FanDuel Executive: Some Fantasy Sports Operators ‘Running Illegal Sportsbooks’

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The scrutiny around daily fantasy sports companies offering sports betting-like products continues to grow in the US as media outlets and major sportsbook operators focus in.

This week, the Wall Street Journal published an article outlining the PrizePicks strategy to target users, including in non-legal US sports betting states. The piece comes on the heels of a pointed comment about some daily fantasy sports operators from FanDuel Head of State Government Relations Cesar Fernandez at the National Council of Legislators from Gaming States summer conference in Denver this month.

“There are companies today posing as fantasy-sports operators, and they are running illegal sportsbooks,” Fernandez said at NCLGS.

DFS offering sports betting products? 

Some DFS operators offer users parlay-style prop bets, allowing them to pick over-under on stats for specific athletes. Representatives from multiple operators at the NCLGS conference told LSR the games fall under the DFS laws of game-of-skill rather than the gambling definition of chance.

While many regulators have allowed DFS operators to keep offering the products, some have clamped down. PrizePicks stopped offering its products in Maryland and West Virginia after regulators broached the topic with the company.

In Vermont, the company offered to help regulators research the potential overlap between DFS and gambling, a study sanctioned under the state’s new sports betting law.

FanDuel calls attention to daily fantasy operators

FanDuel and DraftKings built the US DFS market and now lead the way in sports betting. After spending millions of dollars lobbying for DFS laws state-by-state before the fall of PASPA, they paid millions more in market-access fees and licenses, as well as sports betting revenue taxes as high as 51% in New York.

Fernandez hopes to draw attention to the games in question from pure daily fantasy operators that could potentially qualify as sports betting.

“All we can do is highlight it. It’s really up to regulators to determine if this is something they want to do something about,” Fernandez told LSR after his comments at NCLGS.

Underdog stance on daily fantasy sports

The situation reminds Underdog Vice President of Government Affairs and Partnerships Stacie Stern of the early days of daily fantasy sports when she was at FanDuel. There, she dealt with the “razzing” of season-long fantasy operators saying it was sports betting in disguise.

Stern believes the “pick ‘em games” now under fire are games of skill. Underdog, unlike PrizePicks, has aspirations to move into the US sports betting markets.

“I was one of the few people who looked at DFS and saw it for what it was, just because it was daily did not meant it required less skill than a full season fantasy sports contest,” Stern said. “We’re in that same type of situation. The innovation in the space and still following UIGEA and state laws. Building of a roster, whether it’s predicting performance based on predictions set by operator or a salary set by operator and determining whether that player will perform at that salary is set. When I would set the lineup, I would need 3x, 4x, 5x performance based on salary of my roster. 

“I look at pick ‘em the same way. Where is the operator off on this projection and this is where I go higher or lower. That’s how I would set salary cap. It’s a fundamental difference of opinion, and as long as we’re all respectful, I don’t have an issue on disagreeing with what the law says. I’m talking to legislators and regulators and they’re, for the most part, open to innovation and understanding that it’s a game of skill and that to me is what matters, I’m not worried about what the competition says.”

DFS operators respond to WSJ article

The Coalition for Fantasy Sports, which comprises PrizePicks, Underdog Fantasy and Sleeper, provided a statement to LSR in response to the WSJ story this week.

“It’s unfortunate DraftKings and FanDuel, the same companies that championed fantasy sports as skill-based for years, have changed their tune at the first sign of competition. It’s a thinly veiled attempt to create a false narrative and position themselves as the only games in town.

The current legal framework exists largely because of the efforts of these industry incumbents. Unable or unwilling to compete on product, they’re doing what incumbents often do when faced with new competition. The narrative they’re spreading directly contradicts the laws they helped to write and pass – laws that make crystal clear that fantasy sports are not sports betting. Their anti-competitive approach is disingenuous and is bad for consumers.

Coalition: we are skill, not chance

The statement continues by referencing the age-old argument about skill and chance in DFS:

“Regulators across the country have verified our games as contests of skill, not chance, making them legally identical to fantasy games that have been offered for nearly a decade.

“We respect the views of regulators, including regulators in multiple states who have expressly approved our games as fantasy contests under their fantasy sports statutes. We likewise respect the views of regulators in the small number of jurisdictions who have taken a different view based on issues specific to those states.

“We will continue to work with policymakers nationwide to uphold high standards of consumer protection, ensure our games are only marketed to those legally allowed to play them, and maintain our shared commitment to building responsible play programs.”

Daily fantasy sports operators take a hit

Multiple fantasy sports operators are drawing more ire than companies like Underdog and PrizePicks. Earlier this year, New Jersey issued a cease and desist letter to Prediction Strike for offering unlicensed sports bets.

Prediction Strike was also among five fantasy sports sites the Ohio Casino Control Commission targeted for offering contests resembling unlicensed sports betting in May. Also among those sites were:

What about sweepstakes?

StatHero received a three-year DFS suspension from the OCCC in November 2022 for similar reasons. Meanwhile, Fliff and its “free-to-play sweepstakes” are part of a class action lawsuit in California questioning its legality based on the resemblance to sports betting.

A DFS operator source played coy this week about Fernandez’s NCLGS comments but said if he were talking about Fliff, they would agree that it does not fit the DFS game-of-skill definition.

LSR reporters Sam McQuillan and Mike Mazzeo contributed to this article.