European Gaming Lawyer magazine Spring 2016 | Page 20

The Grey Matter - Discussing Daily Fantasy
Sports, e-sports and Skill Games for Cash
Tal Itzhak Ron and Aviya Arika

T

he beauty of the online
gaming industry is the fact
that it is ever evolving.
Truly, in this industry, he
who is not busy being
born is busy dying. Regulators and
legislators may not see this as an advantage,
as it sets difficult obstacles in adjusting
often-outdated laws to new, unfamiliar
creatures. On top of the already challenging
“traditional” online gaming websites and
apps offering poker, sports bets, lottery and
their likes, not so long ago several
untraditional online games were introduced
such as Daily Fantasy Sports and skill
tournaments played for cash. Now,
legislators are experiencing difficulty and
can no longer file these games in the
“chance” drawer and put a “license-needed”
tag on them, as they contain a dominant
element of skill.
For those who are still in the dark as
to what Daily Fantasy Sports (DFS) is, in
its most common business model, DFS
involves picking a roster of players
from a draft list based on a salary cap,
with participants competing against
one another for a prize. The contests
conventionally require users to select rosters
of nine players each, with each of the nine
player lists including anywhere from
four to 32 players depending upon the
number of real-world games included in
that particular contest. Keep in mind that
many other different variations are emerging
as more ventures enter the market, offering
different roster sizes, side-betting and even
non-salary cap models, and this is only one
possible way to structure the model, being

20 | European Gaming Lawyer | Spring Issue | 2016

popular as it is the model of market leader
FanDuel.
Skill games and e-sports are much
easier to explain, as they are familiar to
all of us. From soccer through to golf to
backgammon and board games, most of
us have played some of these virtual games
at least once. Nevertheless, the idea of
playing them for cash is another revolution
happening in the online gaming scene now.
These products are similar to DFS in the
legal sense, since winning them is achieved
by skill, and not by chance- except for the
inherent element of chance that exists in
every aspect of life. Several actors have
recently entered this market, and we have
had the privilege to be the legal advisors of
several more entrepreneurs with exciting
new e-sports and cash skill games ventures.
Indeed, this is a revolution. Gambling
is usually mentioned in the same breath
as chance or luck, so what should these
forms of betting be called? Can they even
be labelled as gambling and categorized the
same as the other online gambling forms?
This is the hundreds of billions of dollars
question. As we are all aware, DFS is no
small phenomenon, even though it is still
considered a niche industry numbers wise.
The DFS market is said to be worth several
billions in the US alone and the CAGR for
2020 projections are unprecedented- but
there is still a long way to go compared to
online poker, sports betting, and lottery.
It seems that at present, a few dominant
actors with monstrous market shares,
control the DFS market. In the US, industry
leaders DraftKings and FanDuel control
about 96% of the market and they do not

intend to stop there- DraftKings has recently
launched in the UK. Still, for newcomers the
European arena is much more inviting than
the American one, as no single company has
gained control over the markets there yet
and therefore the equality of opportunities
is much higher. The downside is that unlike
the US users, which proved themselves to be
big on DFS, potential for DFS in the UK and
Europe is still unclear. Even though it exists
in the UK through Mondogoal and Oulala
for instance, it does not come from the same
starting point as the U.S.; and the idea of
DFS is still in its infancy across the pond.
Whatever the outcome in the European
market is, it’s safe to say that DFS and skill
games broaden the target markets of online
gaming. When online poker [