Sports Betting vs. Daily Fantasy Sports

Sports Betting vs. Daily Fantasy Sports

Gambling on sports can actually take two forms: traditional sports betting and daily fantasy sports. While sports betting has been a form of entertainment for centuries, DFS is a very modern concept — it only came about in the early 2010s and exploded in popularity during its first decade.

In fact, in recent years you have probably seen loads of television and web ads for DFS operators like DraftKings and FanDuel, offering all sorts of promotional codes to sign up with their services.

So what are the real differences between sports betting and daily fantasy sports? Is one option better for you than the other? Let’s explore.

How Sports Betting Works

Traditional sports betting generally means putting money down on a certain outcome. By examining the odds and doing some research, you choose the outcome that you think has the best shot at actually being the winning result. Your potential payout shifts depending on the odds of either outcome.

You can place simple bets, such as wagering that the Seattle Storm will beat the Connecticut Sun in women’s basketball this weekend. But you can also bet on propositions, point spreads, over-unders, and more. In addition, you can bet on popular sports like football, baseball, and hockey or more obscure sports like badminton, arm wrestling, and jai alai.

Typically, you place your bets with an established bookmaker or online sportsbook, each with its own clearly stated odds and payouts. You often choose the size of your bet based on your personal bankroll, within the confines of any sportsbook’s betting thresholds. Of course, you might be limited in your betting options depending on which state you live in, as some states have banned sports betting or allow it only inside certain venues.

How Daily Fantasy Sports Work

For daily fantasy sports, you pick an entire team of players for a particular sport. To keep you from drafting only top-tier players, you’re often given a salary cap that you can’t exceed on your team. Those players you’ve chosen then earn fantasy points for you by scoring, making runs, sacking an opposing player, etc.

The better that your players perform on the field (or court), the more points your team scores. There are no fixed odds from a bookmaker on fantasy sports, so the potential payouts depend on the type of fantasy tournament that you enter. Beginners usually enter large field tournaments, while more skilled DFS participants can play head-to-head games.

The sports you can draft teams for are more limited to what the fantasy operators offer, so you’ll see the big sports like basketball and football but probably not the more humble badminton.

Most DFS matches have an entry fee, ranging from $1 to thousands of dollars for a major tournament. You have to use a daily fantasy app or website, and which DFS operator you can use depends on where you live. A majority of states allow daily fantasy sports, but not all states have given licenses to the same operators.

DFS also differs from conventional fantasy sports in that it’s “daily.” This means that each matchup takes place over a brief period of time, from one day to a single weekend. You might face off against the same participants every match, but your opponents will most likely change between different DFS games. You can also enter multiple matches on the same day, each with a different lineup.

Regular fantasy sports last for an entire season, with you rotating through other members of your league as regular opponents and culminating in a playoff format. You have to contend with players you’d drafted earlier in the season getting benched due to injury or needing to shuffle around your roster because a couple of your players are on a bye week. You can create different fantasy teams, but they all have to be in different leagues.

The Legal Distinctions Between Sports Betting and Daily Fantasy Sports

It’s still commonplace to see people who argue that because both sports betting and daily fantasy involve wagering money on sports, they are effectively the same concept. Are you still putting money down in hopes of a certain outcome? Yes, you are. So how is it that daily fantasy is still permitted in states that haven’t decriminalized sports betting?

That’s because there are actual legal distinctions that have allowed daily fantasy sports to thrive in an otherwise hostile sports-betting market.

Skill-Based Gaming

The main argument is that it all comes down to the difference between games of chance versus games of skill. Companies like DraftKings and FanDuel have waged years-long marketing and lobbying campaigns to categorize DFS as a skill-based game. They contend that DFS should be viewed as akin to chess, bowling leagues, spelling bees, or even playing the stock market rather than gambling.

Comparing DFS to trading stocks is probably the most savvy argument that such companies could make. Here in the U.S., the law doesn’t view stock traders as entering a game of chance when they invest in stocks, futures, or options; instead, they’re seen as making “skill-based investments.” This is because there’s an expectation that professional money managers with in-depth training would understand the markets they’re participating in and can reasonably expect profits from their investments.

DFS proponents say that the same concept applies to fantasy sports — success in fantasy depends on participants’ knowledge of their players’ skills, and an expert fantasy participant could use that knowledge to profit.

How the UIGEA Factors In

The Unlawful Internet Gambling Enforcement Act passed in 2006, and it prohibited financial transactions involving online sports betting here in the U.S. It drove online video gambling websites off of American soil, but the law actually makes an exception for fantasy sports, educational games, and other contests that have outcomes that reflect the participants’ knowledge. In fact, the bill’s author said that any fantasy sports game with an outcome that derives from accumulated statistical results should not be ruled as gambling. And, if it’s not gambling, then it’s legally okay to do here in the U.S.

To help keep DFS based on participants’ skills and accumulated statistical results, here’s how daily fantasy operators stay fully on the right side of the law:

• You must draft individual players to form a lineup and cannot draft just an entire single team.
• Any cash prizes have to be known by everyone before the contest.
• Only individual players earn points for daily fantasy participants, not entire teams.
• No participant can wager on point spreads, prop bets, or straight/win bets regarding which real-life team won.

States That Currently Don’t Allow DFS

Of course, states can still create their own laws regarding daily fantasy sports, just as they can set their own laws regarding sports betting. DFS is legal in most states; however, the DFS operator sites won’t accept players from these states that haven’t legalized the practice:

Arizona

While Arizona has a good amount of gambling, they explicitly do not allow DFS. A lot of this has to do with the state’s agreement with local tribes. Their contract limits what types of games tribal casinos can offer, but those limits fall away if the state expands available off-reservation gambling options. This protects tribal interests and ultimately means DFS is illegal there.

Hawaii

Overall, the laws against gambling in Hawaii are strict. The general belief among lawmakers is that, if you put money down and there’s a risk you could lose that money, that is gambling. And yes, this includes DFS.

Idaho

It’s legal to bet on horse and dog races in Idaho, and the state does allow tribal gambling. However, DFS is not allowed because lawmakers view it as illegal gambling.

Louisiana

Louisiana currently sits in a murky area regarding DFS. In 2018, voters elected to legalize daily fantasy sports, but the state legislature hasn’t made any real moves to turn this into an actual law. As of 2020, DFS hasn’t been implemented yet in Louisiana.

Montana

At one point, Montana had made some movement to allow fantasy sports contests (season-long contests with low buy-ins and non-monetary prizes), but that fizzled out. The state still does not allow daily fantasy.

Nevada

Nevada is another state that has a more complex relationship with daily fantasy. DraftKings and FanDuel are not allowed to operate in the state, but USFantasy does have a DFS license.

There are two important factors here to note:

1. USFantasy’s contests don’t work like normal DFS. Rather than building a team with a salary cap, participants receive a list of statistics for that day’s games and try to choose the best-performing athletes for those numbers.
2. Despite having an operating license, the USFantasy app is still awaiting approval by Nevada’s gaming control board.

Washington

The state of Washington has some strong feelings about what types of gambling are illegal. Bracket pools, office sports pools, and fantasy sports are not on the list of authorized gambling activities.

Pros and Cons of Sports Betting

Traditional sports betting has you wagering on an event’s outcomes instead of player performances. The whole system of sports betting comes with its own history (as well as baggage) and processes on how it all works.

Pros

Overall, you can find loads more variety when it comes to sports betting than with daily fantasy.

You can try a diverse array of bet types, from straight/win bets and over-unders to parlays and proposition bets. Each type of bet comes with its own odds and potential payout, giving bettors numerous options for how they want to add a thrill to watching their favorite sports.

Like we’d mentioned above, sports betting also has so many markets to choose from. You have your big, established sports you can bet on like football, hockey, basketball, and baseball. You have your slightly more niche (but still wildly popular) sports like MMA, rugby, and soccer. But you can also bet on WWE matches, curling, arm wrestling, cornhole, chess, e-sports, and even rock, paper, scissors.

With this in mind, you can also find plenty more sportsbooks in comparison to DFS sites. Various countries regulate their own sports betting markets, creating safe options for people to bet on sports. While sports betting has no federal protections in the U.S., plenty of states like New Jersey have legalized the process and offer their own state-licensed sportsbooks.

Another benefit to sports betting is lower overall commissions. Bookmakers tend to take a 10% cut (or vig) from any bets. If you bet $110 with a traditional sportsbook and lose your wager, you lose the entire $110. But if you win, you get your $110 back plus $100 in profits. If you manage to win about half the time, you’ll be paying out about a 5% average vig, which is an affordable commission to pay.

Cons

Of course, all of the different bets and styles of odds expression can make sports betting feel like there’s a huge barrier to entry. There’s so much lingo to memorize, and it takes a lot of work and math to figure out which type of wager might be the best option for your personal betting style, bankroll, and preferred sport.

Also, it can be hard to find strong positive-value wagers out there among the sportsbooks. Oddsmakers are highly skilled at analyzing matchups and setting the numbers to where they’ll make a comfortable profit and you’ll be able to make a little something (but probably not much). It’s honestly rare to be able to beat the bookmakers and make real long-term profits.

And while sports betting has lower commission rates, the operators also tend to have lower betting limits. Plenty of online sportsbooks limit the bet sizes you can make so that they don’t take on too much risk. These limits vary from sport to sport and bet to bet, of course. But you might find a small online sportsbook that will only let you wager $100 when you have $150 available in your bankroll.

Finally, you’re still at the whims of the particular state in which you live to determine how you can bet on sports. While a good number of states in the U.S. have legalized the practice, there are still plenty that haven’t and most likely won’t. If sports betting is illegal in your state, you’ll have to turn to offshore options.

Pros and Cons of Daily Fantasy Sports

Daily fantasy sports have a much more recent history, really only coming into existence in the 2010s. It’s like regular fantasy sports but over a much shorter span of time, usually just a day or a weekend. Here, you’re wagering on different players’ performances to eke out a win over someone else who’s built a fantasy team.

Pros

Daily fantasy has no fixed odds from a bookmaker, so you don’t have quite the steep learning curve as you would with sports betting. Instead, you need to look at individual players and how well they’ll most likely perform.

Also, while you’re basically up against the bookmakers in order to make your profits in sports betting, DFS is played against other fellow participants. You need to be able to beat your opponents instead of a sharp bookmaker. If you’re dealing with someone who’s just as educated about the game as you (or even less educated), you probably stand a good chance of beating them.

You also get a lot of versatility in how you can make multiple DFS wagers. Do you want to create three different lineups and try them all out at once? You can. But if you feel supremely confident about this one lineup you’ve drafted, you can also use that single lineup and enter it into as many matchups as you’d like.

And then there’s the legality angle. Daily fantasy sports are legal in the majority of U.S. states, so there’s very little need to use offshore options if DFS is your preferred way of betting on sports.

Cons

You can find way less variety when it comes to daily fantasy sports, whether it’s sports markets or sites you can use. While operators like FanDuel and DraftKings are adding more sports to their offerings, you’re still going to find only the sports with the broadest and most robust followings — no arm wrestling or rock, paper, scissors here.

Also, you’re most likely going to be using either FanDuel or DraftKings. These two operators dominate the daily fantasy scene. Lagging far behind them are Yahoo and Monkey Knife Fight. And sometimes only one DFS operator is licensed within a state, so while daily fantasy sports may generally be legal in your state, your options are still going to be limited.

In addition, many DFS sites add a 10% commission to each buy-in, no matter whether you win or lose. While that doesn’t seem like much if you’re making smaller bets, it can still add up and eat into your bankroll.

Finally, the odds of winning it big on DFS can be deceptive. On all those TV ads you saw just a few years ago, you probably saw some participants holding big checks for $25,000 or even $1 million. Of course, the folks who win big are going to be the most skilled people who have the time, energy, and possibly money to sink into researching everything they can and to enter into the big-league tournaments.

In fact, Sports Business Journal published a study in 2015 that said 91% of the profits from DFS sites went to the top 1.3% of players — and 85% of players were losers. So no, just because there aren’t any fixed odds set by a bookmaker doesn’t mean that you’ll suddenly be swimming in money by switching from sports betting to daily fantasy.

DFS League Partnerships on the Rise

It might shock you to read that Major League Baseball and the National Football League have been big supporters of daily fantasy pretty much right from the beginning. Both leagues have been slow to embrace traditional sports betting, especially the NFL.

But both actually helped to market daily fantasy sports to their fans, even going so far as to offer monetized daily fantasy games on their own websites. Instead of opposing DFS like they had done with traditional sports betting, professional sports leagues from NASCAR to the NBA have actively endorsed fantasy sports (and have, in essence, endorsed monetizing the outcomes of sporting events).

Today, DraftKings is the exclusive daily fantasy sports partner for the NFL and MLB, and they’ve also partnered with the PGA Tour. FanDuel, meanwhile, has a multi-year sponsorship agreement with the Breeders’ Cup for horse racing.

The only league that doesn’t actively endorse daily fantasy is the NCAA. No student athletes are allowed to register as participants in any paid fantasy game, under threat of being ineligible to play in NCAA-sanctioned athletics for a full year. The league has also pushed to forbid advertisements for DFS services during any NCAA tournament telecasts.

Daily Fantasy Is Bridging Worlds

The phenomenon of daily fantasy sports has facilitated some intriguing opportunities to have sports fans embrace new technology and statistics like never before. Bettors are even more willing now to pay attention to the weather forecasts on any given weekend for the fantasy team they’re putting together. They’ll even listen to pundits and podcasts for the latest updates on specific players they might want to draft in upcoming matchups.

Of course, while daily fantasy is considered legally distinct from traditional sports betting, DFS does allow for more people to embrace the idea of betting on sports as a legitimate pastime. Perhaps, as time goes on, more leagues will see the success of DFS and appreciate how its popularity can spark an interest in more people for their particular sports. And maybe more American jurisdictions will see that legally allowing fans to bet on sports doesn’t automatically take away from the thrill of the sport itself.

Sports betting and daily fantasy sports can successfully coexist as two parts of the same ecosystem. While the two are different, both can allow bettors to put their skills and knowledge to the test while adding an extra thrill to watching their favorite sports.

In fact, if you live in a state that allows both, then there’s no reason you can’t try them both out and see which you prefer more. Just be sure that your bankroll can handle all of the action.