Daily fantasy sports (DFS) already boast a decade-plus lifecycle. However, it was the rise to prominence of current industry leaders DraftKings and FanDuel earlier this decade that gave the industry a significant boost in public awareness.
So, what are the nuts and bolts of this popular form of real-money-based gaming? Read on to find out.
What is daily fantasy sports?
Think of the basic elements that have attracted fans to traditional, season-long fantasy sports leagues for decades.
It’s the fun of playing general manager. It’s the research involved in putting together a solid lineup. It’s the decisionmaking from week to week. It’s the thrill of head-to-head competition against another league mate to see which lineup scores the most points.
Or, in certain formats, it’s simply competing to rack up as many points as possible in your league that week.
And, of course, it’s the possibility of walking away with some cold, hard cash if the combination of your skills and Lady Luck conspire in your favor.
Multiply all of those factors exponentially, and you have DFS. There are notable differences between the daily and season-long version of fantasy that we will elaborate on momentarily.
However, DFS can also be similar to its season-long counterpart in many aspects. There are still lineups to be put together, decisions to be made, research to be done, opponents to outscore and, most certainly, money to win.
Yet, the timeframe involved is drastically different. You could say that DFS is for the sports fan who tends to thrive on immediate — or at least fairly accelerated — gratification. The lifecycle of a DFS contest can be the length of a slate of games, or, just a portion of a slate.
And in approximately the last two years — when both DraftKings and FanDuel have started offering single-game contests — a DFS contest ends upon the final whistle, buzzer or pitch, etc.
How DFS stands apart from season-long fantasy
Then, there can also be a wide gulf between the money at stake in DFS compared to that of a season-long league.
Yes, there are indeed some high-stakes, season-long contests available. But they add up to a mere handful when compared to the number of contests with large prize pools offered by DraftKings and FanDuel, in particular.
Typically, the biggest cash payouts are during NFL season. But, Major League Baseball, NBA and NHL contests also feature a healthy allotment of five- and six-figure prize pools.
In past years, it would have also been accurate to say there was a significant difference in the number of players in a season-long league compared to a DFS contest. And, in certain instances, that still holds.
For example, DFS contests include large-field guaranteed prize pools (GPPs). These are tournaments that can range anywhere from 100 to 100,000 participants. In contrast, a season-long fantasy league typically has just 10-15 “teams” on average competing.
However, DFS sites also offer “leagues” contests. These feature a number of contestants much more in line with those of a typical season-long format. DFS sites even offer “league” contests with as little as three participants, as well as a full array of head-to-head contests at different entry fees.
In recent years, DraftKings and FanDuel have also promoted a DFS version of private leagues.
These contests strive to replicate one of the more appealing aspects of the season-long format – the ability to play exclusively against family, friends or coworkers. This development largely came about as a response to criticism that DFS lacked much of the social camaraderie inherent in season-long formats.
A variety of contest types in daily fantasy sports
Having just briefly touched on a few different formats within the DFS realm, let’s delve into them a bit more specifically. Also, in the process, brush on some other types not yet mentioned.
The most popular DFS format arguably remains one based on a salary cap, where participants must build a lineup while staying under a preset amount of money in player “salary.” Each athlete participating in a real-world contest within the slate the DFS contest is based on is assigned a fictional salary figure. Naturally, the players expected to be the most productive command the highest salaries.
Once a lineup is constructed, participants accrue points based on the real-world performance of the athletes they selected for their lineup. Scoring systems vary from site to site, although there’s a certain level of standardization across many categories.
The most popular DFS contests
As already alluded to, there are a wide variety of DFS contests types. Some of the most common include:
- Guaranteed prize pools (GPPs): Players pay a set entry fee to compete for a share of a fixed prize pool These are the contests that typically have the largest prize pools and payouts. The “guaranteed” in GPPs refers to the site’s commitment to adhere to the prize pool structure irrespective of whether the contest fills or not. In other words, any portion of the prize pool not subsidized by user entry fees is put on the site’s “tab,” so to speak. Approximately, the top 18-20 percent of the field wins cash prizes in a GPP, with some paying out as much as 24-25 percent.
- Leagues: As mentioned earlier, leagues are typically much smaller in contestant size than most GPPs. League-type contests are typically offered with as little as three participants and as many as 100. League contests offer much smaller prize pools than many GPPs. Payout percentages can be similar to that of GPPs, but some leagues actually pay out a smaller percentage on average than tournament-style contests.
- Head-to-head: A head-to-head contest is aptly named; it pits two contestants against each other, and the player with the highest-scoring lineup wins the entirety of the prize pool.
- 50/50: A 50/50 contests offer the best payout odds of any DFS contest. The top 50 percent of the field of contestants receives a payout that’s approximately 80-90 percent of their entry fee.
Additional types of DFS contests
While the traditional, salary-cap-based model of DFS remains the most popular, a number of variants have emerged over the years.
- Tiers: In this DraftKings contest type, there is no salary cap. Rather, contestants pick one player from each of six pre-set tiers.
- Beat the Score: Contestants strive to have their lineup surpass a certain pre-set scoring total in his FanDuel contest type. All contestants that accomplish the feat share in a prize pool
- Showdown Captain Mode: In this DraftKings contest type that’s based on one game on a slate, there are no designated real-world positions that contestants must adhere to when building their lineups. Rather, all players in the player pool are eligible for any of the five lineup slots. The player in the one “captain” slot accrues points at a rate of 1.5x.
- Single-Game: This type is FanDuel’s version of single-game contests. There are no designated, real-world positions that contestants must adhere to when building their lineups. Rather, all players in the player pool are eligible for any of the five lineup slots. The player in the “MVP” slot accrues points at a rate of 2x. The player in the “star” slot accrues points at a rate of 1.5x, and the player in the “pro” slot accrues points at a rate of 1.2x.
Parlay and prediction fantasy sports
Even prior to the Supreme Court decision to eradicate the Professional and Amateur Sports Protection Act (PASPA) in May 2018 — a development that ushered in the era of potential single-game sports betting nationwide — certain DFS operators were already flirting with sports betting-like concepts in their games.
For example, there are multiples sites offering contests wherein participants must predict which of two players will accrue the most production in a specific statistical category in their respective game on a given slate. In this sense, these contests heavily mimic proposition bets.
Sites offering these types of contests include:
- Boom Fantasy
Given that all team or individual sports have player statistics associated with them, they’re all candidates for DFS contests. The biggest revenue generators for DFS are far from surprising — they read like a “who’s who” of the most popular sports in terms of viewership and attendance:
- Basketball (NBA)
- Baseball (MLB)
- Football (NFL)
- Hockey (NHL)
But they have plenty of company. Although not all sports outside of the “big four” above are offered on each site, the following have DFS contests based on them on at least one current DFS operator:
- Canadian Football League (CFL)
- College basketball
- College football
- Euroleague basketball
- Mixed martial arts (MMA)
What is the legal standing of daily fantasy sports?
There was a point in time when the legality of DFS was a hot-button topic. Notably, however, it didn’t become a widely publicized issue until several years into its existence as an industry. In fact, DFS ironically become a victim of its own success in this regard.
The combination of an unprecedented advertising blitz by both DraftKings and FanDuel and a controversy involving the premature release of sensitive information prior to an NFL contest “locking” in October 2015, put the industry on the radar of many attorney generals around the country.
After mostly being ignored or not recognized whatsoever by nonfantasy types in the earlier part of the decade, DFS was suddenly on the defensive.
Even deep-pocketed entities DraftKings and FanDuel had significant concerns when New York’s then-Attorney General Eric Schneiderman deemed the contests illegal under the jurisdiction’s existing law in November 2015. The Empire State was one of the most profitable for the sites, so a major legal and legislative push was born.
Legal status per state
After a flurry of aggressive lobbying efforts across the country over the subsequent 36-plus months, the industry saw DFS expressly legalized in 20 states as 2018 drew to a close. They are the following:
- New Hampshire
- New Jersey
- New York
The legal climate for DFS can vary widely across the rest of the country.
Some jurisdictions are treated as complete “stay-away” states by the overwhelming majority of the industry due to the laws surrounding real-money-based gaming serving as enough of a hindrance, at a minimum.
These eight states are:
The rest of the states not named in one of the previous two categories all more or less qualify as gray-area environments for DFS. For example, while there is no specific law on the books outlawing DFS contests in Florida, Yahoo opts not to offer contests in the state due to a past negative attorney general opinion.
Pending DFS legislation
These days, sports betting seems to be the center of legislative attention in many states. However, DFS regulation efforts are still very much alive. Ideally, the industry would like to achieve legal status in all 50 states at some point. That still appears to be quite the uphill climb.
There will likely be daily fantasy sports legislation introduced in nearly all of the states in which it is yet to be legalized during the 2019 legislative sessions. As has been the case for the past several years, a handful of states are likely to join the existing 20 with laws on the books by year’s end.
The current year should also serve as an interesting litmus test for what effect legalized sports betting may have on the ease of passing DFS legislation.
It’s possible that the increasingly reduced stigma surrounding sports betting – an activity with which DFS was often conflated in past years – will create an easier path to DFS legalization. And, in some states, the two activities could certainly be included as part of an omnibus “gaming” package designed to produce several new sources of tax revenue for a jurisdiction.
Frequently asked questions about daily fantasy sports
Here are some questions and answers about the DFS industry not covered above:
How much money is in daily fantasy sports?
Latest reports show that DFS generated approximately $3.2 billion in entry fees and $335 million in revenue during the 2017-18 fiscal year.
Is DFS just a form of sports betting?
There are undeniably some similarities between DFS and sports betting, not the least of which is the fact they are both “graded” based on the outcome of sporting events.
However, while sports betting payouts can often be centered on team-based results, DFS success is based on individual player statistics. Even then, there are certainly exceptions. For example, proposition bets are often based on whether a player surpasses a certain statistical milestone.
The debate of whether DFS is ultimately just a form of sports-based gambling akin to traditional sports betting is one that will never be settled in the eyes of some. In states where DFS has already been expressly legalized, the activity has been established as officially distinct from sports betting.
In some jurisdictions where it’s yet to achieve legal status, though, the very question of whether the two are sufficiently different has been a major obstacle toward the advancement of legislation.
What is the relationship between professional sports leagues and DFS?
Three of the pro leagues in North America have equity stakes in a DFS site, and they have been supportive of the industry (and of regulation of it):
- NBA (FanDuel)
- MLB (DraftKings)
- NHL (DraftKings)
The NFL has no direct relationship with either site, but most of its franchises have deals with one site or the other. The relationships between the leagues and pro franchises are outlined here.
Which are the biggest DFS operators behind DraftKings and FanDuel?
There remain several DFS operators beyond the big two. Yahoo remains the most prominent, likely followed by FantasyDraft. DRAFT, which was once an independent operator, now falls under FanDuel’s umbrella. Both DRAFT and FanDuel share the same parent company, Paddy Power Betfair.
Do you have to pay taxes on DFS winnings?
Yes. For more on this topic, see this series on DFS and filing taxes.