambling to win money.

Click here to find out more about a University of Sydney study and take part in our survey, if you bet on sports and/or play daily fantasy sports.