FanDuel is the premier destination for sports fans online. In 2009, FanDuel reimagined the concept of fantasy sports, giving fans the ability to play one-day fantasy sports for real cash prizes. And despite many imitators, there’s still no better place to play. After launching in 2018, it didn’t take long for FanDuel to become America’s go-to for sports betting and the #1 online sportsbook. Fantasy sports are more skill-based than real ones. By Nikhil Swaminathan Illustrations by Matt Chase August 4, 2016 E arly one Saturday morning in Las Vegas, I sat down at a Texas Hold ‘em poker table with seven or eight other men, all middle-aged. Being 30 at the time, I was the youngest player by about a decade.

[toc]Daily fantasy sports is like gambling.

That’s the conclusion one will come to after reviewing Rutgers Center For Gambling Studies‘ recent report: The Prevalence of Online and Land‐Based Gambling in New Jersey, Nower, L., Volberg, R.A. & Caler, K.R. (2017).

Fantasy sports betting has actually been around for quite some time, but never in the magnitude or with the money making opportunities that it is today. Typically, fantasy sports were done in living rooms or sports bars among a few friends in a league format to make sports more entertaining to watch. Oct 19, 2020 In a Private Letter Ruling, the IRS concluded that daily fantasy sports are gambling transactions. While this will allow players to deduct entry fees, it is bad news for DFS operators.

Of course, whether DFS sites like DraftKings and FanDuel are empirically or legally a form of gambling is a conversation for courts and state legislatures.

“Whether or not DFS is gambling is beyond the scope of this report,” the researchers note. However, the report clearly shows DFS players exhibit many of the same traits as traditional gamblers (and have a high crossover rate).

That’s not the best news for the DFS industry.

As it tries to gain approval in statehouses across the country, DFS has waged a war against the word “gambling.” The industry likes to refer to itself as a skill-based game that has little in common with traditional forms of gambling. DFS proponents use analogies like chess, the stock market, spelling bees, and bowling leagues, and it sells itself as good, clean fun.

The Rutgers study indicates it has some things in common with traditional forms of gambling.

The fallacy of skill-based gambling

Before delving into the prevalence report’s DFS findings, I want to offer up some thoughts on peer-to-peer skill-based games with wagering components.

In a previous column, I asked if poker players and other advantage gamblers weren’t skewing problem gambling data.

But there’s a second piece to this puzzle. Are so-called skill-based games a driver of problem gambling behavior, and/or are they magnets for problem gamblers?

Poker, DFS and other games are sold as skillful. We’re led to believe that if players are smart and diligent enough they will have no problem beating the game.

The problem is these games are played against other players, so skill is only relative to that of others. This isn’t a case of practicing Mike Tyson’s Punchout hour after hour every day and finding the right patterns and strategies to defeat each boxer. In DFS and poker, the opponents are also capable of improving.

Because of this, and because of the rake/fees taken by the house, there can only be so many winners. If blackjack were beatable with perfect strategy (suppose blackjack paid 2-1), then every skilled player would be a winner; they could all adopt the same strategies and beat the house.

Poker and DFS may be skill games, but for 95 percent of players, their skill won’t translate to wins.

But because of the way the games are sold and because of variance, players can convince themselves they are skilled enough to win. Maybe right now they’re just unlucky, or they’re close to being skilled enough to win and just have to work harder, they can rationalize to themselves.

It’s not hard to see how this mindset could lead to addictive behavior.

With that out of the way, let’s move on to the study’s findings.

DFS is like day-trading?

The researchers explained the reasoning behind their inclusion of DFS (and day-trading) thusly:

“A majority of activities listed in this study are historically classified and widely accepted as “gambling,” because they involve spending money on activities with an uncertain outcome and the possibility of winning or losing that can result in harm. However, other activities elude precise classification and are largely context and jurisdiction‐dependent.

“Stock trading, for example, is traditionally viewed as a skill‐based investment, focused on compounding earnings over time. The advent of day‐trading, however, shifted the focus from investment to the exciting and immediate activity of taking greater, short term financial risks on options and futures for the potential of larger payouts but also larger losses.

“Similarly, traditional fantasy sports games were originally season‐long competitions based on the actual performance of players and were exempted from the Unlawful Internet Gambling Enforcement Act of (2006) (UIGEA) because they relied in large measure on the knowledge and skill of the players.

“… Given the lack of consensus over where high risk stocks and daily fantasy sports fall in the gambling spectrum, they are included in this study in a separate section.”

DFS findings don’t paint a pretty picture

According to the Rutgers study, “A total of 336 respondents (out of 1,500) endorsed participation in daily fantasy sports (DFS) in the past year.”

In all but seven instances, DFS players also took part in traditional gambling. That means 98 percent of DFS players in the survey also gambled on gaming machines, bingo, live casino table games, other games of skill, sports and horses.

According to the report, 84 percent of DFS players gambled on non-DFS games once a week or more, placing them in the high-frequency group. Ninety-five percent of DFS players landed in the high-frequency/high-risk for problem gambling group.

With a 336-person sample, further research will be needed. But on the surface it appears DFS players share much with traditional gamblers. And when it comes to addiction in general, they’re far more likely to succumb than traditional gamblers, as seen in this chart.

Mental health problems?

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One of the stranger findings is the high level of mental health disorders among the DFS group.

The report states, “Notably, DFS players also reported higher levels of substance use, behavioral problems and mental health issues than other non‐DFS gamblers.”

“… half the sample used tobacco, four‐fifths used alcohol, and one‐third reported binge drinking and using illicit drugs. DFS players were more than twice as likely as other gamblers to endorse problems with overeating, nearly four times more likely to have problems with sex and pornography, and five times more likely to exercise excessively. More than one‐fourth of DFS players reported serious mental health issues in the past 30 days, twice as many as other gamblers.”

The report also states DFS players were “13 times more likely to report suicidal ideation” than traditional gamblers. They are also “nine times more likely to have attempted suicide compared to other gamblers.”

According to the study, “these findings suggest that DFS play is highly correlated with problem and disordered gambling and a host of other mental health problems.” Policymakers should consider that data, the study suggests.

“Policy decisions regarding DFS regulation should anticipate a very high prevalence of gambling problems in this group and the negative consequences that typically accompany those problems such as employment, legal, relationship, financial, health and mental health problems. It is important to ensure there are prevention, education, and treatment resources developed for and available to this population.”

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Final thoughts on DFS and problem gaming

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The only thing the report proves about DFS is that more research is needed.

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If DFS players are just as, or more, likely to fall victim to the mental disorders that plague problem gamblers, then similar responsible gaming procedures should be put in place.