Take your pick: How pick'em games have emerged as a new regulatory battlefield in DFS
As the NFL season gets into full swing, the heated debate about whether pick’em DFS could be considered gambling and not just a skill game shows little sign of subsiding
Among the myriad of prop bets on offer ahead of the Monday night game between the New York Jets and the Buffalo Bills on the opening weekend of the new NFL season was the option to bet the over/under on Bills quarterback Josh Allen making 1.5 touchdown passes. The odds for either outcome was -115 with DraftKings Sportsbook. However, certain daily fantasy sports (DFS) firms were asking their users to predict whether Allen would score under or over 1.5 touchdowns that night at the MetLife Stadium in East Rutherford, New Jersey. This alternative form of fantasy sports, known as pick’em DFS, has exploded these past few years as players turn their backs on the traditional format of drafting a lineup of athletes within a salary cap.
“The biggest reason we’ve seen pick’em gain in popularity is the simplicity of the game,” says Dan Back, SVP of DFS resource RotoGrinders. “Salary cap [DFS] is much more like chess in that there is a lot of game theory involved. That can consume an incredible amount of time if someone wants to compete at the highest level.”
Today, companies such as PrizePicks, Underdog Fantasy, Boom Fantasy, Sleeper, Thrive Fantasy, and Jake Paul-backed micro-betting operator Betr offer pick’em games, or what’s been dubbed DFS 2.0. Taking Underdog Fantasy as an example of how it works, the Brooklyn, New York-based outfit requires its users to predict the outcome of a minimum of two and a maximum of five player stats. If correct, they can win between three and 20 times their ‘entry amount.’
Carving out a niche
When the Unlawful Internet Gaming Enforcement Act (UIGEA) was signed in 2006, there was an explicit carveout for fantasy sports. From that, DFS emerged and eventually turned FanDuel and DraftKings into billion-dollar companies. Yet unlike traditional DFS, a peer-to-peer product where the operator takes a fee from players, the pick’em format is played against the house. It’s why these products have been accused of essentially being betting on athlete stats masquerading as fantasy sports. In fact, FanDuel’s head of state government relations, Cesar Fernandez, pulled no punches at the National Council of Legislators from Gaming States conference in July when he accused pick’em DFS firms of “running illegal sportsbooks.”
No doubt cognizant of any potential regulatory heat, DraftKings and FanDuel — both leaders in legal US sports betting — don’t offer pick’em games. Marc Edelman, a professor of sports law at New York’s Baruch College, says the Wire Act and UIGEA, which disallow interstate sports betting, have a carveout for contests where “winning outcomes reflect the relative knowledge and skill of the participants.”
“However, against-the-house games fall outside of this carveout because the word ‘relative,’ in plain English, means compared to one another,” he explains. “Against-the-house contests, even if based on knowledge and skill, would not constitute contests based on ‘relative knowledge and skill of the participants’ because the participants are not being compared to one another to determine who wins, and thus, there is not always going to be a winner.”
Those that offer the pick’em variant are adamant it is all perfectly legal and is still fantasy sports, which is deemed a game of skill rather than sports betting. When pick’em first emerged, it generally involved predicting higher or lower in relation to fantasy points athletes accrued for various in-game actions, such as touchdowns or rushing yards. As a way of simplifying things, pick’em later became a binary choice: Will Lionel Messi score under or over 0.5 goals for Inter Miami, or will the total points racked up by Boston Celtics’ Jayson Tatum be higher or lower than 29.5? While players are required to make picks involving athletes from a minimum of two games, as is the case with peer-to-peer DFS, some still suggest pick’em is effectively player prop betting.
Gambling industry consultant Dustin Gouker admits those offering pick’em games using UIGEA, DFS, and skill gaming laws as a legal argument is “actually pretty compelling.” However, he adds: “The thing about it is it can be legal DFS but can also be sports betting under the same umbrella. The mechanics of placing a pick’em entry and a parlay bet are identical — it is definitely gambling. Sure, there is skill involved but there is also skill in sports betting.” What’s more, Gouker expresses concern that there is quite a large amount of “parlay betting going on that is quasi-regulated.”
“Even in a state with legal DFS, the amount of scrutiny these companies have been getting, until recently, has been pretty minimal,” he says. “What people don’t realize is that the DFS apps don’t offer the product in some states that have DFS laws, likely because it was identified as gambling by regulators.”
State of play
PrizePicks’ website shows its offering is available in 31 states, plus Washington DC, and Canada (apart from Ontario). That 31 includes the US’ two most-populous states: California and Texas, two jurisdictions where sports betting is illegal. Underdog Fantasy says its pick’em product is also live in 31 US states and all Canadian provinces bar Ontario. While DFS itself is available in most of the US, a handful deem it a form of gambling.
In July, documents obtained by Legal Sports Report showed the Wyoming Gaming Commission sent cease-and-desist letters to PrizePicks and Underdog Fantasy accusing them of offering illegal and unlicensed sports betting. There was a similar clampdown in Maine recently, while Underdog Fantasy had to appease Colorado’s regulator by making its games a minimum of four selections and only ‘higher or lower’ on athletes’ fantasy points accrued. However, the industry suffered its heaviest blow so far when Florida’s regulator sent cease-and-desist letters to PrizePicks, Underdog Fantasy, and Betr, accusing them of “offering or accepting illegal bets or wagers from Florida residents.”
Meanwhile, New York has clamped down on DFS contests “mimicking” player prop betting, and Michigan has ratified a similar ban which will come into force later this month. North Carolina is also understood to be considering banning the vertical as part of its own sports wagering rule proposals.
Despite the pushback, the popularity of pick’em games can be seen in a state like Michigan, where the regulator’s figures show PrizePicks generated total DFS revenue of $8.5m for the first seven months of 2023, far outstripping DraftKings ($3.1m) and FanDuel ($1.3m). RotoGrinders’ Back says: “Three or four years ago, I would not have guessed anyone would come close to competing with FanDuel and DraftKings in the DFS space.” Perhaps spurred by how the status quo has been disrupted, sports betting app Betr has just launched Betr Picks in 24 US jurisdictions (players can win up to 100x their entry for eight correct selections). “Betr Picks is currently in front of 52% of the US adult population,” the micro-betting firm’s CEO Joey Levy tells EGR North America.
Quite clearly, the pick’em format is booming, though that likely means scrutiny on the sector will intensify. “I also don’t think, by and large, that lawmakers thought this is what they would be authorizing,” says Gouker. “You are not going to convince me that legislative intent when fantasy laws were passed was in order to allow DFS to offer a parlay betting product.”
As for Allen, the Bills quarterback, he only made one touchdown pass against the Jets, despite 98.5% of Underdog Fantasy’s users predicting higher than 1.5, the firm revealed on social media. The house always wins.