The Rise of Online Fantasy Sports Betting

The birth of internet ushered in the era of Fantasy Sports Betting. Critics who termed the magnanimous growth of online sports betting as a bubble have been proved wrong. The world of fantasy sports betting against all odds has managed to thrive and today it has become a billion-dollar industry, churning out new winners and losers by the seconds. However, the industry is also accused of blurring the lines between skilled competition and sports betting. This is a matter for the legal authorities to ponder upon. For the time being, the future for Fantasy Sports Betting only appears brighter and bigger.

How it all started?

The seeds of Fantasy Sports were laid in the summer of 1962. Wilfred "Bill the Gill" Winkenbach, an Oakland area businessman and owner of the Oakland Raiders may be called the father of modern day Fantasy Sports Betting. The system of organization and rulebooks developed by Bill and his team are the basis of modern fantasy sports betting.

The first league was named The Greater Oakland Professional Pigskin Prognosticators League and it consisted of eight teams. The group agreed on a points system and released a pre-season draft.

The idea caught on and gained momentum of its own. Within a few seasons, bars around Oakland started experimenting with fantasy football to generate a strong customer footfall.

The concept was applied to other sports as well. But tracking stats and the manual mathematical calculations involved in betting prevented a mass appeal.

All this changed drastically in the 90’s with the popularity of the internet. Real-time stats were now available online and entry of big players like CBS Sports and Yahoo! Sports catapulted fantasy football popularity to an all-time high. From a statistician's desk to a normal guy’s desktop, fantasy football with the much-required thrust from the internet had taken the giant leap ahead.

Fantasy sports betting has had its fair share of critique. Time and again analogies are drawn with Gambling. The concept has raised a lot of eyebrows. Critics argue that concept of fantasy sports betting is synonymous with gambling where people place bets on matches or events and the outcome of these result in either the loss or gain of money. Based on this argument, the lines between Fantasy Sports Betting and gambling appears to be blurring. However, as data shows most Fantasy Sports Betting players hardly visit casinos or place bets with bookmakers.

Fantasy Sports Trade Association on its website says, “Fantasy sports players are motivated to enter the hobby for reasons that have nothing to do with money or prizes.”

More than 70% of the players enter a contest or use league software that includes no cash or material prize. The FSTA also asserts that rather than the possible money rewards, factors like competing with friends, enhanced sports experience drive players.

But a closer look at the marketing strategy used by these leagues makes the argument appear insincere. Fantasy Sports Leagues highlight massive money winners in their ad campaigns for luring new customers. All leagues and related online gaming platforms are guilty of this.

The Growth of Online Fantasy Sports Betting

Since the dawn of the internet, the number of players playing fantasy sports has grown steadily. From 15.2 million in 2003 to 59.3 million in 2017, the numbers have quadrupled. Despite the staggering growth rate, fantasy sports leagues did not see monetary gains until recently. Since 2012, fantasy online sports has grown from a $2.9 billion dollar industry in 2012 to one worth $26.4 billion in 2015. This means that fantasy sports can now boast of an industry status of its own.

This evolution of the fantasy sports has to be lauded. Faster internet access and powerful mobile devices coupled with the barrage of different online sports leagues enabled frequent participation of players. This prompted industry experts to refer fantasy sports as daily fantasy sports (DFS). Players can now play in competitions that last only for a day or a week rather than the traditional season-long leagues. Moreover, payout options have also diversified which has made DFS much more accessible for the masses. For example, nowadays leagues pay top 50 players rather than a single player only. Innovation in the payout structure has been a major driving force in the evolution of Fantasy Sports into DFS..

Regulations and The Road Ahead

Casino business was thriving until the late 90’s. However, internet disrupted this business model. Online casinos took over the traditional brick and mortar types. Las Vegas, the world capital for gambling, was in poker slump throughout the 90’s. During this time a new and rapidly increasing audience of online poker was created. This possessed a tremendous threat to Las Vegas based traditional Casinos. Online wagering was hurting LA in real time. By 2005, Online Poker industry was sitting on a $2.4 billion valuation. Dictated by various sources, including traditional casino owners, financial institutions and watchdog groups worried about everything from underage gambling to the moral erosion of America, the online poker industry was dealt with a heavy hand.

The USA’s Internet Gambling Enforcement Act of 2006 barred an individual from transferring money from his/her bank account to an online casino. Some call it illegal state intervention.

The law exempted some online sports betting activities specifically horse racing and fantasy sports. DFS defends the decision by stating that Fantasy Sports is a game of skill, not blind luck.

Further citing a specific language in the forced Internet Gambling Enforcement Act of 2006: “...an outcome that reflects the relative knowledge of the participants, or their skill at physical reaction or physical manipulation (but not chance), and, in the case of a fantasy or simulation sports game, has an outcome that is determined predominantly by accumulated statistical results of sporting events, including any non-participant’s individual performances in such sporting events…”,

The FSTA asserts that game managers need to be well educated and informed to play DFS. In addition to having grips on statistics and game theory, managers must stay updated on weather patterns, home and away statistics, injuries and many other pieces of information in order to be successful. Also, an analysis of the winners of the toughest competition in various fantasy leagues reveals that top informed players win more frequently.

But DFS or online sports betting leagues should keep in mind that they are the new threats to the traditional casinos and Las Vegas sportsbooks at large. A collision for survival between the Goliath’s and David’s of the internet age is inevitable. And if history is to be believed they are bound to come under the radar of the law enforcement and other regulatory bodies. However, it is for time to decide whether the traditional or the new disruptive online sports betting model survives in the long run.

The future of online fantasy sports betting is bigger and brighter than how it is today. With the growth of the internet and the invention of technologies like virtual reality, 3D and augmented reality, it would only be fair to say that there is much more we haven’t yet seen or experienced what this industry has to offer.