Fantasy Football: Illegal Gambling or Legal Game of Skill?
| Publication year | 2006 |
A lawsuit has been filed in the federal court system that threatens the continued success of online fantasy sports. The plaintiff in Humphrey v. Viacom, Inc. has sued the three main providers of online fantasy leagues, claiming that pay-to-play fantasy sports constitute illegal gambling. Since courts have traditionally distinguished between permissible and impermissible forms of gambling by looking to the requisite level of skill involved, this case will hinge on whether the court determines that skill or chance is the dominant factor in the outcome of fantasy games. The policy considerations weighing in favor of the fantasy sports leagues include: (1) traditional rationales for outlawing gambling do not apply to fantasy sports; (2) recent Congressional legislation evidences Congress's support for fantasy sports; and (3) an adverse decision would damage an innocuous billion-dollar industry.
At 12:45 p.m. on the second Sunday in September, Joe finalizes his lineup for the first week of the fantasy football season. He checks a variety of websites that enable fantasy football players to be sure none of their starters are out of this week's game due to injury. He checks another website to decide if the rain in Pittsburgh means he should start Michael Vick instead of Ben Roethlisberger. As the 1:00 p.m. kickoff time nears, he clicks on the submit button, convinces himself that he picked the best possible lineup, and parks himself in front of the television, within arm's reach of a computer. Joe has spent the last month researching the players, looking at the offensive style of various coaches, planning a draft strategy, and drafting his team for the current season. Joe hopes that Week One of the National Football League (NFL) season is when all his hard work and strategizing will start to pay off.
Joe will spend a significant portion of his Sunday afternoons and Monday nights between September and January waiting for the browser to refresh on his fantasy league websites and flipping between television channels to find the most current player statistics from games across the country. He does this to know whether he is gaining the upper hand in his head-to-head match-up this week. Sometimes Joe ends Monday night elated and looking forward to having bragging rights around the office or on the website's message board—at least until the next Sunday afternoon. Other times he returns to work, checking websites and strategizing, in hopes that his team does not meet the same disastrous fate the following week.
The scenario above has become the norm for a growing population of fantasy football players across the United States. Beginning in the early 1990's, fantasy football—and fantasy sports in general—ceased being an isolated cult activity and gained mass public appeal.1 Since that time, an entire industry has developed to provide services to fantasy football players such as league hosting, expert information and analysis, and mobile means of checking fantasy scores on game days.2 These industries, as well as the entertainment of millions of fantasy football players, are now being threatened by a lawsuit filed in the Federal District courts of New Jersey.3
A. History
Fantasy football began in 1962 when a group of men associated with the Oakland Raiders were looking for a way to pass the time during long road trips with the team.4 It quickly spread to sports bars in the Oakland area but did not immediately achieve mainstream popularity.5 Fantasy football finally gained national attention in 1988 when well-known regional newspapers such as the L.A. Times, N.Y. Daily News, and Chicago Sun-Times ran pieces instructing readers on how to form their own fantasy football leagues.6 As the Internet grew in popularity in the early 1990's, fantasy football moved into the mainstream and became a major industry.7 By the end of the 1990's, the growth of fantasy football prompted the formation of the Fantasy Sports Trade Association (FSTA), which tracks its growth and promotes the industry's economic interests.8 According to the FSTA, between fifteen and eighteen million people will play fantasy sports this year.9 That number is increasing by seven to ten percent each year.10 The mass appeal of fantasy football and its remarkable growth has transformed it from a hobby to big business.11 As the president of the FTSA, Greg Ambrosius, commented in a Sports Illustrated article, "It used to be thought of as [something for] just geeks and hard core fans. But this isn't a small closet hobby anymore. This sumbitch is a big, big industry, and it's all due to the Internet."12
B. Rules
Fantasy football leagues consist of any number of participants, but most leagues have eight to twelve owners.13 These leagues are often made up of groups of friends, but many also consist of co-workers or unaffiliated groups of players formed via the Internet.14 In order to participate in the league, participants often pay preliminary dues; the price varies, but the average cost is ninety-five dollars.15
The first phase of a fantasy football league each season is the draft, where each player is assigned a draft position.16 The participants go in order, selecting NFL players until their rosters are full.17 An NFL player is no longer available once he has been drafted, which means the best players are generally selected first.18 The numbers of rounds in the draft also vary by league, but most leagues have a fifteen to seventeen round draft.19
Each week during the football season participants are paired in head-to-head games,20 and each participant selects a starting lineup for the week.21 Lineup requirements vary by league, but a common lineup would include "one quarterback, two running backs, two wide receivers, one tight end, one kicker," and a team defense.22 Throughout the season, participants can add and drop players as new stars emerge or as injuries occur.23 Participants receive points based on how their players perform in the actual games that week.24 For example, if a wide receiver in a participant's starting lineup scores a touchdown, that fantasy team receives six points.25 Points are also commonly awarded based on yardage gained, such as one point for every ten yards rushing that a running back has in a game (hence, a running back that rushes for 100 yards would score ten fantasy points).26 Point systems vary by league, but the most common system points are for touchdowns and yardage for offensive players.27 Team defenses score points for categories such as sacks, interceptions, and fumble recoveries.28
While the NFL regular season has seventeen weeks, a regular season for a fantasy football league usually encompasses the first thirteen weeks.29 At that point, the top teams in the fantasy league are arranged in a playoff system.30 The playoff structure mimics the NFL playoff system, with the fantasy league championship normally held during week sixteen of the NFL season.31 In addition to bragging rights, the league champion also wins a percentage of the registration fees.32 The runner-up also typically receives a smaller award.33
Other fantasy sports utilize variations of this same concept.34 National Hockey League (NHL) and National Basketball Association (NBA) based fantasy games operate very similarly to NFL fantasy football.35 The outcomes of head-to-head fantasy match-ups depend on the performance of a team's players during a specified time period.36 Major League Baseball fantasy games are often based on a rotisserie scoring system.37 This means the cumulative stats of the members of a team are compared with those of the other teams to determine the winner.38 NASCAR based fantasy games typically determine the winner based on the cumulative finish position of the members of a fantasy team.39 The general concept—that team owners research players and statistical information to build teams that win or lose based on the success of the players on these teams—does not change from sport to sport.40
C. Economic Impact
The economic impact of fantasy sports industry is staggering. The total impact is an estimated $1.65 billion each year.41 Fantasy sports not only generate extensive revenues directly, but they have also been credited with causing the soaring popularity of several media endeavors such as Fox NFL Sunday, ESPN's Baseball Tonight, and DirecTV NFL Sunday Ticket.42 While the total impact is difficult to calculate precisely,43 the FSTA estimates it could be as high as $4 billion.44
The fantasy sports industry obviously has a large economic impact on the companies which host the leagues and provide fantasy content. SportsLine.com, Inc. ("SportsLine") is one of the major fantasy sports providers.45 In 2003, SportsLine generated $56.6 million in revenue, and of that money, $15.9 million came directly from payments made by fantasy team owners.46 In the month of October, during the heart of the NFL season, sixty-six percent of the website's hits were fantasy team owners, and they stayed on the site an average of one hour and forty-two minutes.47 SportsLine's Senior Producer of Fantasy Sports, Scott Engel, notes, "I've seen our [fantasy sports content] go from having a minor cult following to being a major part of our success."48
The impact of fantasy sports in the marketplace is just beginning to be felt. New companies are looking for ways to benefit from this phenomenon.49 Best Buy built an entire marketing campaign around fantasy football contests.50 The highly popular Madden NFL Football series by EA Sports has bought the rights to use fantasy football games run by the NFL so it can allow gamers to build their Madden teams around their fantasy football teams.51 The possibilities for future economic growth are considerable.52
Fantasy sports leagues that utilize up-front entry fees ("pay-to-play leagues"53 ) are currently facing a significant...
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