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When daily fantasy sports first took off around 2016, there was excitement quickly followed by concern from states whether this stuff was legal or not. Remember, that was before betting was legalized like it is today across the majority of states. At the time, it was just Nevada.
Some states did end up banning DraftKings and FanDuel, whose entire business was built around DFS. That regulatory tension went away and was thought to have died when the federal ban on betting was lifted in 2018.
Here we are, six years after that, and sports betting is allowed in some capacity in 38 states, and the heat is back on. This time the reasoning is different. Yes, there are still some concerns about whether this is even legal, but the bigger point of contention is whether DFS is siphoning money away from legal sports betting, and with that, the state tax dollars that come with that.
It could be argued the state of Ohio began this second wave of tension too. Let us bring you up to speed on how we got here to begin with:
Ohio Comes After DFS Platforms
In May of 2023, the Ohio sports betting regulators had multiple daily fantasy sports operators in their line of sight. Five platforms — Lucra Sports, Prediction Strike, Fliff, TeamStake, and Dynasty Owner — were publically outed. The state announced all were being investigated for offering illegal gambling in the form of Ohio betting apps.
These sites were not necessarily targeted for fantasy-based games offered via contests or tournament style. However, Ohio alleged they were offering player vs. house contests — makeshift prop bets in a sense. Months before this, in November 2022, Ohio suspended StatHero‘s license for three years for the same issue.
This all comes back to the chance vs. skill debate. Are these bets a game of chance? If the answer is yes, then it’s traditional sports betting. Skill, though, gives them room to operate despite licenses and laws. So the investigates operators are claiming it’s a game or skill. Ohio says it’s chance. This is the latest debate that stems back to the Unlawful Internet Gambling Enforcement Act (UIGEA.)
However, Ohio’s actions acted like a domino because other states followed suit after them. A total of 10 other states raised similar concerns as Ohio did in the year 2023. They are as follows:
- Arizona
- California
- Florida
- Maine
- Michigan
- Mississippi
- New York
- North Carolina
- Virginia
- Wyoming
Not only did they raise concerns, but many actually ended up banning or suspending certain operators. In Wyoming, for example, both PrizePicksand Underdog Fantasy were sent cease-and-desist letters, and then effectively banned.
Those platforms aren’t sitting and just taking the punches though. The market opportunity is simply too big. Here is how they’ve adapted:
DFS Platforms Roll With The Punches
The responses from DFS operators have been both small and big — and sometimes both at the same time. Here’s how they’re going about it separately.
On the less extreme side of things, they’ve just adjust their offerings to remain in regulation. In several states, Underdog Fantasy switched its pick-style games to peer-to-peer format. PrizePicks then rolled out free-to-play contests. These can pass regulation stress tests without issue.
However, some DFS operators are fully embracing betting in its regulatory form. This is Underdog Fantasy and Betr, which is a micro-betting platform owned and promoted by Jake Paul. In a few states, these platforms operate full-on sportsbooks. DFS players are being funneled into the sportsbooks — which is a higher margin product for these apps anyway.
Then there’s the curious case of PrizePicks. They are the kingmaker app of DFS based on downloads in three United States. PrizePicks grew app downloads by 64% last football season, surpassing 3.2 million ahead of the Super Bowl, a study by Citizens JMP Securities showed.
Unlike Betr or Underdog Fantasy, they don’t have a sports betting offshoot, nor does it seem to be a plan down the line. They are a true fantasy-only play in a market where almost everyone wants to be a sportsbook.
Anyway, PrizePicks just hired an investment bank. That usually means one of two things — they want to buy another company or they want to sell themselves. So which one is it for PrizePicks? Bloomberg is reporting that the platform is not interested in an outright sale.
They’d be an interesting acquisition for some of the big sportsbook operators (we’re looking at you, DraftKings and FanDuel), that’s for sure. This is because PrizePicks does huge business in California and Texas — states where betting remains banned. PrizePicks has user bases those companies would love to tap into right away.
This story is going to be key the rest of 2024, and likely onto 2025. Whether it’s Ohio, other states, offshore sites, legal operators — there’s simply too much money on the line here. Everyone’s fighting for the same piece of the pie, which leads to investigations and lawsuits.
We’ll be monitoring these stories closely so make sure to check back and read the latest news happening.
See below the top sportsbooks where you can wager online and choose the best one for you:
