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Is Big Data Bringing Legal Troubles for Daily Fantasy Sports Companies?

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Is Big Data Bringing Legal Troubles for Daily Fantasy Sports Companies?

Big data can introduce serious issues for fantasy sports sites such as DraftKings. Learn what the implications and regulations are.

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Daily fantasy sports (sometimes referred to as DFS) have gone from fun little hobby to business and cultural phenomenon. The companies at the forefront of the trend – DraftKings and FanDuel to be specific – have each been valued at more than $1 billion. A lot of money is at stake, which is why the main DFS businesses are nervous about the recent push to regulate their games. With the passage of the Internet Gambling and Enforcement Act (UIGEA) in 2006, daily fantasy sports companies thought they were spared. The act made a special exception for DFS since it determined that fantasy sports were games based more on skill than luck. That attitude has changed significantly in recent months, no doubt bolstered by the advertising blitz DFS companies have launched with the start of the NFL season. Legal troubles may be on the horizon, and big data may be in part responsible for them.

For those unfamiliar with how daily fantasy sports work (and those lucky few who haven’t seen one of the many commercials out there), players compete by selecting professional athletes from a list and assembling their own team. Each team accumulates points during a day or week of on-field competition. If you get more points than your opponent for that week, you emerge victorious. Some competitions have competitors going up against hundreds of other players, but the goal is still the same: amass as many points as possible based on real world results. Determining which athletes to ultimately select is a decision that can take careful consideration and analysis. This is where proponents of DFS say skill, rather than luck, is involved. Someone who knows their sports and athletes may have the advantage over a novice.

Aiding in this competition is big data analytics. Some DFS companies actually provide statistical analysis for competitors, giving them added insight into who might perform better on the field on any given day. This analysis goes beyond simply indicating how many yards a running back is predicted to gain in the next game, for example; big data analytics can even take into account how well an athlete does in certain weather conditions, home or away factors, and much more. DFS players crave this level of statistical insight, making daily fantasy sports competitions grow in popularity. Big data can also be seen in DFS in the algorithms that are used to properly assess each athlete’s performance for the day. They can take into account aspects of the game that don’t show up on a traditional stat sheet.

So what does this have to do with possible legal troubles for DFS companies? Big data has contributed to the rise in popularity of daily fantasy sports. This increased popularity has naturally led to more advertising, and more advertising has led to more attention, both from fans and critics alike. With that increased attention, government regulation may become a reality. While it’s true that the federal government largely spared fantasy sports the last time it cracked down on online gambling, the next go around might not be the same. Defenders of DFS will still insist that big data analytics actually makes the game skill-based, but regulators will likely not see it that way.

The law remains undecided at the moment, but more scrutiny of the DFS industry will likely come with more regulations. It may even be treated closer to online gambling in the end. Some states have already started to act, with Nevada recently declaring that DFS was a gambling operation and needed a license to operate within state lines. Big data will continue to influence DFS as well, and with so many big data vendors to choose from, DFS companies will have plentiful options at the ready. Unless they can somehow convince government agencies that the use of big data is evidence of using skill, however, they better get ready to deal with more rules.

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