Pick’em Fantasy Sites Under Regulatory Attack, What Happens Next?
Last February, Bill Miller, the American Gaming Association president, issued his “state of the industry” speech.
It was, to my ears, a warning to PrizePicks, Underdog, and other companies in the so-called DFS 2.0 space.
Miller was discussing illegal gambling, and how it is a threat to the regulated marketplace. Here’s part of what he said, italics and bold mine.
“They’re brazenly ignoring the law exploiting consumer confusion by trying to present themselves as legitimate operators,” Miller said. “Whether it’s so-called skill based machines, offshore operators, or sportsbooks posing as fantasy sites, we’re just not going to stand for it and for and the AGA is chipping away at their market share.”
The bold and italics seemed like a thinly-veiled reference to pick’em fantasy, which has been thriving. (To wit: In states where daily fantasy numbers are broken down by operators – basically, Michigan and Arizona – PrizePicks was routinely trouncing FanDuel in handle.) At the time, I reached out to the AGA for clarification – was my gut correct? Was this a shot across the bow at pick’em?
The official response: “Sports betting and daily fantasy sports have distinct licensing and regulatory obligations, so it’s a serious concern if fantasy operators attempt to sidestep the rules to offer sports betting products. Blurring these lines not only creates a competitive disadvantage for legal sports betting operators that have spent significant resources to secure and maintain a gaming license, but also hurts communities by undermining consumer protections and tax revenue. It’s critical that regulators enforce the rules in their jurisdictions and ensure that fantasy operators are only offering products they are licensed to offer.”
That was from Chris Cylke, the AGA Senior Vice President, Government Relations.
Seemed like a “yes, we are taking aim” response.
To the AGA – which is an industry association that represents member sportsbooks, including FanDuel and DraftKings – it seemed like pick’em fantasy was simply unlicensed parlay betting and should be banned. But I couldn’t get them to say they were going after legal, licensed fantasy operators.
Fast forward eight months, and it’s becoming increasingly clear pick’em fantasy is under attack.
“Isn’t it ironic, dont’cha think?”
According to Underdog founder and co-CEO Jeremy Levine, DraftKings and FanDuel have been running a behind the scenes campaign to knock pick’em fantasy out of the game.
FanDuel and DraftKings don’t want to compete on product. Instead, they’re working the political backrooms to try to limit competition and options for customers. And then they stand up on a stage at G2E and try to mislead our entire industry. https://t.co/1MrAilovls
— Jeremy Levine (@JerLevine) October 26, 2023
DraftKings and FanDuel want to limit your choices, and they don’t want you to know that. pic.twitter.com/UWOJq0uVQ5
— Underdog Fantasy (@UnderdogFantasy) October 26, 2023
Levine’s concerns were crystallized in Wyoming, where Legal Sports Report noted a lobbyist working for those, and other, sportsbooks sent a letter to state regulators, basically saying, “Hey, those pick’em contests should be illegal, they’re simply sports betting.”
A few months later, cease and desist letters were sent to Underdog and PrizePicks – and it didn’t stop there.
Florida, New York, Michigan, Maine, North Carolina, Alabama, and Colorado have all jumped in the fray, with all of them either banning the pick ‘em games, discussing banning them, or, in the case of Maine, hitting the companies with hefty fines.
For long-term watchers of this space, there is a certain irony at work here. After all, DraftKings and FanDuel faced down regulators in 2015 after the infamous (and somewhat overblown) “Ethangate” that threatened the existence of daily fantasy.
Today, the two companies – which happen to be the top two sportsbook operators by handle (by a large margin) in America – are now seemingly on the other side of the fight, seeking to put DFS 2.0 operators out of business.
(By the way: Levine’s claims aren’t exactly the rantings of a tortured soul; check out this quote from FanDuel’s head of government relations, Cesar Hernandez, speaking at the National Council of Legislators from Gaming States this past summer: “There are companies today posing as fantasy sports operators and they are running illegal sportsbooks.” I mean, it doesn’t get more clear than that.)
What happens next?
Obviously, PrizePicks and Underdog and the rest of the DFS 2.0 companies are, no doubt, doing their best to stop the bleeding. I’m sure they have their own lobbyists and are talking to the same regulators. But it would certainly appear things are looking a lot dicier for these companies’ offerings going forward than they looked one short year ago. At the risk of mixing metaphors, once a snowball starts rolling down a regulatory hill, there is a monkey-see, monkey-do tendency that can sometimes take effect.
So what’s a DFS 2.0 company to do?
Clearly, there is a market – and a large one – for what these companies offer, but it’s fair to wonder if there’s a point at which they will have to pivot to something different.
Or perhaps the answer is to partner with a licensed sportsbook operator?
Fair or not, the cold reality is the regulatory community are eyeing up DFS 2.0 companies in a non-favorable fashion at the moment and what direction – and decisions – these brands take are going to be a big storyline in the months ahead.