Daily Fantasy Sports (DFS) is a relatively new phenomenon. Sometimes labelled as ”the next big thing” after the arrival of poker 10 years ago, this trendy iGaming product is taking North America by storm and slowly knocking on Europe’s doors.
The way it works is simple: sports lovers select a team of real-world athletes like football stars Lionel Messi and Wayne Rooney, who then score fantasy points during their real football matches, according to set scoring rules. Fantasy sports games are more diversified and require a higher level of skill than the more established and wide-spread sports betting. Participants do not place a wager on the outcome of different matches or play against bookmakers. Instead, they put money on their own team and compete against other fantasy teams’ owners with the hope of winning their money (similar to the poker websites’ business model).
In countries like the USA, Canada, and, to a lesser extent, the UK, fantasy sports has been a cultural activity for decades, but has become extremely popular in the last few years with the transformation of a season-long fantasy format into a more dynamic and high-frequency daily model. We are talking about a multi-billion business here: this year alone (2015) ‒ according to the Fantasy Sports Trade Association ‒ 56.8 million people are playing fantasy sports in the USA and Canada, with each of them spending on average $465 (€413) per year. Two operators, FanDuel and DraftKings, have mastered the industry, allowing them to control the vast majority of the daily fantasy sports action. Yet, we should not forget that sports betting is illegal throughout most of the United States.
In many countries, the regulation of gaming is based on whether the predominance for the outcome of the game lies in skill or chance. Presently, in most US states, fantasy sports (including DFS) is generally considered a game of skill and therefore not legally considered as gambling (where there is an element of both luck and, obviously, chance). At a US federal level, fantasy sports is defined and exempted by the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA). The Act included an explicit provision noting that the law would not apply to fantasy sports games.
Europe is a late adopter of technological innovations, so the DFS landscape looks a bit different there. ”Talking about the legal issues of DFS in Europe is not easy,” says Valery Bollier, CEO of OulalaGames, the company that stands behind fantasy football game Oulala. ”Each country has a different vision of what iGaming/moneytainment is, as well as what a skill and luck game is. Some countries are not aware of DFS yet, and their legislator have therefore no opinion on that subject for the moment. Therefore we have to take different approaches to target different markets.”
Most countries allowing fantasy sports have already included fantasy sports in their traditional iGaming licences. The most obvious example is the UK, the leading EU market for fantasy sports, where DFS falls in the same category as sports betting and horse racing. Therefore, operators need to acquire an operating ”pool betting” licence from the Gambling Commission to target UK customers.
Legally speaking, Hungary is facing a very similar situation. ”As I understand, you have to pay a fee of €300,000 – €400,000 to obtain a gambling licence, so I believe that any DFS game would be considered as gambling because of that,” explains Tamás Varga, who has helped to create the official, season-long fantasy game of the Hungarian top-tier league Nemzeti Bajnokság.
Hungary is just one among many European countries where DFS has not really taken off, and most sports lovers are not well acquainted with the concept. ”Daily fantasy games are not in the public mind,” explains Varga.
Romania and Bulgaria represent another two emerging markets. In Romania, fantasy sports is not yet expressly regulated. ”In my view, fantasy sports are covered by the new gambling legislation,” says Cristian Tuca, a gaming law specialist. The law defines DFS as ”other gambling activities”, and if the characteristics of the game meet all the required conditions then it is to be considered a type of gambling activity (the deposit and the prize are set in real money).
Tuca, who does not know of any big gambling operator which have started offering fantasy sports in his country, points out an interesting legal fact: ”Players that are gambling on platforms of unlicensed operators (in Romania) are committing a misdemeanour and may be sanctioned with a fine of up to RON10,000 (approx. €2,300). However, this aspect should not be applicable to fantasy sports, as the law provides that the fine is applicable to those participants that play online games, while fantasy games would fall under ”other gambling activities”.
Romania’s neighbouring country, Bulgaria, has a slightly different set of rules. The Gambling Act expressly exempts from the definition of gambling ”games of sports or entertaining nature, which require the participants to manifest deftness, knowledge and skills and which are not predominately based on chance.” The main problem is that entry fees have to be entirely allocated among participants, which means that operators cannot take any commission. If they do, the game is regarded as gambling/game of luck.
In Germany, on the contrary, the law defines DFS as a game of skill. In its judgement of 16 October 2013, the Federal Administrative Court decided that a so-called Bundesliga manager game is not to be classified as a game of chance under the Inter-State Treaty on Gambling (GlüStV). This led to chances for media companies and sports associations to offer similar fantasy sports games without causing conflict with gaming law regulations. Indeed, one can find quite a few games, but the market potential is still huge. German people love sports, numbers, gaming and betting, so it is no wonder that the total betting market volume alone is held to be more than 7 billion Euros per annum.
Another potentially big market for DFS is Poland. Interestingly enough, DFS does not fall under gambling, but it is also not regulated separately. Legally speaking, it is just like any competition, such as the quiz where people receive prizes if they win. ”The companies that are offering DFS do not need to acquire any licence for it,” says betting insider Michal Kopec. According to Kopec, fantasy football competitions should be reported to the Ministry of Finance if the prize pool is more than around €500 and winners should pay 10% win tax.
It is obvious that DFS has not really picked up as yet in Europe. The main questions is: are DFS and traditional sports betting complementary products or is DFS a dangerous substitution product for sports betting? Without a doubt, DFS games provide richer (real-time second screen) experiences than what is being offered at the moment by well-established betting operators. However, a lot of effort will be required to evangelise people about this niche in the fantasy sports industry with DFS lovers putting hope in DraftKings, who – backed with millions to be spent on advertising – has been granted a licence to operate in the UK.
Jure Rejec is Content Writer for Oulala.com, Europe’s most advanced daily fantasy football game. Oulala offers its clients the chance to join different leagues, create and manage (in real time) their virtual teams with footballers from the top four European leagues. The leagues’ winners are awarded daily cash prizes.