If you turn on the TV to any sports channel your almost certain to see a commercial from one of the two major daily fantasy sports websites, FanDuel or DraftKings. The increase in popularity of these new daily fantasy sports sites in the last couple years has been astounding and has lead to massive profits. FanDuel alone ballooned from $135,360 in revenue in the first quarter of 2011 to nearly $37 million in the final quarter of 2014. Furthermore, their massive growth has attracted huge investors. As of April 2015, hundreds of millions of dollars in venture capital has been invested in daily fantasy sports. Large and respected institutions like NBC Sports Ventures and Disney have delivered money to these platforms, because they realize the immense potential for further growth in fantasy sports and believe that daily fantasy games are simply the next iteration of an industry that has a track record of proven success.
Like with your traditional fantasy sports, participants draft a roster of players to compete. However, unlike traditional fantasy sports websites that require customers to play for an entire season, participants of daily fantasy sports sites can play for a single days games and get a fast payout. Participants can play head to head, against multiple people, or through a tournament. Customers can enter a draft for as much as $1 and up, and the prizes vary from the hundreds to the tens of thousands of dollars.
Many of the major sports teams have already capitalized on the opportunity by partnering with either DraftKings or FanDuel. The MLB has invested in DraftKings, while the NBA has partnered with FanDuel. The NFL, which is one of the few major sports organizations who has yet to partner with a fantasy league website, stands to make more than $50 million per year from a deal with one
Even though these fantasy sports websites are really just a form of online sports betting they are able to skirt the Unlawful Internet Gambling Enforcement Act (UIGEA). The UIGEA was enacted in 2006 to regulate internet gambling and specifically bans internet sports gambling. However, the UIGEA carved out an exception for fantasy sports in § 5362. Despite not being banned in the UIGEA, a few states including Arizona, Iowa, Louisiana, Montana and Washington have chosen to prohibit these type of fantasy sports sites.
Because there has been a new trend of acceptance towards sports betting and because these fantasy sports websites now have big money to throw at lobbyists, it is unlikely that a change to the UIGEA will be made banning fantasy sports sites. One thing is evident, barring an unlikely change in the law, their enormous growth will likely continue.