Should DFS be Considered Gambling?

Fantasy sports have become one of the most popular games in America over the past few decades. With the increase in technology and statistical tracking ability, fantasy sports have evolved from a hobby for only the most dedicated sports followers into the multi-million dollar industry that it is today. The basic concept of fantasy sports is that online fantasy players select real-world athletes based on their projected statistics in specified scoring categories to make up fantasy teams that will compete head to head. Depending on the fantasy sport, different statistical categories will be awarded different numeric point values to determine who wins the fantasy matchup. For example, in most fantasy football leagues a standard team is made up of one quarterback, two running backs, two wide receivers, one tight end, one kicker, one team defense, and what is called a flex player that can be either a running back, wide receiver, or a tight end. These different players earn points for the fantasy owner based on their actual performances in real-world games.

Today there are two main gameplay styles for fantasy sports: traditional and daily. The first is traditional fantasy sports (TFS) that run the full length of the season of the real life sport it is based on. TFS for the most part is considered a game of skill and is therefore legal and not considered to be gambling. The second is daily fantasy sports (DFS) that only one run for one day or one week depending on the sport the fantasy game is based on. The legality of DFS has been called into questions a number of times recently by a number of different states therefore DFS will be the main focus of this blog post.

Daily fantasy sports contests can vary in both entry cost and payout breakdown, depending on the type of daily fantasy sports contest. Some of the main types of daily fantasy sports contest offered on Draftkings and Fanduel are:

Guaranteed Prize Pools: Players pay a set entry fee to compete for a share of a fixed prize pool; GPPs run regardless of whether they fill up or not.

Cash Games”: Players can either join an existing league or create their own league, in which the best-performing fantasy teams win prizes. These are smaller than GPPs and not guaranteed to run.

Head-To-Head: A contest that pits two players against one another; the winner receives the entire prize pool.

50/50: The top half of the field nearly doubles their investment; the other half of the field receives nothing. [1]

DFS is a relatively recent addition to online fantasy sports. It was started in approximately 2007, one year after Congress essentially killed the online poker industry with the passage of the Unlawful Internet Gambling Enforcement Act (UIGEA), which contained a specific exception for online fantasy sports. [2] The language of the UIGEA exempts fantasy sports that meet certain conditions. One such condition is that, “all winning outcomes reflect the relative knowledge and skill of the participants and are determined predominantly by accumulated statistical results of the performance of individuals (athletes in the case of sports events) in multiple real-world sporting or other events.” Thus, in order to be exempt under the UIGEA, DFS must be based upon the skill of the fantasy participants; it must not be based upon chance. [3] Further, the UIGEA defines unlawful internet gambling as placing a bet using the internet where such bet is “unlawful under any applicable Federal or State law in the State or Tribal lands in which the bet or wager is initiated, received or otherwise made.”[4] Therefore, if a state, such as Florida, finds that daily fantasy sports constitutes illegal gambling under its state law, then it would be considered unlawful internet gambling under the UIGEA as well.

Under the common law, gambling is defined as those activities in which a person pays consideration for the opportunity to win a prize in a game of chance.  Because most games contain elements of skill and chance, this common law definition requires the court to determine whether a game is one of chance or skill.  “Skill has been defined as the exercise of sagacity upon known rules and fixed probabilities where sagacity includes, keenness of discernment or penetration with soundness of judgment; shrewdness; or the ability to see what is relevant and significant.”[5] Chance can be described as something that is not planned or designed. The participant in the game has absolutely no control over the elements of chance, which distinguishes them from the elements of skill. [6]

Recently the New York State’s attorney general filed lawsuits against two leading DFS companies, Fanduel and Draftkings, asking for an injunction to stop them from operating, saying that they are violating the prohibition on gambling that is part of the state’s constitution. In his complaint Mr. Schneiderman argued, “DFS is a new business model for online gambling. The DFS sites themselves collect wagers (styled as “fees”), set jackpot amounts, and directly profit from the betting on their platforms. DFS’ rules enable near-instant gratification to players, require no time commitment, and simplify game play, including by eliminating all long-term strategy.” [7] Mr. Schneiderman also argues that the instant gratification of DFS and ability to wager large sums of money could lead to gambling addiction. Due to this recent litigation the New York legislature has passed a bill recognizing DFS as a game of skill and creating different regulations for the DFS industry to follow to be considered legal in the state of New York. [8]

These regulations fall under three main categories: Registration and oversight for operators; Operator taxes; and Consumer protection. Under registration and oversight for operators the bill requires all paid entry fantasy sports operators wishing to do business in the state must apply with the New York State Gaming Commission. [9] Under operator taxes registered sites in the state must pay a 15% tax on gross revenues derived from New York players, plus an additional tax of 0.5% of revenues, with a $50,000 annual cap.[10] Under consumer protection sites must prevent play by minors. Also in advertisements and upon entry in a contest, operators must “make clear and conspicuous statements that are not inaccurate or misleading concerning the chances of winning and the number of winners.”[11] Lastly sites must ensure that player funds are segregated from operational funds. [12]


Questions for Class:

Do you think DFS should be considered a illegal gambling?

Do you think the UIGEA fantasy sports exemption should apply to DFS?

Do you agree with the New York Attorney General that DFS is a new business model for online gambling?

Do you think the New York legislation does enough to regulate DSF? If not what regulations would you add?



[3] 31 US Code Section 5362

[4] 31 US Code Section 5362










~ by zim1029 on November 6, 2016.

9 Responses to “Should DFS be Considered Gambling?”

  1. I think DFS definitely is gambling (the Nevada gaming commission ruled it was gambling as well). [1]. Yes, fantasy sports having particular skills and knowledge can make you more competitive but a lot of it is luck too. You still can not pick the “perfect team” and guarantee an outcomes because anything can happen to cause the players not to perform the way you thought they would. Most people who play fantasy have probably had a friend who never played before or does not closely follow sports and still manages to be competitive or even win. So I would not say the skill aspect in fantasy is strong enough to claim it is not gambling. People who play DFS place wagers for the opportunity to win large sums of money or other prizes and also have the chance to not win anything.

    However, I do not think it should be illegal if it is properly regulated. I think the “gambling addiction” excuse is pretty weak because there are plenty of other avenues to gamble and develop a problem, so totally banning fantasy sports does not seem very logical to me. It is a fun game for sports fans and I am sure generates a decent amount of tax revenue for state governments.

    I think the New York legislations set a decent foundation for regulating DFS. It made sure that DFS sites are registered, taxed the revenue , and most importantly they implemented provisions for consumer protection. Although, I am sure the regulation isn’t perfect, I think as more and more states develop DFS laws the flaws in the regulations will be addressed. Most of the states have already developed legislation to legalize DFS such as Colorado, Missouri, Kansas, Mississippi, Tennessee, Virginia, Massachusetts, and Indiana. [2].



  2. I believe only daily sports betting is gambling. This is clear by Nevada’s decision on the matter. I say this, not because Nevada decided to regulate the websites as such, but because of the evidence that shows people use these sites in place of other legal gambling options. Nevada’s decision was likely influenced by big gambling lobbyists who, for obvious reasons, wanted the sites kept out of the state – so I take the decision with a grain of salt. However, there is no doubt in my mind that the people who use these sites do so because they want to gamble. And there actions on these sites will lower the popularity of legal gambling alternatives. If you want to offer gambling services, you have to comply with gambling laws. Otherwise, these online sites get an unfair advantage over casinos that have spent millions of dollars complying with regulations and bring in millions of dollars in taxes to their state. That being said, I truly believe we should work towards legalizing gambling and deregulating the industry as a whole. I believe regulation in the industry is necessary and beneficial, however I believe it is too hard to safely and legally gamble and that is why such sites gain traction in the first place. In essence, my opinion is deregulate gambling as a whole; if not, regulate online fantasy sites in the same way as casinos.

    I say this because, to me, the distinction between traditional fantasy football and daily fantasy football and even more traditional sports betting is almost completely arbitrary. (Admittedly, this could be because I’m not a huge sports fan and have never partaken in any types of sports betting or fantasy league.) This is especially evident, to me, in the fantasy sports exemption that Congress wrote in to the UIGEA. This exemption is more likely the result of extensive lobbying than it is the result of any logical legal reasoning. It clearly follows the traditional line of how we regulate games as gambling but exclude games of skill, however, I’m not a huge fan of how such analysis includes some games but excludes others despite the fact that they share almost complete similarity. Traditional and daily fantasy are logically the same game in all ways except duration. So how is one a game of skill and one a game of chance? We don’t say buying stocks and selling them a day or week later is gambling, nor do we say buying them and holding them long-term before selling is gambling. So why is daily fantasy gambling, but season long fantasy is not? To me, there’s not much difference.

    In my opinion, if we are going to continue to regulate gambling and gambling-like games, we need to reassess how we decide what games are considered gambling. As you point out, all games have some level of chance and some level of skill. Since there is no clear definition of when a game has so much chance and so little skill to be considered gambling, we should find a new way to define gambling. Admittedly, I don’t have a better way to define gambling, but I do know our current “game of chance versus game of skill” definition is leading to some very illogical decisions. Thus, we need a new one.

    I believe the current regulations on fantasy sports sites are insufficient, since such sites displace the customer base away from legal gambling venues. We regulate gambling and allow casinos to partake in an otherwise illegal activity because they have chosen to comply with strict rules. Because they have complied with these rules, they are rewarded with their profits. Fantasy sites should not be rewarded with their profits unless they choose to comply with the rules as well.

  3. FanDuel and DraftKings have applied (and DraftKings received) a gambling license in the United Kingdom. [1]. Many people and states have been taking that action at face value and categorizing the activities under these companies as gambling. The problem is that FanDuel and DraftKings have not applied for gaming licenses in the states and are thus not regulated. [1].

    Daily Fantasy Sports should be considered as illegal gambling. There have already been several states that both FanDuel and DraftKings have come to agreements with to leave, some of which include Texas, Hawaii and Mississippi. [2]. As the opinion of the Attorney General of Texas points out, the first thing to consider is whether or not the users of DFS are betting on “the performance of a participant in a game” or whether daily fantasy leagues are “bona fide contests for the determination of skill.” [3]. The blog referred to the Unlawful Internet Gambling Enforcement Act (UIGEA), which includes the elements of knowledge and skill of the participants as well as accumulated statistical results. [4]. DFS are played and won with the elements of chance and luck. A DFS participant cannot predict how a chosen player will perform regardless of all the statistics there may be in front of him/her because there are so many factors at play that may impact a player’s performance, i.e. potential for injury, a bad or good referee call during the game, or weather conditions. [4].

    The UIGEA fantasy sports exemption should NOT apply to DFS. All players regardless of skill and knowledge can play in the same league. This allows experienced players to seek out the newcomers and exploit their inexperience. Such an act is called “bumhunting.” [5]. Bumhunting comes from Poker and has resulted in huge losses to inexperienced players while awarding huge gains to experienced players who patiently wait for an inexperienced player to sit at their table. [5]. DFS has no safeguards for such an act/play. Being exempt from the UIGEA also means that players who have the money and the technology can script. A participant can use a script to adjust hundreds of lineups with minimal effort and time wasted. [5]. If DFS was not to fall under the UIGEA exemption, then the fairness of the gambling may be evenly spread through experienced and unexperienced players to a certain extent. Instead of banning or limiting the use of scripting, since both companies are not regulated, FanDuel and DraftKings changed their policies to allow for scripting to be used. [5]. However, if FanDuel and DraftKings were to be regulated, they would have to establish and implement policies that identify and prevent restricted transactions, such as scripting. [6].

    [4] 31 US Code Section 5362

  4. It sounds like the only main difference between the traditional fantasy sports and the daily fantasy sports is the time period of when a gamer can start a game. I am very unfamiliar with online gaming in general, and especially with fantasy sports, but I don’t see how the possibility of starting a new game every day and having the games start randomly instead of having the games tied to a league changes the nature of the game. Both are based on the athletes’’ performance in actual games and you pick your fantasy players in the same manners. If lawmakers decide that traditional fantasy sport is not gambling, then the daily fantasy sports should also not be defined as gambling.

    However, in my opinion, they both sound like gambling. You pay money to play the game and you have a chance to win money. The argument is that the game is based on skills. But it is based on the skill of the actual athlete not the person who picks his/her online fantasy league. And while I agree that knowledge about the game, each athlete performance, and statistics are helpful to win, the element of chance outweighs the skill. In the end, the person is picking a random player and hoping that this player won’t mess up in the next game (or gets injured).

    I agree with the New York Attorney General that DFS is gambling under current law and should be regulated as such. It provides people with an instant gratification and can be addicting. Again, the same argument can be made in regards to the traditional fantasy league. Regulations are needed in order to assure that consumers are protected, appropriate taxes collected, and that the online sites adhere to licenses requirements.

  5. DFS should be considered illegal gambling. As Attorney General Schneiderman pointed out in his complaint against FanDuel, DFS is essentially proposition betting (prop betting). [1]. This is a form of betting where a bet is won or lost on the occurrence of a statistical outcome. [2]. In the case of DFS, those outcomes, as the author points out, just happen to be touchdowns and yards allowed. Further, DFS are distinct from traditional fantasy leagues in that DFS involve short-term picks and rewards that are based on single-game performances instead of season long strategies and results. [3]. In fact, DFS so resembles prop betting that FanDule encouraged participants to review Las Vegas odds on athlete prop. bets. [4].

    The only real difference between DFS and prop betting appears to be their legality. In Nevada, for comparison, prop betting, and specifically fantasy sports betting, is considered a form of gambling that must be licensed and subject to regulation. [5]. However, in N.Y., one is legal but the other is not. What could explain this anomaly? It is not likely the N.Y. legislature was duped by arguments that fantasy sports require skill and finesse, such as what was envisioned under the UIGEA. As has been pointed out many times, games such as Poker are largely based on the skill and experience of the player, but still rely on chance to the point of becoming a form of gambling. A.G. Schneiderman made this point clear in his memorandum of law:
    “The key factor establishing a game of skill is not the presence of skill, but the absence of a material element of chance. Here, chance plays just as much of a role (if not more) than it does in games like poker and blackjack. A few good players in a poker tournament may rise to the top based on their skill; but the game is still gambling. So is DFS.” [6].

    What most likely occurred was intense lobbying by sports leagues and franchises along with projections of tax revenue. N.Y. comprises 13% of online daily fantasy sports users and FanDuel and DraftKings both have sponsorship and equity positions with almost every major sports franchise in N.Y. [7]. DraftKings also has a sponsorship deal with Madison Square Garden. [8]. In addition, N.J. had made recent headway in its attempts to legalize gambling under the 1992 PASPA, and the N.Y. legislature perhaps feared their revenue would flee to Atlantic City. [9].

    DFS is in many ways a new business model that has masked an old, and illegal, concept with professional sports. Ratings for sports telecasts increase when fans have a financial stake in games that normally would have little importance to their team’s position in the league’s standings. Fantasy sports also create an immersive experience for fans who feel a greater sense of connection to the league in general. This good will no doubt fosters greater patronage. However, that is where DFS ends and where prop gambling begins.

    Before the N.Y. legislature acted, the settlement allowed for FanDuel to continue operations within the state so long as fans did not provide any consideration for use. [10]. Were DFS truly about more than gambling, the positive sports externalities, along with the sties’ services and software, [11] should have been more than enough to secure sponsorship deals and keep the industry going. However, the entire appeal of DFS sites is the chance to win money and this “new business model” gave them the ability to provide gambling services without licensing.

    In general, these sites are based largely on the dream of winning big. FanDuel continues to face allegations of false advertising, and among the many claims is that FanDuel misrepresented the likelihood that players would win large sums of money. [12]. Advertisements have focused on monetary aspects instead of any connection of DFS to sports knowledge or the appreciation of sports as a fan, [13], and even the descriptions of the sites games have nothing to do with sports.

    If DFS is going to continue, legislatures must insist on requiring strong statements as to the probabilistic nature of the games. The N.Y. statue requires clear and convincing statements as to the chances of winning, but everyone thinks they can beat the odds with their “expert talent.” Thus, I don’t think the statute goes far enough to dispel the notion that DFS is in fact gambling – that success or failure often has very little to do with a user’s knowledge of sports. Users need the feel the sense that they are sitting down at a poker table or playing roulette.

    [1], at paragraph 7.
    [2] Id.
    [3] Id. at paragraph 40 a-b.
    [4] paragraph 7.
    [10], at F.1.
    [11] See and
    [13] See, at paragraphs 4-5.
    [14] See and

  6. I am a little torn about whether DFS should be considered illegal gambling. The only difference between the DFS and traditional fantasy league is the amount of time in which the team decisions are made. Realistically, each sport is different and regardless of what sport a DFS or traditional player is participating on, there is a great deal of knowledge and skill required. I have had friends that participated in baseball and football leagues. Most were traditional fantasy leagues. I learned an incredible amount about both sports by listening to them talk about their teams and their leagues because there is so much knowledge required to know which athletes are good and which athletes are injured or coming back from an injury and how that affects the team. However, each sport is different in and of itself. For example, if timing of team decisions is the problem, then every traditional baseball fantasy league should be considered online gambling too. Baseball is the only sport in which teams play several days back-to-back in regular season. Therefore, there must be team lineup changes every single day. Athletes get dropped to minor league or put on the disabled list every day and it affects the outcome of the game. But, if the players are not keen to the sports news and the dynamics of the game, there is no chance at winning.

    I think it is difficult to compare sports fantasy leagues to gambling because regular gambling has much more chance involved than fantasy sports do. For players who really know their team and athlete statistics, the only chance that still exists is the unexpected injury or the unfortunate bad day on the field. Fantasy sports is not just knowing the athletes, it is knowing the opposing team and the team’s management as well. There are so many more moving parts to fantasy leagues than there are to casino gambling. That is why I think that the UIGEA should apply to DFS and traditional fantasy leagues.

    I think that the New York legislation is a good approach to DFS. Much like in Nevada, regulating gambling has proven to be a good method to avoid illegal activity. Whether DFS is considered gambling or not, I am in favor of regulating the conduct to a certain degree. Minimum age requirements, limiting which sports can be part of DFS, and imposing taxes on operators are important steps to take to ensure that the betting is fair and safe for users. I think legislation could take it a step further and also tax the players according to how much money they win. Regulating prize winnings would also help to keep tabs on the website in general to see how the money is flowing in and out of the business. I think players would be irritated by this, but ultimately they shouldn’t be surprised. People who participate in gambling know that casinos take a percentage off of the top to pay the IRS. [1]


  7. 1. I do but with a wrinkle – I do not believe gambling should be illegal regardless and this comes with two caveats:
    a. I do not gamble, in fact, the only thing that I have ever done that could be considered “gambling”, as we now think of it, is paying a small fee for a season of fantasy football because I agreed to play that particular league before I knew there was a buy-in. Then I would have felt bad if I hadn’t played because the league would have fallen apart. That being said, gambling has a long history in my family. My great-grandfather was a degenerate gambler and so my grandfather won’t even touch a deck of playing cards. I personally take the same position for the same reason – what I believe is a hobby that I believe can be highly destructive and highly addictive.
    b. Simply making daily fantasy football illegal feels a whole lot like politicians playing the “let’s only anger the demographics that don’t vote” game. Far more destructive forms of gambling are legal, with caveats, but daily fantasy football is experiencing pushback while it is popular with younger people. Older people vote and are more likely to engage in the forms of gambling that are currently legal (while ironically tending to also be more opposed to gambling of any form). There just doesn’t seem to be a clear dividing line between what is or is not gambling for us. It seems to me that if we as a society decide gambling should not be legal then there should not be exceptions to that rule with little logic behind them when we all know what the deal is – certain forms of gambling are seen as less bad for some reason and so those remain legal. To me, however, the difference seems very unclear.
    2. No I do not because I do believe that the short-term nature of the game does reduce the degree to which it is a game of both skill and chance. While I have already stated that I believe the difference is minimal, if one is to be made and we are actually going to abide by it, I can see the difference in this instance.
    3. I do agree, grudgingly as I am no fan of AG Schneiderman generally, but again this is irrelevant to me as I do not see why gambling is illegal in the first place.
    4. In my mind it should be legal like any other vice and regulated on that basis, not within a framework in which we seemingly choose at random what gambling is “ok” and what gambling is not.

  8. I do think that under the current laws DFS should be considered illegal gambling. To me the poker analogy seems like the most applicable, there is skill involved in playing but ultimately luck is what drives the game. I think the DFS companies have been clear that they should be treated as gambling sites based on the way they advertise their product. They list themselves as gambling companies on international forms, they have sometimes compared their product to poker, and use gambling keywords for advertise their sites on search engines.[1]

    As part of that I do not think the UIGEA fantasy sports exemption applies, to me it is pretty clear that exemption was not intended for this type of fantasy sports games. The exemption was intended to keep leagues which had been running for decades from suddenly being illegal, particularly online where the stat recording and calculation has made fantasy sports more popular than ever. The skill of traditional fantasy sports is, in my view, based upon long term roster construction and balancing winning now with winning long term. That being said I do not think this activity should be illegal but under current law it is, personally I’d be ok with all sports betting being legal with regulation.

    I agree with the NY Attorney General that the DFS companies as currently set up are just a new way to disguise online gambling. For customers it’s a very similar experience and involves much of the same motivations as regular gambling. I think the NY legislation does enough to comply with the existing law and would properly regulate DFS. I particularly like the requirement that ads would not be allowed to make clearly inaccurate claims about the odds of winning, anything that brings clarity to customers is a good thing in my book.


  9. I personally do not think that DFS should be considered illegal gambling. But, to be honest, I also do not believe that online poker (as mentioned in the blog) should be considered illegal. I do not understand why games of chance are placed under higher scrutiny and are deemed illegal. This seems more of a moral and ethical issue and less of a legal one. If someone wants to spend (or waste) their money on games of chance, then they should have the right to do whatever they choose. And frankly, there is more situations in which games of skill are more unfair than games of chance. In games of skill, it would be very simple for someone to deceive others by portraying that they are not as skillful as they actually are, only for the opponent to find that they are actually quite skillful. This, I believe, should be illegal, more so than games of chance.

    Do you think the UIGEA fantasy sports exemption should apply to DFS?
    I do think that the UIGEA fantasy sports exemption should apply to DFS. The statute exempts those activities that require knowledge and skill. I believe that there is a very valid argument to be made that games of chance also require some level of knowledge and skill. Nothing is completely random and nothing is ever purely chance. There are rules, there are processes, and there are avenues to master these modes of chance gameplay. It would be false to say that playing a game of 21 is purely a game of chance and does not require any knowledge or skill. It requires knowledge because you have to know how to play, and it requires skill because there are ways in which you can learn the game to the point where you can ensure you beat the house (although you can never beat the house). So I do think that the exemption should apply to DFS.

    I do not think I agree with these legislations in regards to DFS and online gambling. Much of the dicta surrounding these decisions is that the lack of these regulations would enable gambling addictions. Again, these are moral issues and not legal issues. Alcoholism addiction is a serious issue, yet there are no laws or regulations prohibiting how much people should drink. yes there are Blood Alcohol levels, but this is simply for driving. If you are not driving, you are well within your rights to be over the legal limit. If such regulations are in place for issues like online gambling, then the same regulations should be in place for other addictive substances, like alcohol. And the problem with that is: because everything can be addictive (even food), then where is the line drawn?

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