For the typical American sports fan, fantasy sports plays the role that sports betting does in the rest of the world—making the drama of winning and losing very personal. As the world flattens, technology is making it ever easier for Americans to join the party. An estimated $95 billion is wagered on sports in the US—less than 10% of that legally.
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01Vegas
More people are going to Vegas than ever in history. And they are spending more than ever in history. But fewer of them are betting. Instead, they’re going to Vegas for the shows, parties, conventions, clubs and restaurants. With gaming revenue flattening, casinos are looking to innovate— and angling to attract tourists who love fantasy sports to their sportsbooks.
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02Fantasy
Fantasy has to (and will) change. Daily fantasy’s legality will be resolved by creating protections for newbies so they aren’t suckered into the games only to be slaughtered by highvolume experts. Is daily fantasy a skill? In fact, it’s so much a skill that the highly skilled have it in the bag. Your odds of winning at daily fantasy are similar to your odds of beating Steph Curry in a free throw contest.
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03States
States want the revenue. Lawmakers have woken up to the way their citizens travel out of state to gamble, and many states have licensed new casinos to keep the money in state. On top of that, illegal gambling costs the states hundreds of millions in lost tax revenue, which instead funds organized crime.
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04Globalization
Globalization brings us into regular contact with the other model, used by many other countries: licensed sportsbooks contribute taxes that fund regulators who protect consumers and the integrity of sport.
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05Legality
For leagues to get a piece of the action, it has to be legal. In Europe, pro teams get significant jersey sponsorship deals from betting operators— Real Madrid was being paid $20 million a year by BWIN. In Korea, nationalized sports betting funds the country’s sports programs and even builds their stadiums. In the US, leagues get zilch.
Saahil Hilsud reacts to news on Twitter that Channing Frye is getting an unexpected start for the Orlando Magic. Computer scripts enable him to add Frye to 400 of his lineups. Hilsud wins 1st place in a DraftKings prize— and also 3rd, 4th and 7th, taking home hundreds of thousands in one night, adding to the $3 million he won during the year.
NFL Week 16—Eric Hafner pays over $30,000 in entry fees on 20 lineups. After the morning games, in good position, he switches his lineups to favorites to protect his lead. When the afternoon games end, he downloads the entire DraftKings database to analyze his competition’s positions. Hafner wins $1.6 million.
We will be heavily promoting a variety of ways to protect the casual player, including Beginner Contests, the capacity to challenge a friend in a direct Head-to- Head, and the ability to play in a pool with your Facebook friends. You won’t be getting matched up against anonymous multi-bettors anymore. We’re also regulating and approving the scripts in use.
Rick Cordella
FanDuel board member
Since their regulatory showdown in New York, DraftKings and its competitors are introducing fair-play features aimed at both bringing back casual players and appeasing the regulators.
Entry fees now as low as $2 successfully entice free players to convert. In 2010, 74% of players played for free. Now it’s inverted—70% pay entry fees.
The Friend or Foe question has been soundly answered. Fantasy is not a replacement for being a fan, it’s additive. Data shows that fantasy players consume 40% more sports content after becoming players.
Fantasy grew rapidly into a $1.1 billion industry mostly on advertising revenue. Then it upped the game by offering “prizes” and the market tripled. A race for market share ensued.
A “lottery effect” distorted the market. Fantasy sites found that new players flocked to whoever advertised the biggest prize pools (not the best odds). In order to increase their prize pools the fastest, fantasy sites had to allow players to enter more than once. (If everyone played twice, that would double the prize pool.)
Wall Street traders and poker pros didn’t just play twice—assisted by computer scripts and optimization software, these high-volume sharks created as many as 1,000 lineups a day, putting over $100,000 on the line regularly. The scripts allowed them to make last-minute adjustments to their lineups to take advantage of gameday breaking news.
Officially, the odds of winning were always 50%. Finish in the top half of players and take home your share! But the reality couldn’t be more different. In MLB fantasy, 91% of the prize money was being won by only 1.3% of the players. DraftKings data showed that over 89% of players lost money.
THE CHANGING CASINO SPORTSBOOK ECOSYSTEM
A typical big Strip casino in Vegas (there are 23 of them) accepts about $60 million in bets at their sportsbooks annually, profiting $3.2 million. There are 197 sportsbooks in all.
Of the $4.3 billion bet on sports last year in Nevada, 37% was on football, 28% on basketball and 17% on baseball.
The growth is solid—it’s doubled since 2003.
But this is still peanuts compared to slot machines, which bring in 30 times the revenue and profit.
And slot machines’ popularity has never recovered to its 2007 highs.
Only 4% of first-time visitors to Las Vegas say their primary reason for coming is to gamble.
ORGANIZED CRIME IS AT THE CENTER OF THE DEBATE OVER THE LEGALIZATION OF SPORTS BETTING.
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PRO
Organized crime’s revenue stream can be cut off by channeling sports betting to legal, licensed operators.
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PRO
In the UK, fans bet $12.3 billion legally in 2015, contributing $2.2 billion to government coffers.
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CON
Legal betting habituates the fans to gambling, then illegal operators recruit the bettors with improved odds or spreads. In its most recent crackdown on illegal gambling dens, INTERPOL conducted 4,000 raids, arresting 4,100 people in 11 countries across Europe and Asia.
Match Fixing Scandals
Few Americans are aware of how prevalent match-fixing scandals are.
68 different match-fixing scandals have been discovered in the last three years, some of which are single-game scandals (a Wimbledon player declaring a bribe attempt), others of which were more pervasive—affecting 15 soccer games in Korea, 19 in Turkey.
An ongoing Europol investigation into a syndicate out of Singapore has revealed bribes in 15 different countries on soccer—including a Champions League game played in England, and qualifiers for both the World Cup and Euros. 700 games are under investigation. 50 people have been arrested; 425 additional team officials, referees and players are under suspicion.
Because bets are placed in one country on games played in another country, the most globalized sports are the most vulnerable—soccer, cricket, tennis and soon, basketball.
PRO LEAGUES’ NEW PARTNERS
Preparing for the era of convergence, pro leagues are making investments and cementing relationships with technology companies that play a role in the betting ecosystem.
NBA & NUMBERFIRE, which uses algorithms to make recommended bets on pro sports.
NFL & SPORTSRADAR, which provides real-time statistics to bookmakers.
MLB & SPORTIM, whose parent company provides software for bookmakers.
HOW SPORTS BETTING COULD BECOME LEGAL IN THE US
Sports betting gets legalized by transforming into something that looks and feels a lot more like fantasy sports.
Step 1
Daily fantasy plays the role in the process that medical marijuana did, softening people’s preconceptions of betting as a black-market business.
STEP 2
States already run lotteries; in many other countries, sports betting is nationalized. The most common form is sports toto, in which you have to pick all the winners on any given day or weekend—a hybrid of fantasy, gambling and the lottery.
STEP 3
Savvy politicians who don’t want sports teams leaving town will realize that a sports toto game can fund construction of a new stadium. Much like with marijuana, the legality changes state by state.
WHY FANTASY COULD TAKE OVER GLOBALLY
To end match-fitting: Because fantasy results are always based on performance statistics from an array of players, it’s invulnerable to match-fixing bribes and scandals. The fantasy format is ranked the lowest risk to the integrity of sports by world bodies. As match-fixing endures worldwide, and possibly accelerates with globalization, fantasy could emerge as the answer, socially and politically.
The kids prefer it: 32% of all American teens have played fantasy (vs. 18% of adults). American teens have long stamped their print on world trends. Then consider that even where sports betting is legal, you have to be 18 years old to bet. So most teens will start with free fantasy, then at age 18 start paying entry fees rather than switch to traditional sportsbook betting.
It’s a better fan experience: Fantasy sports is intellectually and emotionally engaging. It’s far more complex than betting on single games, and it puts fans in the more empowered role of coach or GM. It makes fans care about all the teams and all the players, not just their favorite team.