My fantasy football team is 10-0. It’s only tangentially related to this column, but I figured this was a good use of space to brag about it.
Yes, I just broke the first rule of fantasy football: Nobody cares about your fantasy football team. Jeb Bush tried to brag about his somehow undefeated fantasy team during a Republican debate, despite claiming to start Ryan Tannehill, and was promptly shut down by Chris Christie. Because it’s true: Nobody cares about your fantasy team.
Nobody cares except for the government, that is. Eric Schneiderman, New York attorney general, recently sent a cease-and-desist order to daily fantasy sports companies DraftKings and FanDuel, saying the businesses constituted illegal Internet gambling. Efforts by the companies to prevent the shutdown ahead of a Nov. 25 court date failed, thus ending the contests in the state until litigation is resolved. The companies were allowed to exist because the Unlawful Internet Gambling Enforcement Act, passed in 2006, contained an exception noting that the restrictions outlined in the act did not apply to fantasy sports.
Yet these daily fantasy sports sites operate very differently than the standard week-to-week format of fantasy leagues that were intended to be exempted under the law. In standard daily fantasy sports games, entrants are given some virtual salary cap, and must play the role of a virtual general manager to form a roster of players in which each player has a set price determined by the site. A consistently very good player will have a high price. Thus, finding players who provide a good performance-to-price ratio is key to success. Real money is then “bet” — or entry fees are paid, depending on how you want to define it — on the real-life, in-game performance of this built roster.
Each company says it is a legal enterprise, based on the claim that the daily games are games of skill, not games of chance, since entrants can use existing knowledge of the sport and the players when building their roster.
These companies’ futures are staked on the designation of their game as a game of skill — so much so that employees of the companies staged a protest in Manhattan where they hid their employment status and chanted, “Game of skill! Game of skill!”
Like most betting games, there are certainly elements of skill, and daily fantasy sports at a basic level represent a classic problem in computation theory called the knapsack problem. The idea is there is some fixed amount of space — in daily fantasy sports, a budget — and many objects that are assigned values — in this case, players. To build an ideal roster, objects must all be analyzed algorithmically to most efficiently use the space to maximize the value of things in the space — in this case, the best player performance within the budget.
The result is somewhat predictable: The numbers nerds who can build advanced algorithms to both accurately predict players’ future performances and solve the knapsack problem to maximize the potential of their rosters are able to claim most of the winnings in the long run. According to a Sports Business Daily report, the top 1.3 percent of players paid on average $9,100 each in entry fees and profited $2,400 each, resulting in them taking a disproportionate 77 percent of all the payouts. Meanwhile, 80 percent of players represent a more average group that pays an average of $49 in entry fees with a net loss of $25. A smaller group representing 5 percent of players is the “big fish,” who lose $1,100 on average. These numbers certainly suggest that it’s a game of skill, but only for the 1.3 percent of players who actually have the skills.
Because along with the first rule of fantasy football, that nobody cares about your team, is the first rule of gambling: The house always wins. Data for one week, according to an ESPN analysis, showed that DraftKings made $2.6 million in profit off $25 million worth of entry fees that week, while FanDuel’s profit was $3.5 million off $20.6 million in entry fees. And that’s just one week. In 2014, FanDuel brought in more than $1 billion in fees. That’s an incredible amount of money being moved with zero oversight or regulation like there is for other forms of gambling.
In reality, these daily fantasy sports sites are extremely similar to poker — a comparison that company executives have made themselves. In poker, while casual players will play on mostly intuition, similar to the 80 percent of daily fantasy sports players who lose an average of $25 weekly, skilled players are able to quickly determine the odds they have of winning a hand, and adjust playing strategy accordingly. There are set odds in poker for obtaining certain combinations of cards and winning the pot, but there is also the unknown of the cards other players at the table have. There’s some predictability based on certain factors, such as playing and betting patterns, but not 100-percent certainty — just like how the future performance of sports players is predictable but also has volatile results. Poker is considered gambling, and online poker experienced a similar boom before being phased out by law. Daily fantasy sports could be next.
Daily fantasy sports are already incredibly alluring, and official partnerships with sports teams and an inundation of advertising only serve to fuel the machine. Sixteen NFL teams have exclusive partnerships with FanDuel, and 12 with DraftKings. The NBA has an exclusive deal with FanDuel and also equity share in the company. DraftKings has exclusive partnerships with the MLB and ESPN. As John Oliver joked during his rant against daily fantasy sports, HBO has a partnership with FanDuel, so he noted his jokes were in a sense sponsored by the same company he was targeting.
Daily fantasy sports do not fit the intention of the law, which was to exempt the low-key office and friend pools that I myself have played in since I was in middle school, a fact that the author of the UIGEA law is even on record as stating. Fantasy sports are incredibly fun, but also can be quite addictive. Add in betting and gambling, activities known to be extremely addictive, and daily fantasy sports become dangerous and immediately accessible via the Internet. Even more dangerous is its focus on millennials, a group of people often unable to afford the costs of gambling.
There are moral arguments against the legalization of such gambling, but for better or worse, society has accepted and allowed it. The solution isn’t necessarily to outlaw daily fantasy sports, but simply to treat them as the sports gambling that they actually are and provide consumer safety regulations that are necessary for the industry. Nobody will ever care about your fantasy team, but it’s time they cared about the money behind it.
David Harris can be reached at email@example.com.