By: Harrison Lebov
Daily Fantasy Sports (“DFS”) offer a participant, whether he or she is an avid fantasy gamer or a casual sports fan, the opportunity to partake in a fantasy sports experience where the user goes from player selection to payout in just a day. This format is often preferable because it allows a participant greater autonomy in the player selection process, without restrictions that traditional snake or auction drafts impose, and provides expedited payouts to those fortunate enough to reign victorious, rather than at the conclusion of a fantasy season, as is the case in traditional fantasy formats.
Traditional fantasy formats typically consist of leagues ranging from eight to twelve teams, and can be played using many, if not all, of the major American sports; this includes, but is not limited to, football, basketball, baseball and hockey. One person is usually dubbed the “league commissioner,” and organizes a draft where all the team owners gather, either in person or online, and partake in a painstaking, albeit sometimes exhilarating, two to four hour draft. Worth noting, finding a day and time where all team owners are available is no easy task. Each owner will pay a one-time entry fee for admission into the league, and the league commissioner inherits the responsibility of collecting payments; again, no easy task. From there, the draft is conducted using one of two approaches, a snake draft or an auction draft. Neither option is “better” than the other, per se; rather, it is more a matter of individual preference. Snake drafts designate draft picks to owners which “snake” from round to round; meaning, if a person has the first pick in the first round, they’ll have the last pick in the second round, the first pick in the third round, and the last pick in the fourth round, etc. On the other hand, auction drafts allow owners to place a player from the player pool “up for auction,” and owners then bid on each player without exceeding their cap limit. During the fantasy season, teams will be limited to the players they’ve drafted, with the exception of players acquired via trade or free agency (free agency refers to all players who went undrafted during the live draft). Months later, after a victor has been crowned, only then will that owner, and maybe a second or third place team owner, depending on the league, be able to collect the fruits of their labor.
Now enters the emergence, and rapidly growing popularity, of Daily Fantasy Sports (“DFS”) leagues. DFS integrates the competitive nature of the fantasy beast with one-day matchups that result in instant gratification of victory or heartbreak of defeat. DFS allows a user to pick and choose when he or she plays, without being tied down with a long-term commitment. Under the DFS format, a user may elect to participate one week, skip a week or two, and play the following week; a strategy that is sure to lead to devastation in traditional fantasy leagues. With DFS, the issue of when a user desires to play, or not play, is squarely the decision of that individual, as no penalty is assessed for week-to-week nonparticipation.
If a person has an account on DraftKings.com, FanDuel.com, or the like, he or she transfers money into the account and joins as many daily leagues as one desires. Entry fees into leagues range from one dollar to thousands of dollars, and the number of teams in any given league ranges from two people to hundreds of thousands of people. Instead of drafting players like in traditional fantasy leagues, DFS sets a salary cap and allots a value to every player in the player pool. The highest skilled, most desirable players will have a high price tag attached to them, and the less talented, less desirable players will be relatively cheap in comparison. The ultimate goal is to build a lineup of players, which users subjectively think have the best chance of scoring the most fantasy points on a given day, with the one constraint being staying beneath the salary cap, without consideration as to the players your opponents have selected. At the end of the day, in each individual league, the user who assembled the highest-scoring team will win the league and his or her account will be credited with money from the victory, and in the event of large tournaments, a top percentage of participants will receive a payout. Users can then cash out their winnings, if they so choose, and turn the monetary figure on their computer screens into tangible cash.
Therein lies the problem; this sounds an awful lot like Internet gambling, which is illegal on both the state and federal level. Precariously so, this is not the case. A federal exception to “bets and wagers” is carved out for DFS and similar fantasy formats, noting the outcome of such endeavors are not based solely on chance, but rather on the “relative knowledge and skill of the participants.” 31 U.S.C.A. § 5362 (Oct. 13, 2006). This distinction may seem arbitrary, as it is the knowledge and skill of a participant playing online blackjack not to hit when his or her cards equate to twenty, or the knowledge and skill of a participant playing online poker not to fold when he or she has an ace and king of hearts, and the flop shows a ten, a jack, and a queen of hearts. But nevertheless, the federal government has found these situations to be dissimilar. When “all winning outcomes … are determined predominantly by accumulated statistical results of the performance of individuals … in multiple real-world sporting … events,” the federal government says play ball! 31 U.S.C.A. § 5362 (Oct. 13, 2006).
Harrison Lebov is a Staff Member of the Journal of High Technology Law. He is currently a 2L at Suffolk Law with a concentration in Business Law. He holds a B.S. in Business Management with a minor in Legal Studies from Suffolk University. Harrison is currently the Vice President of the Suffolk Law Intramural Basketball Association and the Captain of a men’s recreational basketball team in Cambridge.