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Blurry line between fantasy sites & sports gambling

I LOST $25 in the last few weeks. A few things didn't fall my way. It started the night of Aug. 11, when the Dodgers' Adrian Gonzalez, hitting .298 at the time, went 0-for-4 with a pair of strikeouts. Astros phenom Carlos Correa had the same stat line. Yankees outfielder Brett Gardner, an All-Star for the first time last month, went 0-for-6 with a strikeout hat trick.

I LOST $25 in the last few weeks.

A few things didn't fall my way. It started the night of Aug. 11, when the Dodgers' Adrian Gonzalez, hitting .298 at the time, went 0-for-4 with a pair of strikeouts. Astros phenom Carlos Correa had the same stat line. Yankees outfielder Brett Gardner, an All-Star for the first time last month, went 0-for-6 with a strikeout hat trick.

It's tough to win a contest on DraftKings competing against more than 61,000 other lineups of 10 players - a complete diamond, but with two pitchers - when 30 percent of your lineup combines to go 0-for-14 with seven strikeouts.

Three dollars down the drain after finishing in the middle of the pack of DraftKings' $160K Moonshot contest, one of many daily fantasy sports contests offered by the website. The winner of that one, "davebla," pocketed $12,000.

Tomorrow is another day, I tell myself. More baseball lineups to put together and the PGA Championship tees it up.

DraftKings, which plans on paying out $1 billion in prizes this year, offered a pretty enticing contest for golf's fourth and final major. Like all other DraftKings contests, each athlete is given a certain salary based on talent. In golf, many times the player's salary correlates directly to his odds of winning the tournament.

Each entrant into a DraftKings contest - like many other daily fantasy sites, including DraftKings' main competitor, FanDuel - is allotted the same salary cap as the rest of the given contest's entrants. The goal is to fill out a lineup of MLB, NFL, NHL, NBA and soccer players, PGA golfers, NASCAR drivers, college football and basketball players, MMA fighters, etc., within your salary cap, and hope the team you create does the best it can possibly do.

There's an element of skill involved, most definitely. There are numbers to study, probabilities to ponder to help make the best decision when creating your lineup. But then it's up to the execution from the athletes. It's much like the same fantasy football and baseball leagues - among other sports - in which people participate.

According to the Fantasy Sports Trade Association, 56.8 million are involved in fantasy sports in the United States and Canada.

The difference with DraftKings, FanDuel and other daily fantasy sports websites, is the daily element, which allows a fantasy player to either make or lose much more money than in a standard fantasy sports season.

Back to the PGA Championship, though . . . DraftKings was out to make someone a millionaire. For a $20 entry fee, a DraftKings user could select six golfers to fill out their PGA lineup. The contest got 188,925 entrants and had a prize pool of $3.3 million. Does that math not add up? The entry fees totaled close to $3.8 million. Ah, the vig. There's always the vig.

I had the magic touch that week, selecting eventual champion Jason Day to be in my lineup, but so, too, did 33.2 percent of the contest entrants. My 132,057th-place finish was because of who I surrounded Day with. Yes, it included Tiger Woods. I swore it was finally time for those swing changes to take full effect. Two users, "mailnurs" and "TooMuchMonta," tied for the title with the same lineup. The contest paid out to 45,840 players.

It was a stupid gamble, really, considering how poorly Woods has looked of late. Sunday's meltdown at the Wyndham Championship confirms that.

But was I actually gambling? That's where the concept of daily fantasy sports gets tricky.

A booming business

DraftKings is having a big year, one that has seen the company in its fourth year of existence add around $300 million in new investments. The company, founded by three former Vistaprint executives in Boston, has raised more than $400 million since its inception. FanDuel has also increased its investment base as the market for daily fantasy sports continues to grow at a huge rate.

"We thought that this would someday be huge," said Paul Liberman, DraftKings' COO and co-founder. "That being said, our projections didn't have us giving away more than a billion dollars our fourth year in business."

But it's not just the amount of money they're raising and how much they're giving away, it's who they're partnering with.

In late July, DraftKings added investors like FoxSports - which paid $150 million for an estimated 11 percent of the company, according to a New York Times report - the NHL, MLS and more. Major League Baseball increased its funding to DraftKings, according to the report.

The 76ers are among many teams to be associated with DraftKings. The microphone flag on nearly every press conference bears the DraftKings logo.

Major League Baseball was the first sports entity to get seriously involved, when it purchased a small stake in DraftKings in 2013. DraftKings has sponsorships with 27 of the 30 MLB teams, including the Phillies.

The Phillies were notified this spring, according to team executive David Buck, that MLB planned to launch an extended deal with DraftKings.

"Times have changed," said Buck, the Phillies' senior vice president of marketing and advertising sales. "Things are more acceptable now than they were several years ago. Did we think about it? A little bit, but you do take direction from the league, and the league thought long and hard about it and it kind of makes sense. So we said yes.

"Fantasy sports are very, very popular. And this is kind of the next step of that, short of gambling."

Since fantasy sports is considered, by law, to be a "game of skill," corporations are jumping at the chance to get involved, despite money changing hands similar to sports betting.

And fans are loving it, too.

"What we found out is that what we're doing really reinforces people watching and kind of engaging in sport," Liberman said. "There's a study that looks at golf. We found out that some of our players that play on DraftKings didn't like golf until they started playing on DraftKings. So it's that type of impact that of really engaging our users into the games that we think is mutually beneficial for the leagues."

Golf specifically, like MMA and NASCAR, has seen massive growth in its fantasy population because of daily fantasy sites. Andrew McSweeney, a 25-year-old from Chester County, has always wanted to participate in fantasy golf, but finding enough friends to do it for a whole season was always pretty difficult.

Enter DraftKings.

"It gives an added interest to the week in and week out tournaments," McSweeney said. "It provides an added excitement to the Thursday through Sunday of a regular tournament that typically only comes when watching a Sunday at a major."

And if you don't succeed one week, there's always next week.

"One week you might draft two heavy, but expensive, favorites and then four other cheaper guys that you hope just make the cut and maybe get into contention," McSweeney said. "The following week you may change your strategy to pick six guys that you think will all be in contention."

Daily fantasy sports is booming. Even Yahoo! has launched a daily fantasy platform.

DraftKings, with help from its recent investments, is expanding internationally. It plans to open a London office by the end of the year. From there, only time will tell where the industry goes.

A skill game

NBA commissioner Adam Silver is a proponent of sports gambling becoming legalized, so his league's involvement with daily fantasy sports is no surprise. But his NFL counterpart, commissioner Roger Goodell, has taken a harder stance against gambling and even daily fantasy sports.

The NFL, daily fantasy's biggest money maker, has an ad-driven relationship with the industry. Many of its teams, though, are corporate partners.

Fantasy sports, including daily fantasy websites, are protected under the Unlawful Internet Gambling Act of 2006. The bill exempts fantasy sports games from being unlawful - unlike online sportsbooks - because of the distinction that fantasy sports are games of skill. Residents in Arizona, Iowa, Louisiana, Montana and Washington, however, are ineligible to compete in daily fantasy games for prizes because of state rules, despite the skill aspect.

Isn't sports gambling also skillful? One could certainly argue it takes math and probability calculating - similar to fantasy sports - in order to make money.

A recent ESPN report revealed that the U.S. Department of Justice and the NFL - then under commissioner Paul Tagliabue - argued in court that sports wagering is skill-based in 2013 and 2003, respectively.

Sports betting is moving closer and closer to becoming legal, but it doesn't appear likely in the near future. Meanwhile, money is healthy in the daily fantasy world.

Todd Fuhrman has been involved with the gaming industry for nine years. The Chicago native is a former oddsmaker at Caesars and now works as a contributor to SportsLine.com and hosts a podcast, "Bet the Board." As someone who has been on the opposite side of the counter of someone placing a sports wager, he doesn't see how daily fantasy sports doesn't get the "gambling" label like a regular sports wager.

"Any of the operators in daily fantasy, I understand their platform, where they're coming from," Fuhrman said. "But in my opinion, it is 100 percent gambling. Does that mean I'm opposed to it? Absolutely not. But to say if someone is risking money to try and make money back, I don't know how anybody can look you in the eye and say it's not gambling.

"And I understand, by the letters of the law, that's not defined the same way as sports gambling, because they deem it a game of skill more so than a game of chance, but to take that stance and truly believe it, I think, is a little bit of a leap of faith."

Daily fantasy companies are fully aware of the stigma associated with sports gambling and they're pretty protective of the skill element.

Bill Burr, a comedian who hosts a popular weekly podcast, recently found himself with some trouble from one of his advertisers. Burr ad-libs all of his advertisements, and DraftKings wasn't happy with the way he would make side comments connecting the company to gambling.

"What are you talking about? You're gambling," Burr said in a rant on a late July episode. "You've combined fantasy baseball and fantasy football with the Vegas sportsbook. We're all adults. I don't have a problem with it. Why can't you just be who you are, DraftKings?"

Well, because then it wouldn't be legal, obviously. It's a fine line that daily fantasy operators are walking. And they're all capitalizing at seemingly the right time. In this period between now and when/if sports betting gets regulated, DraftKings, FanDuel and others are starting to seize the marketplace to perhaps get involved.

But what would it mean if sports betting became legal? How would daily fantasy sports be affected?

"If it became legalized and regulated, I think that it would help," Liberman said. "The more people consume sports, I think the better it is for DraftKings because I think that we kind of naturally make a good second-screen experience to watching sports.

"Ultimately, I look at us as an entertainment company, an entertainment sports company. And given that, we're constantly evaluating how do we do better local games? How do we engage sports fans everywhere they are in every different capacity?

"Right now we're focusing on creating an amazing game for our players. That's been the focus for the last three years and that continues to be the focus. There are all sorts of different possibilities that lie ahead, whether it's an IPO, whether it stays a private company, whether we get purchased, I'm not actually sure."

One thing's for sure, though: Football season is around the corner. A promotional email from DraftKings made sure to remind that.