Daily Fantasy Sports (DFS) is a relatively new phenomenon. Some say it’s definitely a game of skill, others claim it’s just another form of gambling and shouldn’t be legal.
DFS, ”the next big thing” is taking North America by storm and slowly knocking on Europe’s doors. The way it works is simple: sports lovers select a team of real world athletes who then score fantasy points according to set scoring rules.
Presently, in most US states, fantasy sports (including DFS) is generally considered a game of skill and therefore not legally considered as gambling (where there’s an element of both luck and chance). However, there are a few states that have either a more restrictive set of laws that outline what is considered a game of skill or have specific laws outlawing paid fantasy sports. These states are currently Arizona, Montana, Louisiana, Iowa and Washington. According to Legal Sports Report, gaming regulators in Nevada are thinking about taking a look at the legal frame of DFS. The state ”could emerge as a pivotal state in the American conversation over the legality of real-money daily fantasy sports contests”.
At a US federal level, fantasy sports is defined and exempted by the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA). The act, signed into law by George W. Bush, included an explicit provision noting that the law would not apply to fantasy sports games, educational games, or any online contest that “has 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 single score, point-spread, team performance, or individual performance in such sporting events…”
Talking about the legal issues of DFS in Europe is not easy as each country has a different vision of what iGaming/moneytainment is, as well as what a skill and luck game is. Most countries allowing fantasy sports have already included fantasy sports in their traditional iGaming licences. The most obvious example is the UK, where DFS falls in the same category as sports betting and horse racing. Therefore, the operators need to acquire an operating ”pool betting” licence from the Gambling Commission.
Some countries are not aware of DFS yet, and their legislator has therefore no opinion on that subject for the moment. In France, the iGaming regulator ARJEL (Autorité de régulation des jeux en ligne) is not offering (yet) a specific legal frame of fantasy sports yet.
In many countries, for instance in Germany, the regulation of gaming is based on whether the predominance for the outcome of the game lies in skill or chance. While this distinction is simple for pure games of chance and pure games of skill, it is a complex and yet unsettled question. Is relative skill or the chance dominating the outcome of a game? Is DFS more similar to chess, which is legally classified as a game of skill – i.e. not gambling, or to roulette, which is regarded as a pure game of chance?
According to Ingo C. Fiedler, a researcher at the University of Hamburg who has a deep understanding of gambling, DFS falls into the category of mixed games. ”Whether it is considered a game of skill or chance depends on the question at hand. For example, there is a distinction between a game being recognized as a game of skill/chance in the legal/regulatory sense and other senses, e.g. for income tax purposes. From a legal perspective, it is essential if the majority of the players are playing it as a game of skill or as a game of chance. In this regard, I think of fantasy sports as a game of chance.” For other purposes, e.g. if a professional fantasy sports bettor is due to income tax, the game is to be deemed a skill game, because this individual player plays it as a game of skill.
The reason for this distinction is the repetitions: the more often a mixed game is repeated, the higher the share of skill that is involved. Fiedler says that some fantasy sports bettors do not play it often enough to play a game of dominant skill. ”However, a few heavy highly involved players (like the professional bettors), play it often enough to reach the so called Critical Repetition Frequency (CRF), which is the threshold of repetitions a mixed game has to be played until skill dominates the outcome.” At the same point he stresses that empirical evidence is yet to be presented on where the CRF lies for fantasy sports as it was originally applied to poker.
For Valery Bollier, CEO of the most advanced European fantasy football/soccer game Oulala.com, it is very important to differentiate a skill game from a luck game because the whole point of DFS is to prove to your friends that you know sports better than them: ”The results have to be as close as possible to reality. If you have an encyclopaedic knowledge of football, you should reasonably expect to beat your friends who only have a social interest in football. Therefore, if the result of the game is random, your friends might crush you, which is purely unacceptable.” In other words, what’s the point of playing the game if luck determinates the winner?
So, what are the skills that are needed to play DFS? As written on the website of American Fantasy Sports Trade Association (FSTA), DFS players ”must take into account a myriad of statistics, facts and game theory in order to be competitive”.
Bollier believes that Oulala has everything it takes for a client to become a skilled player – thanks to Big Data: ”The cornerstone of our game is a sophisticated mathematical matrix allowing our game’s results to be as close as possible to reality. Our scoring system includes 70 football statistics, and each criteria is weighted based on the player’s position (keeper, defender, midfielder, and striker), to stick even more to the reality of a football game.”
In concrete terms, when a football player performs one of the actions on the field, all the virtual teams having selected him will be automatically given points, positive or negative – according to the real on-field performance. Extra bonuses don’t exist, since that increases the luck aspect of the game. The effects of events that are hard to predict, such as injuries and substitutions, can be eliminated by a live-coaching feature. All collected data, broken down to different stats, are then available for further analysis, which offers an excellent overview of a player’s current form. And the numbers obviously don’t lie: FC Barcelona star Lionel Messi was statistically the best player of the 2014/2015 season with 2330 points, ahead of Real Madrid rival Cristiano Ronaldo (1897pts) and top Chelsea boy Eden Hazard (1435pts). The best goalkeeper was Lyon’s Anthony Lopes (1101pts, 7th overall), followed by Montpellier’s Vitorino Hilton as the best defender (1066pts, 9th overall). Gone are the days when we talked only about players’ goals.
The best client of their last season’s game, who took part in 41 daily competitions, finished among top three ”fantasy managers” on five occasions. According to a mathematical calculation, the chances of finishing five times on Oulala’s podium in a given year if the game was based on luck were 560,000,000 against 1.
Bollier adds that they are currently working with the Maltese government to help create the first skill game licence purely dedicated to Fantasy Sports: ”We believe this is a critical issue in Europe (and a very different situation than in the USA), as some iGaming operators might want to pretend, for marketing reasons, that they offer a game of skill when it is actually a game of luck.”
So far there haven’t been any empirical investigations as to whether DFS is really a skill game. Despite the fact that skill in games has to be measured relatively, that is, relative to the skill of other players, in some DFS games – as I have explained in the case of Oulala – luck is certainly present to a certain extent. However, skill plays a greater role in determining the outcome, and this is evident especially at the top of the leaderboard where one can usually find ”fantasy managers” who do their homework.