Draft Kings: How Fantasy Football Sports Site Makes Money Legally

Wherever there are sports, there are bound to be sports fans. This is true regardless of what sport is in question – baseball, football, boxing, mixed martial arts, and countless others. Sports fans don’t just love watching the real version of their sport – they also love participating in their fantasy counterparts.

Fantasy sports are a popular pastime for many sports fans, as well as an opportunity to get paid if things go well. Fans can put together dream teams of actual players and take on other fans’ teams, betting money on the outcome. These teams gain points based on how well they perform against other their competitors. The player with the highest points is declared the winner, and to the victor go the spoils – usually in the form of cash prizes.

This trend is so popular that various companies have started cashing in on it. One of the most popular is a startup known as Draft Kings – a fantasy sports site that was recently valued at more than $1 billion, as reported by Time.

Draft Kings has skyrocketed in popularity, having hosted large-scale tournaments that can pay out thousands of dollars, according to the Washington Post. However, it is a well-known fact that sports gambling is illegal outside of four states (Nevada, Oregon, Delaware, and Montana.) This raises a question: If betting on sports is against the law, how are sites such as Draft Kings able to operate legally?

The answer: fantasy sports are considered a game of skill instead of chance. As reported by Business Insider, legislation exists that legally permits the betting activities of fantasy sports leagues such as Draft Kings. The Unlawful Internet Gambling Enforcement Act of 2006 will allow a “game of skill” to continue if the following conditions are adhered to, like in Draft Kings.

  • It isn’t dependent only on the outcome of any single sporting event or non-participant’s individual performance in a sporting event.

  • It has an outcome that is influenced by the relative skill or knowledge of the participants and by accumulated statistical results of sporting events the participants are involved in.

Under these guidelines, fantasy sports activities are seen as skill-based contests that are not determined by whim or blind chance. They are legally protected, despite many opinions to the contrary. Thanks to legislation that gives them free reign, Draft Kings and other fantasy sports leagues are set to draw legions of fans, no matter what sport is in season.

[Photo by Getty Images/ Contra Costa Times / Tribune News Service]