Daily Fantasy Sports in 2016: A Year of Wins, Losses, and a Mega-Merger

Posted on: December 26, 2016, 02:00h. 

Last updated on: December 20, 2016, 09:06h.

Daily fantasy sports (DFS) once again endured a stormy year in 2016.

The emerging online betting market geared towards sports fanatics encountered plenty of controversy and scandal for the second straight year, but DFS also scored its own share of victories.

daily fantasy sports DraftKings FanDuel Eric Schneiderman
New York Attorney General Eric Schneiderman delivered daily fantasy sports a crushing blow in 2015, but in 2016, DFS operators got revenge. (Image: movietvtechgeeks.com)

And as America readies to ring in the New Year, DFS is still standing.

Industry leaders DraftKings and FanDuel, who in November announced a planned merger that still has to pass muster with regulators before it can take effect in 2017, continue to make their case for legality around the country. It hasn’t been easy, but today a dozen states have passed laws or regulations governing the internet sports contests.

Of course, plenty of work and obstacles remain.

More than a dozen states are expected to consider DFS legislation when state governments reassemble in 2017. Congress could also intervene, though at the current moment there seems to be little interest among politicians in Washington, DC, to make DFS a federal issue.

New York Shuffle

In 2015, it was difficult if not impossible to watch a televised sporting event without being bombarded by DFS commercials and advertisements. In late 2014, DraftKings and FanDuel raised hundreds of millions of dollars in capital from private investors.

DraftKings, headquartered in Boston, and New York-based FanDuel, used those dollars to market to their future consumers. It worked, as the two companies gained a near-monopoly on DFS in the United States.

Financial analysts valued the companies at over $1 billion each, but then another analyst, attorneys general, gave their opinions. And many opined that DFS violated online gambling laws.

New York Attorney General Eric Schneiderman was enemy #1 of DFS. While most attorneys general simply wrote opinions against DFS, Schneiderman issued cease-and-desist orders and sued DraftKings and FanDuel.

In March, Schneiderman reached an agreement with the DFS operators. Schneiderman agreed to postpone his lawsuit, and in exchange the platforms suspended contests in the Empire State.

Meanwhile, the New York State Assembly acted and amended the current law. New York Governor Andrew Cuomo (D) signed the DFS bill in early August.

The New York DFS win was the most substantial development in 2016 for DraftKings and FanDuel. However, it came at a cost, as the industry reportedly spent $800,000 lobbying in the state alone.

The Daily Grind

Winning New York was imperative to DFS longevity, as the state has a reported 600,000 daily fantasy players. But laws were also passed in additional states.

Then Donald Trump running mate Mike Pence (R) signed a DFS bill into law in Indiana, as did Colorado, Massachusetts, Mississippi, Missouri, Rhode Island, Tennessee, West Virginia, and Virginia. This was all, of course, before Pence became Vice President-elect of the United States in the greatest upset election of modern times.

All eyes in the DFS executive offices are now focused on California, Florida, and Pennsylvania. Legislation has been proposed in all of those jurisdictions.

Together, the three states account for over 22 percent of the entire US population.

Will DFS Crow?

As was the case in 2016, the next 12 months will prove critical for the future of daily fantasy sports.

The majority of football fans don’t play DFS, and this past fall many of them were delighted to see far fewer DraftKings and FanDuel advertisements.

Football is DFS’ bread and butter, but it got off to a slow start this season. In September, DraftKings admitted to paying out millions of dollars to cover shortfalls stemming from large guaranteed events. According to daily fantasy executives, overlays are simply a form of marketing.

After all, 2017 is the year of the rooster, and perhaps also the year DFS finally crows.