Daily fantasy sports (DFS) are a subset of fantasy sport games. As with traditional fantasy sports games, players compete against others by building a team of professional athletes from a particular league or competition while remaining under a salary cap, and earn points based on the actual statistical performance of the players in real-world competitions. Daily fantasy sports are an accelerated variant of traditional fantasy sports that are conducted over short-term periods, such as a week or single day of competition, as opposed to those that are played across an entire season. Daily fantasy sports are typically structured in the form of paid competitions typically referred to as a "contest"; winners receive a share of a pre-determined pot funded by their entry fees. A portion of entry fee payments go to the provider as rake revenue.[1][2]
In the United States, the daily fantasy sports industry was dominated by two competing services: the New York-based FanDuel, and the Boston-based DraftKings. Both companies were established as venture capital-backed startup companies, received funding from investment firms, sports broadcasters, leagues, and team owners, and became known for the aggressive marketing of their services. As of September 2015, both companies had an estimated value of at least $1 billion and controlled 95% of the U.S. DFS market.[3][4] The two primarily compete against smaller DFS services, such as Fantasy Aces and Yahoo! Sports.[5][6] The popularity of the daily fantasy format has been credited to its convenience in comparison to season-length games, as well as the focus on major cash prizes in the promotion of these services. Daily fantasy was also credited with helping to improve television viewership and engagement with sports.
DFS faced criticism over its semblance to sports betting; multiple U.S. states ruled that DFS contests constituted gambling and sports betting—which, at the time, was effectively illegal in most states under the Professional and Amateur Sports Protection Act of 1992—arguing that their elements of chance were predominant over those or skill, or how much control the player has over the outcome of the game. A New York State lawsuit, spawned from an investigation of allegations that DraftKings and FanDuel employees had used inside information to win cash prizes from each other, spawned retaliatory lawsuits from the companies. They argued that the rulings were the result of a misinterpretation of the nature of their services. By December 2017, 18 states, including Massachusetts and Virginia, had ruled that DFS was a legal game of skill.[7]
In the U.S., these issues became largely moot in 2018, when the Professional and Amateur Sports Protection Act of 1992 was struck down in the Supreme Court lawsuit Murphy v. National Collegiate Athletic Association. With states free to legalize sports betting, DraftKings and FanDuel subsequently expanded into bookmakers to leverage their existing customer base and legal expertise, while FanDuel agreed to be acquired by Irish company Paddy Power Betfair to become its main U.S. subsidiary.
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