Fantasy sport

The concept of picking players and running a contest based on their year-to-date stats has been around since shortly after World War II. One of the earliest published accounts of fantasy sports involved Oakland businessman and one time Oakland Raiders limited partner Wilfred "Bill" Winkenbach. He devised fantasy golf in the later part of the 1950s.[1] Each player selected a team of professional golfers and the person with the lowest combined total of strokes at the end of the tournament would win. Golf is a simple fantasy game to administer and keep tabs on, since each participant is concerned only with the scores of his or her team members without anything else to complicate it. However, it was never organized into a widespread hobby or formal business.

In Oakland in 1962, Winkenbach formed the first reported fantasy football league, called the Greater Oakland Professional Pigskin Prognosticators League (GOPPPL), with eight teams.[2] George Blanda was the first player taken in the first draft in 1963.

The first reported fantasy baseball league began in Boston in 1960. Harvard University sociologist William Gamson started the "Baseball Seminar" where colleagues would form rosters that earned points on the players' final standings in batting average, RBI, ERA and wins.[3] Gamson later brought the idea with him to the University of Michigan where some professors played the game. One professor playing the game was Bob Sklar, who taught an American Studies seminar which included Daniel Okrent, who learned of the game his professor played.[3] At around the same time a league from Glassboro State College also formed a similar baseball league and had its first draft in 1976.[4]

An important development in fantasy sports came with the development of Rotisserie League Baseball in 1980. Magazine writer/editor Daniel Okrent is credited with inventing it, the name coming from the New York City restaurant La Rotisserie Francaise where he and some friends used to meet and play.[5] The game's innovation was that "owners" in a Rotisserie league would draft teams from the list of active Major League Baseball players and would follow their statistics during the ongoing season to compile their scores. In other words, rather than running realistic simulations using statistics for seasons whose outcomes were already known, the owners would have to make similar predictions about players' playing time, health, and expected performance that real baseball managers must make.

Because Okrent was a member of the media, other journalists, especially sports journalists, were introduced to the game. Many early players were introduced to the game by these sports journalists, especially during the 1981 Major League Baseball strike; with little else to write about, many baseball writers wrote columns about Rotisserie league. A July 8, 1980 New York Times Article titled "What George Steinbrenner is to the American League, Lee Eisenberg is to the Rotisseries League" set off a media storm that led to stories about the league on CBS TV and other publications.[6]

In March 1981, Dan Okrent wrote an essay about the Rotisserie League for Inside Sports called "The Year George Foster Wasn't Worth $36."[7] The article included the rules of the game. Founders of the original Rotisserie league published a guide book starting in 1984.[8] In 1982, Ballantine published the first widely available Bill James Abstract, which helped fuel fantasy baseball interest. Fantasy fans often used James' statistical tools and analysis as a way to improve their teams.[9] James was not a fantasy player and barely acknowledged fantasy baseball in his annual Abstract, but fantasy baseball interest is credited with his strong sales.[9]

In 1988, USA Today estimated that there were thousands of leagues in the US, typically 8 to 12 players.[10] The hobby had spread to football as well.[11]

In the few years after Okrent helped popularize fantasy baseball, a host of experts and businesses emerged to service the growing hobby. Okrent, based on discussions with colleagues at USA Today, credits Rotisserie league baseball with much of USA Today's early success,[12] since the paper provided much more detailed box scores than most competitors and eventually even created a special paper, Baseball Weekly, that almost exclusively contained statistics and box scores.

The first experts on record as having written fantasy baseball articles for USA Today were John Benson, Alex Patton, and Ron Shandler. Perhaps the most well-known fantasy baseball expert in the late 1980s and early 1990s was Benson, who published his first fantasy baseball book in 1989. Later that year Benson developed the first draft-simulation program, software that he still sells today.[13]

Patton published his first book ("Patton's 1989 Fantasy Baseball League Price Guide") in 1989 and his dollar values were included in USA Today Baseball Weekly's fantasy annual throughout the 1990s. Ron Shandler published his "Baseball SuperSTATS" book in November 1986. At first the book wasn't meant for fantasy baseball fans, but rather as a book of Sabermetric analysis.

Fantasy football also saw new businesses and growth. Fantasy Football Index became the first annual fantasy football guide in 1987. Fantasy Sports Magazine debuted in 1989 as the first regular publication covering more than one fantasy sport. Fantasy Football Weekly was launched in 1992 (later becoming Fanball.com) and had $2 million in revenue by 1999.[14] A large number of companies emerged to calculate the stats for fantasy leagues and primarily send results via fax.

In 1993, USA Today included a weekly columnist on fantasy baseball, John Hunt, and he became perhaps the most visible writer in the industry before the rise of the Internet.[15] Hunt started the first high-profile experts league, the League of Alternate Baseball Reality which first included notables as Peter Gammons, Keith Olbermann and Bill James.[16]

The hobby continued to grow with 1 million to 3 million playing from 1991 to 1994.

In early October 1995, a fantasy hockey website was released by Molson Breweries.[17] It was part of the company's "I am Online" strategy and centred on its "I am Canadian" advertising campaign; it would focus on music, entertainment and hockey.[18] It allowed visitors to register accounts and participate in hockey leagues of nine teams, in which the visitor would be the general manager for one of those teams.[17] The general manager would draft a team from a pool of NHL players, and could later negotiate trades with other teams in the league.[17] Disputes would be arbitrated by a commissioner by email.[17] The site included updates of NHL statistics, also provided content, from the Hockey Hall of Fame.[17] On 24 May 1996, Molson Breweries won the International Digital Media Award for best website of 1995.[19]

Commissioner.com launched on January 1, 1997 and first offered a fantasy baseball commissioner service that offered statistics, league message boards, updated box scores and other features. Commissioner.com was sold to SportsLine, late in 1999, for $31 million in cash and stock.[20] By 2003, Commissioner.com helped SportsLine generate $11 million from fantasy revenue.[20] Commissioner.com is now the fantasy sports engine behind the CBSSports.com fantasy area (after SportsLine was sold to CBS in 2004).

RotoNews.com launched in January 1997 and published its first player note on February 16, 1997.[21] Within two years RotoNews had become one of the top ten most trafficked sports sites on the web, according to Media Metrix, ranking higher than such sites as NBA.com.[22] RotoNews.com was sold to Broadband Sports in 1999 and later survived as RotoWire.com.

The growth in fantasy sports revenue attracted larger media players. Yahoo.com added fantasy sports in 1999 - a new business model for fantasy sports.[23] A trade group for the industry, the Fantasy Sports Trade Association was formed in 1998.

Other entries to the market during this era included Fanball.com, launched in 1999 by the parent company of Fantasy Football Weekly.[24]

An early survey of the fantasy sports market in the U.S. in 1999 showed 29.6 million people age 18 and older played fantasy games. However, that figure was reduced in later years when it was determined the survey also included people who play NCAA bracket pools, which are not fantasy sports, since they involved picking teams, not individual players.[25]

While fantasy sports were fueled by the dot-com boom of the Internet, there was a turbulent period when many of the high-flying Internet companies of the era crashed in 2001. Fanball.com went bankrupt in 2001,[26] (later to re-emerge that same year).

There were also different business models. RotoNews.com launched the Web's first free commissioner service in 1998, quickly becoming the largest league management service.[24]

Two years later the trend reversed. Sportsline moved back to a pay model for commissioner services[27] (which it largely still has today). TheHuddle.com, a free site since 1997, started to charge for information.[28] RotoWire.com moved from a free model to a pay model in 2001 as well.[29] Despite the economic instability, fantasy sports started to become a mainstream hobby. In 2002, the NFL found that the average male surveyed spent 6.6 hours a week watching the NFL on TV; fantasy players surveyed said they watched 8.4 hours of NFL per week.[30] "This is the first time we've been able to demonstrate specifically that fantasy play drives TV viewing," said Chris Russo, the NFL's senior vice president. The NFL began running promotional television ads for fantasy football featuring current players for the first time. Previously fantasy sports had largely been seen in a negative light by the major sports leagues.[31]

Fantasy sports continued to grow with a 2003 Fantasy Sports Trade Association survey showing 15 million people playing fantasy football and spending about $150 a year on average, making it a $1.5 billion industry.[32] More recently a 2013 article by Forbes.com shows 32 million Americans spend $467 per person or about $15 billion in total playing. https://www.forbes.com/sites/briangoff/2013/08/20/the-70-billion-fantasy-football-market/#30a3709d755c

In autumn 2008, the Montana Lottery, one of only four U.S. states to legalize sports betting at the time, began offering fantasy sports wagering for the first time.[33]

Since 2012 there has been a boom of apps being built for fantasy.[34]

Daily fantasy sports (or DFS) contests are played across shorter periods of time, such as a single week of a season, rather than an entire season. Daily fantasy games are typically played as "contests" subject to an entry fee, which funds an advertised prize pool and an administrative fee is partially collected as revenue for the service.[35]

Daily fantasy sports began to emerge in 2007 with the launch of Fantasy Sports Live.[36] In 2008, NBC launched SnapDraft; and FanDuel quickly became the prominent DFS site shortly after it launched in 2009.[36] DFS experienced a major increase in prominence in 2014 and 2015 with the dramatic growth of two competing services: DraftKings and FanDuel. Both received venture capital investments from various firms, including sports teams and broadcasters, and became known for running aggressive marketing campaigns with an emphasis on large cash prizes.[37][38][39][40]

The legality of daily fantasy games has been challenged, with critics, as well as the state of Nevada, arguing that they more closely resemble proposition wagering on athlete performance than a traditional fantasy sports game, while DraftKings' CEO has referred to its games as being similar to online poker.[35][37][41] DFS providers have cited the UIGEA's exemptions of fantasy sports as being a general exception for their legality; their legality is subject to how individual states classify a game of chance.[42]

Daily Fantasy Sports were not historically offered in 5 states [Iowa, Arizona, Louisiana, Montana, Washington] that have laws stating a game that involves any chance is gambling. In addition several other states have murky legal environments for paid fantasy sports contests with negative AG opinions or in the case of Nevada, requiring a gambling license. As a result, Draftkings and Fanduel are active in only 41 states. Neither is currently accepting customers in Washington, Idaho, Montana, Arizona, Hawaii, Louisiana or Nevada. Additionally, Fanduel did not accept customers from Texas from 2016 to 2018, but reversed its standing and started offering contests again. In his final remarks at the January 2016 FTSA conference in Dallas, Fantasy Sports Trade Association President Paul Charchian said "We need to formally legalize fantasy play in 50 states."[43]

However, since initial legal challenges, 21 states have since enacted laws confirming that DFS contests are legal games of skill.[44] States such as Iowa and Alabama enacted laws to allow DFS and paid fantasy sports contests in 2019. Louisiana passed a voter referendum in 2018 to allow paid fantasy sports contests, but needs to pass a law to regulate the industry.[45]

In May 2015, Australian research company research firm IBISWorld reported that fantasy sport was a $2B industry, experiencing 10.7% annual growth, and employing 4,386 people in 292 businesses.[46]

According to the Fantasy Sports Trade Association, Fantasy sports is a $7.22 billion industry with 59.3 million fantasy sports players in the United States and Canada as of 2016.[47]

A prior study conducted by the FSTA in 2013, showed 33.5 million people age 12 and above in the U.S. with the 2011 FSTA Study showing 3.1 million people in Canada played fantasy sports.[48] A 2006 study showed 22 percent of U.S. adult males 18 to 49 years old, with Internet access, play fantasy sports. Fantasy Sports is estimated to have a $3–$4 Billion annual economic impact across the sports industry.[49] Since 2011, yearly non-betting fantasy sports users have grown 25%.[50] And with the help of media and the growing fantasy sports market, daily fantasy sports leagues, FanDuel and DraftKings, were able to generate over 300 million dollars in investments from companies like Comcast, NBC Sports, and Time Warner.[50] The new development of daily fantasy sports is where major growth can be seen, "...the daily fantasy spending is where the numbers jump: $257 per year in 2015, while players only spent $5 in 2012."[51]

[52]

In comparison to the United States, the UK has roughly 5% of the population participating, whereas the U.S. has about 10% of its population playing fantasy sports.[53] ESPN Super Selector launched in 2001 for fantasy cricket and had 500,000 users during the 2003 ICC World Cup in South Africa.[54] By 2017, there were 40 million fantasy sports players in India.[55]

The FSTA industry group collected and presented statistics showing the percentage of fantasy sports players compared to the general population in the United States and Canada (Age 12+).[56]

In regards to the consumption habits of fantasy managers, demographic and psychographic research has found the average participant is: male (80%), Caucasian (91%), holds a bachelor's degree or higher (70%), has more than five years of internet experience (84%), earns an average of $94,000, and spends approximately $200 on entry fees and other fantasy related costs. Fantasy players were also stronger consumers of the following products compared to the general population: beer/alcohol, fast food, airline travel, video games, sports periodicals, athletic shoes, cell phones, and credit card usage.[57]

In September 2015, Forbes reported that Eilers Research was projecting that daily fantasy games will generate around $2.6 billion in entry fees this year and grow 41% annually, reaching $14.4 billion in 2020.[58]

The Fantasy Sports Trade Association was formed in 1997 to represent the growing industry. Beginning in 2000, the FSTA has honored past members and contributors to fantasy sports with induction into its Hall of Fame.

The Fantasy Sports Writers Association was formed in 2004 to represent the growing numbers of journalists covering fantasy sports exclusively.[59] The Fantasy Sports Association was formed in 2006 as a rival trade group, but folded in 2010.

Due to the popularity of fantasy sports, in-season programming by major sports networks like ESPN, NFL Network and Fox Sports have created dedicated weekly fantasy programming to analyze player performance and predict outcomes in relation to particular scoring systems. ESPN's on-demand streaming platform ESPN+ offers a unique fantasy program called The Fantasy Show hosted by long time staff writer Matthew Barry. The Fantasy Show utilizes puppets and comedy to present statistical information about NFL Players. ESPN also aires a show on Sunday mornings during the NFL season called Fantasy Football Now. "Fantasy Football Now" airs live on Sunday mornings during the NFL season, a time when fans are making last-minute roster moves and need the latest news from around the league. Providing the latest info are host Will Cain and analysts Matthew Berry, Field Yates and licensed physical therapist Stephania Bell, who gives injury updates. NFL Network aires NFL Fantasy Live as an hour long program containing a consistent weekly segment list that viewers can count on to help them manage their team. NFL Fantasy Live is hosted by Cole Wright and features Michael Fabiano, Adam Rank, Marcas Grant, Akbar Gbaja-Biamila, Graham Barfield and statistics analytics expert Cynthia Frelund. Fox Sports Net aires Fantasy Football Hour on a weekly basis durin the NFL season hosted by Katy Winge and features industry experts Brad Evans and Nate Lundy.

The Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA), was enacted as part of the "American Values Agenda" of 2006 and was added as an amendment to the unrelated SAFE PORT ACT.[60] The UIGEA generally prohibits funds transfers to businesses engaged in unlawful internet wagering.[61] However the UIGEA does not itself define unlawful internet wagering, and expressly refrains from altering the legality of any underlying conduct other than funds transfers.[62]

While the act doesn't alter the legality of any particular activity permitted or prohibited under other laws, it does contain some express exemptions to its funds transfer prohibitions.[63] One of these exemptions from the UIGEA prohibitions is for fantasy sports that meet certain criteria.[64] Specifically, fantasy sports that are based on teams of real multiple athletes from multiple real world teams, that have prizes established before the event starts, that use the skill of participants to determine the outcome, are exempted from the definition of a bet or wager that is the basis for requiring banks to identify and block funds transfers.[65] According to Congressman Jim Leach, an author of the UIGEA, exemptions, particularly one for fantasy sports, were included to relieve the burden of enforcement on banks and the UIGEA does not make fantasy sports legal.[66]

Because the UIGEA exempted fantasy sports from its definition of a bet or wager, there is a misconception that fantasy sports were made legal by the UIGEA.[67] However the UIGEA is not a criminal gambling statute, and it specifically does not alter any criminal gambling laws and thus does not make fantasy sports legal.[62] Federal criminal gambling statutes are found in Title 18 of U.S. Code, such as the Federal Wire Act 18 U.S. Code § 1084 (which prohibits interstate sports wagering) and the Illegal Gambling Business Act 18 U.S. Code § 1955 (which prohibits the interstate conduct of wagering activity prohibited under state law).[68][69] By contrast, the UIGEA is found in Title 31 with other anti-money laundering and financial crimes statutes.[61]

Whether state laws can regulate fantasy sports conducted across state lines depends on whether fantasy sports are a form of sports wagering under federal law. This is because the Federal Wire Act prohibits the conduct of sports wagering in interstate or foreign commerce.[68] With regard to intrastate sports wagering, in 2018 the United States Supreme court in Murphy v. National Collegiate Athletic Association struck down the Professional and Amateur Sports Protection Act, which had prohibited states from authorizing any wagering, lottery, betting, sweepstakes or other wagering scheme that is based directly or indirectly on games in which professional or amateur athletes participate or on the performance of any athletes in such games.[70]

Where states have not expressly authorized fantasy sports contests, usually general gambling laws prohibit lotteries or wagering if three elements are present: an entry fee (known as "consideration"), a prize (a "reward", in legal terms) and chance.[71] Whether fantasy sports are legal under these laws hinges on the definition of "chance" that the state applies. For some states, if skill dominates the outcome of the event, then the contest is legal, and passes what's called the "dominant factor test". Other states with a stricter definition of chance, called "any chance test", have made fantasy football illegal.[72]

Several states have clarified that paid fantasy sports contests are games of skill and exempt from gambling laws, beginning with Maryland in 2012.[73][74]

One exception is the state of Nevada, which has an exemption in PASPA to allow for sports betting. The Nevada attorney general issued an opinion that found Daily Fantasy Sports to be a form of sports wagering, similar to the current wagering offered by Nevada Sports Books.[75] The opinions states that Daily Fantasy Sports are not illegal in Nevada; however, a sports pool license is required to conduct the activity in Nevada.[75]

Several Attorneys General have also issued opinions that Daily Fantasy Sports are a form of sports wagering. A Florida state attorney general's opinion in 1991 called into doubt the legality of fantasy football contests, but companies have operated in the state without any legal action. Since then nine other AGs have issued options, statements or formal opinions that equate DFS with gambling.

However, several other Attorneys General have issued opinions that DFS are legal games of skill. In August 2015 in Kansas, due to uncertainty with the state’s Racing and Gaming Commission position,[76] the state’s attorney general issued an opinion that daily fantasy sports was a skill game and thus permitted under state law. Kansas Gov. Sam Brownback signed legislation a month later authorizing fantasy gaming.[77] The Attorneys General of West Virginia and Rhode Island have also issued opinions that clarified the legality of DFS and paid fantasy sports.[78]

As of December 2017, 18 states have followed Maryland to clarify that DFS and paid fantasy sports are legal contests of skill. These states include Kansas (2015), Indiana, Virginia, Missouri, Massachusetts, Colorado, Tennessee, New York, Mississippi (2016), Arkansas, New Jersey, Vermont, New Hampshire, Ohio, Maine, Vermont, Delaware, Pennsylvania, Connecticut (2017).[44]

In September 2015, New Jersey Congressman Frank Pallone, who has championed legal sports betting in his state, requested a hearing from the House Energy and Commerce Committee to examine the relationship between the professional sports leagues and the fantasy sports companies.[79] The hearing was held in May 2015 and resulted in no proposed legislation, changes or regulations of fantasy sports.[80]

There have been other legal cases involving fantasy sports and the use of professional athletes' statistics for purposes of scoring.

In 1996, STATS, Inc., a major statistical provider to fantasy sports companies, won a court case, along with Motorola, on appeal against the NBA in which the NBA was trying to stop STATS from distributing in game score information via a special wireless device created by Motorola. The victory played a large part in defending other cases where sports leagues have tried to suppress live in-game information from their events being distributed by other outlets.[81] The victory also accelerated the market for real-time statistics which were largely fueled by the growth of the fantasy sports industry.[82]

The development of fantasy sports produced tension between fantasy sports companies and professional leagues and players associations over the rights to player profiles and statistics. The players associations of the major sports leagues believed that fantasy games using player names were subject to licensing due to the right of publicity of the players involved. Since the player names were being used as a group, the players had assigned their publicity rights to the players association who then signed licensing deals. During the 1980s and 1990s many companies signed licensing deals with the player associations, but some companies did not. The issue came to a head with the lawsuit of Major League Baseball Advanced Media (MLBAM), MLB's Internet company, vs. St. Louis-based CBC Distribution and Marketing Inc., the parent company of CDM Sports. When CBC was denied a new licensing agreement with MLBAM (they had acquired the rights from the baseball players' association) for its fantasy baseball game, CBC filed suit.

CBC argued that intellectual property laws and so-called "right of publicity" laws don't apply to the statistics used in fantasy sports.[83] The FSTA filed an amicus curiae in support of CBC, also arguing that if MLBAM won the lawsuit it would have a dramatic impact on the industry, which was largely ignored by the major sports leagues for years while a number of smaller entrepreneurs grew it into a multibillion-dollar industry, and a ruling could allow the MLBAM to have a monopoly over the industry.

"This will be a defining moment in the fantasy sports industry," said Charlie Wiegert, executive vice president of CBC. "The other leagues are all watching this case. If MLB prevailed, it just would have been a matter of time before they followed up. Their player unions are just waiting for the opportunity."[84]

CBC won the lawsuit as U.S. District Court Judge Mary Ann Medler ruled that statistics are part of the public domain and can be used at no cost by fantasy companies. "The names and playing records of major-league baseball players as used in CBC's fantasy games are not copyrightable," Medler wrote. "Therefore, federal copyright law does not pre-empt the players' claimed right of publicity."[83]

The 8th Circuit Court of Appeals upheld the decision in October 2007. "It would be strange law that a person would not have a First Amendment right to use information that is available to everyone," a three-judge panel said in its ruling.[85]

The U.S. Supreme Court upheld the 8th Circuit Court's decision by declining to hear the case in June 2008.[86]