Daily Fantasy Sports

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Daily Fantasy Sports (DFS) are online contests in which entrants compete against one another in assembling rosters of professional athletes. Entrants are awarded points based on the statistical performance of their players in real-world contests. Two companies predominately dominate the Daily Fantasy Sports market - DraftKings and FanDuel. These competitors have announced they plan to merge in late 2017. The companies stated their common legal issues as a reason to merge. An example of these issues is a DraftKings employee who allegedly used insider information to win $350,000 on FanDuel. Additionally the companies have faced accusations of using false advertisement. Furthermore, the companies do not operate in a handful of US states that consider daily fantasy sports to be gambling. However the majority of US states still allow the companies to operate within their borders, by characterizing their product as a “Game of Skill”.


DraftKings roster selection interface

Daily fantasy sports feature contests for a variety of leagues including: NFL, MLB, NBA, NHL, and even less popular leagues like MMA and CFL. [1]

For any of these leagues; entrants can assemble a lineup of professional athletes who have each been assigned a cost. These entrants must strategically assemble a team that does not exceed the “Salary Cap” constraint; which is the maximum sum of a team's player costs. [2]

When the games are played, each athlete is then awarded points based on their statistical performance in their real-world contest. An entrants score is computed as the sum of points accumulated by the athletes in their selected lineup.

There are two main categories of daily fantasy sports: cash games and tournaments. [3] In cash games player’s who outscore at least 50% of the competition are deemed as winners. These winners receive a payout of roughly double their entry fee. On the other hand tournaments typically pay out only entrants who score in the top 20%. But the tournament prizes often exceed million dollars. [3] [4] In both cases, entrants who are below the winning threshold lose their entire entry fee.

Background of Major Companies

Two companies currently capture 95% of the US daily fantasy sports market: DraftKings and FanDuel. [5]

Major Companies


FanDuel was launched by the web based prediction market Hub Dub in July 2009.[6] FanDuel has raised $363 million in funding.[7] FanDuel has a partnership with the NBA.[8]The New York City based company has most recently been valued at $1.2 billion dollars.[7]


Former Vistaprint executives Jason Robins, Paul Liberman and Matt Kalish established DraftKings in January of 2012 [6] DraftKings has received $776 million in funding.[7] The MLB and NHL have formed partnerships with DraftKings.[8] The Boston based company has most recently been valued at $1.2 billion dollars.[7]

Yahoo Daily Fantasy

Yahoo! Sports, a subset of the large web services company Yahoo! Is one of the largest fantasy sports platforms, similar to ESPN. Yahoo Daily Fantasy is relitively new to the daily fantasy scene compared to companies such as Fan Duel and Draft Kings. The daily fantasy section is simply another page on Yahoos main "Yahoo Sports" cite and preforms similar functionality to DraftKings or Fan Duel. Users can sign in to their Yahoo sports accounts, link their paypal to their accounts, and then simply deposit money and begin making their fantasy teams. Entry fees into daily fantasy tournaments can be as low as 1 dollar and as high as 10,500 dollars [9].

Daily Bracket

Daily Bracket was launched in late 2014[10]. The application offers "Daily Bracket" and "Daily Lineup" as its two modes of play. In "Daily Bracket" mode, users are given a pre-determined set of five games to bet on each day at no cost. The games come from multiple sports and all users are given the same set of five games to chose from. If a user guesses correctly on three or more games, the day is seen as a success and the users begins a "streak." For each consecutive day users guess correctly on three or more games, the streak grows larger. A streak of one day gives 200 "Bracket Bucks", two days gives 500 "Bracket Bucks", eight days gives one dollar, twenty days gives twenty dollars, and eventually sixty days gives a one million dollar reward. In "Daily Lineup", users are given a set of five games to chose five players from. Users are given fifteen points each day that they can spend to build their lineups with the best players costing five points and the worst costing only one. "Daily Lineup" allows users to wager real money or "Bracket Bucks" in a wide array of betting pools. "Bracket Bucks" can be used in the in-game store to purchase various prizes from jerseys to basketballs[11].


In November of 2016, FanDuel and DraftKings reached an agreement to merge. Similar regulatory and legal challenges were cited as reasons for the competitors' decision to join forces. [12] Pending approval by the Federal Trade Commission, the merger will likely close in late 2017.[12]

Data Scandal

In October 2015 a DraftKings employee, Ethan Haskell, won $350,000 in a FanDuel contest. Haskell earned this prize by placing second in FanDuels’s NFL Sunday Millions contest. [13]

It is believed that Haskell was able to win these contests, in part, because of his access to player ownership data [13]. This means he may have seen which NFL players had been selected by DraftKings users, and by how many users. This information would have given him an advantage on FanDuel because the two sites work very similarly and typically have the exact same price for each player in a given week.

Company Response

In response to the scandal, DraftKings and FanDuel released a joint statement:

“Nothing is more important to DraftKings and FanDuel than the integrity of the games we offer to our customers. Both companies have strong policies in place to ensure that employees do not misuse any information at their disposal and strictly limit access to company data to only those employees who require it to do their jobs. Employees with access to this data are rigorously monitored by internal fraud control teams, and we have no evidence that anyone has misused it.” [13]

False Advertising

The New York attorney general Eric Schneiderman began investigating both DraftKings and FanDuel; after he discovered evidence that the companies were misleading customers through advertisements.[14] Schniederman claimed that the companies’ advertisements led potential players to believe they had a real shot at winning; when few players win money over time.[14]This is centered on the idea that a subset of contestants termed "Grinders", who utilize automated computer scripts and sophisticated statistical strategies, reap massive payouts at the expense of casual users.[15]


The newly required user payout statistics as displayed on DraftKings official site

DraftKings and FanDuel each agreed to pay $6 million to settle the false advertising violations cited by the New York Attorney General.[14] Also FanDuel and DraftKings are now required to provide information about the distribution of winnings on their respective websites.[14] These statistics show that, over the past six months on DraftKings the top 1% of players have claimed 44% of the available winnings. [1]


Internet Gambling Enforcement Act

In 2006, the federal government passed the Unlawful Internet Gambling Enforcement Act.[16] This Act established fantasy sports as “games of skill” and not “games of chance”. The law says a contest is legal if it:

  • (I) Is not dependent solely on the outcome of any single sporting event or any singular individual performance in any single sporting event.
  • (II) Has an outcome that reflects the relative knowledge of the participants. [16]

Games of chance v. Games of skill

Map of DFS activity in the US

A game of chance can be defined as a contest where the outcome depends to a “material degree” on an element of chance. [17]. The Supreme Court of Washington contended that DFS fall under this heading, by ruling “the outcome of a football game may depend on several chance factors including: the physical condition of the athletes; the psychological mindset of the athletes; the weather; and any sociological problems between and among the members of a team”[17]. The title of gambling is roughly defined as staking or risking something of value upon the outcome of a contest of chance. [17] Sports gambling is illegal in 46 US states [16]

To avoid the title of “gambling”, DraftKings and FanDuel argue that DFS are games of skill. The companies contend that a contestant chooses the players for his/her team by skillfully analyzing player statistics [17] .

Individual State Rulings

States have been divided on this issue. The majority of states currently allow daily fantasy sports to operate within their borders [18] However daily fantasy sports currently cannot be played in the states of Arizona, Iowa, Montana, and Washington[17].


  1. 1.0 1.1 DraftKings Site https://about.draftkings.com/
  2. Salary Cap Explanation http://venturebeat.com/2015/09/10/how-to-make-a-killer-daily-fantasy-sports-football-roster-on-draftkings-and-fanduel/
  3. 3.0 3.1 Rotoworld Guide http://www.rotoworld.com/articles/nba/48892/425/cash-games-vs-tournaments
  4. Guaranteed Prize Pool http://dailyfantasysports.codes/basics/daily-fantasy-basics-what-is-a-guaranteed-prize-pool-gpp/
  5. Daily Fantasy Sports Advertising Report: http://adage.com/article/media/draftkings-fanduel-spe/300658/
  6. 6.0 6.1 History of Daily Fantasy Sports: http://dailyfantasynews.com/the-complete-history-of-the-daily-fantasy-sports-industry/
  7. 7.0 7.1 7.2 7.3 Comparison of FanDuel and DraftKings: http://www.legalsportsreport.com/3832/fanduel-or-draftkings/
  8. 8.0 8.1 Partnerships within DFS: http://www.legalsportsreport.com/dfs-sponsorship-tracker/
  9. https://sports.yahoo.com/dailyfantasy/featured
  10. Yang, Avery. Daily Bracket – The Future “Candy Crush” of Daily Fantasy Sports. 30 Mar. 2016. "The Emory Wheel"
  11. Daily Bracket. Daily Bracket: Sports Pick'em for Cash Prizes 2017. "Daily Bracket"
  12. 12.0 12.1 Merger Report: https://www.wsj.com/articles/draftkings-and-fanduel-agree-to-merge-1479479405
  13. 13.0 13.1 13.2 Scandal Report: http://fortune.com/2015/10/07/draftkings-fanduel-scandal-timeline/
  14. 14.0 14.1 14.2 14.3 False Advertising Report: http://adage.com/article/digital/fanduel-draftkings-agree-pay-6-million-amid-false-advertising-claims/306477/
  15. How casual users are being tricked: https://www.nytimes.com/2016/01/06/magazine/how-the-daily-fantasy-sports-industry-turns-fans-into-suckers.html
  16. 16.0 16.1 16.2 Business Insider Report: http://www.businessinsider.com/why-draft-kings-and-fanduel-are-legal-2015-4
  17. 17.0 17.1 17.2 17.3 17.4 University of Cincinnati Law Review:https://uclawreview.org/2016/04/06/daily-fantasy-sports-game-of-skill-or-game-of-chance/
  18. Legality Map: https://www.dailyfantasycafe.com/academy/undergraduate/is-daily-fantasy-sports-legal/