Not Your Grandpa’s Fantasy Football
02.18.22
In the summer of 1963, Bill “Wink” Winkenbach, an Oakland-area businessman and a limited partner in the Oakland Raiders, gathered a group of confidantes to drum up fan engagement for the ailing team. The team sucked, and nobody was having much fun watching anymore. Their solution? A fantasy football team, the Greater Oakland Professional Pigskin Prognosticators League, aka “GOPPPL,” the first documented example of a fantasy football league.
The league was old-school. Armed with nothing but paper, pens, and stats gleaned from the local newspaper, GOPPPL promised to “bring together some of Oakland’s finest Saturday morning gridiron forecasters to pit their respective brains (and cash) against each other.”
“We were pro football addicts when nobody in the East Bay knew about pro football,” says Andy Mousalimas, fantasy sports’ first dedicated evangelist. “So, one day, Scotty comes in and says, ‘I have a good game for you. I want you to join this GOPPPL.’ I said, ‘fine.’ But I didn’t know what the heck he was talking about.”
The first fantasy draft took three hours and was hosted in Winkenbach’s rumpus room. Mousalimas remembers the feeling of euphoria he felt that night. “We couldn’t get over how much we enjoyed it. We knew it was something special.” He would spend the next forty-five years chasing that feeling across Oakland, opening his own underground Mecca for fantasy football, and working every Sunday night until the crack of dawn to have the results from Sunday games ready for the Monday lunch crowd.
“Later, we would go to Raiders games and be rooting for opposing players. Other guys would be like, ‘What the hell are you doing?’ Nobody knew.”
By 1998, some people knew, and at least one very convincing MLB lobbyist, Marianne McGettigan, made the case to Congress that fantasy sports deserved their own special legal protections within, of all things, an anti-poker bill. Drawing on the wholesome, unadulterated, all-American character of traditional fantasy sports, McGettigan guilted Congress into carving out an exemption for the fledgling industry, setting off a cascade of regulatory arbitrage that is still benefiting the principal ringleaders today.
A Rose by Any Other Name…
“I remember the days when fantasy football, it was looked at by the players from the league: ‘Don’t get involved in fantasy football, you don’t want to talk about fantasy football.’ All of a sudden, it got to a point where it could be monetized, it can be controlled, and fantasy football kind of blew up. Same thing with gambling. We were told, ‘Don’t do any appearances in Las Vegas. Don’t do any appearances in casinos, that’s a no-no, that’s a no-no.’ But now it’s come full-circle and here we are with gambling everywhere and casinos everywhere. And it’s all okay.”
— Warren Moon, February 2022, Hall of Fame Quarterback, Houston Oilers
1997 was a bad year for gambling. Concerned at the sudden explosion of internet-based poker and sports betting sites, Congress started to hold hearings on Internet gambling, a discovery process that ultimately resulted in the Unlawful Internet Gambling Enforcement Act of 2006. Signed into law by President Bush, the act aspired to “cut off the head of the funding regime for illegal gambling.”
Luckily, the MLB was there to save the day for fantasy sports. McGettigan quickly distanced fantasy sports from gambling, stating that “the Major League Baseball Players Association wants to go on record as being strongly opposed to gambling on sporting events, but we do not believe that fantasy sports leagues constitute gambling.” Fantasy sports, she assured Congress, were so low stakes that “there [was] no opportunity, as in casino gambling, for anyone to ‘lose the farm.’” Instead, she argued, fantasy sports were a game of passion and skill. “Playing in a fantasy league takes a considerable investment, not in money, but in time and interest.”
No one would attempt to throw a game because the teams weren’t real. And the MLB, for its own part, was doing God’s work by protecting the devotion of its most avid fans from the “chilling affect on legitimate entertainment options for the consumer.” McGettigan’s testimony cemented the idea that fantasy sports were a different breed from gambling, both morally and categorically.
And, at the time, all of this was true. Fantasy sports leagues were still predominantly played at the local level, attracting small regional community bases that played full-season contests. They had a romantic, small-town feel: chicken-noodle soup for the middle-aged soul. Even in the early 2000s, nobody cool or below the age of thirty played in these things. To many, fantasy sports were seen as “activit[ies] for outcasts [and] engaged [in] by those presumed to be overly bookish and socially challenged.” They seemed, as DraftKings and FanDuel continuously refrained, non-threatening, wholesome, *skill-based*, and fun.
Daily Fantasy Takes All
Then came the Internet, ushering in a whole new demographic attracted to the game. One such individual was Kevin Bonnet, a former poker player, who read about the UIGEA carve-out and decided to design a website that looked and felt like a traditional sportsbook but was conveniently categorized as fantasy sports, thanks to his custom-built creation. He called this hybrid product — what many have referred to as “day trading, but for athletes” — Daily Fantasy Sports (DFS).
DFS differs from traditional fantasy sports in many significant ways. No longer are participants locked into a months-long commitment of time and energy. Instead, DFS creates a market for daily and weekly competitions, often with extremely large pots since it can draw from a much larger pool of strangers. “Daily fantasy sports combine everything dudes love,” said John Oliver. “Sports, money, and a lack of commitment.”
Suddenly, drafting a team no longer required painstaking labor or hunting down scarce information. Participants could instantly download tabulated statistics, eliminating any need for mathematical prowess among casual players. “I was talking to my grandson today,” said one GOPPPL founder, “You know, they do [drafting] through computers now. He drafted three teams within an hour… I think his best team is the one Yahoo drafted for him. But where’s the fun in that? It doesn’t get you out among people.”
While Bonnett’s website never took off commercially, the same moniker was soon adopted by FanDuel in 2009, and Boston-based DraftKings followed soon after. Jason Robins, co-founder of DraftKings, even explained his product on Reddit by comparing it to a gambling operation. “The concept is almost identical to a casino… specifically poker. We make money when people win pots.”
Yet, in 2015, when New York Attorney General Eric Schneiderman issued a cease-and-desist order against DraftKings and FanDuel after a DraftKings employee inadvertently released internal betting data and won $350,000 on FanDuel, the two were quick to disavow any associations between them and gambling. Hundreds of FanDuel employees took to the streets, chanting, “GAME. OF. SKILL. GAME. OF. SKILL.”
While judgment and skill may still be an element for pedestrian players, many of the top players aka “sharks” have turned to customized algorithms to engage in programmatically enhanced trading. Despite being prohibited by both major companies, GitHub currently has over 200 code repositories that promise to “automate and optimize DraftKings and FanDuel lineup construction.”
Former New York Yankees beat writer Daniel Barbarisi writes in his new tell-all, Dueling with Kings, how he was “fighting an army of machines” in his quest to join the top 1% of DFS players. “These sharks hold every advantage: money, time, scripted programs, and a system that lets them leverage their edge to a massive extent through a largely unrestrained multiple-entry format,” he writes. “The entire DFS industry has grown so fast, and with so little control or oversight, that it truly is a situation where the inmates run the asylum.”
A Seamless Transition to Gambling
Ultimately, DraftKings and FanDuel hired an army of lobbyists and lawyers, paid a fine of $12 million in penalties and costs (the highest New York penalty awards for deceptive advertising in recent memory), and came out unscathed. Two years later, the companies were vindicated by the Supreme Court’s Murphy decision, which overthrew the Professional and Amateur Sports Protection Act (PASPA), allowing states to legalize sports betting for the first time in 24 years.
PASPA, which created the Las Vegas loophole, awarding Nevada a monopoly on legal sports gambling in 1992, was long despised by justices for its arbitrary application. Justice Douglas referred to PASPA as “a derelict in the stream of law that we, its creator, should remove.” By declaring PASPA unconstitutional, the Supreme Court allowed states to legalize and regulate sports betting, with more than 30 of them rising to the occasion so far.
In the wake of legalized sports betting, DraftKings and FanDuel seamlessly unveiled sports betting products to go alongside their daily fantasy offerings and found themselves natural market leaders in a fragmentary regulatory system. “Operators are needing to build up their infrastructure in each state and operate there basically in silos, so that’s pretty expensive if you aren’t a DraftKings or FanDuel,” says John Holden, professor of sports law at Oklahoma State University.
They also found themselves privy to many advantageous loopholes, not unlike the dysfunctional PASPA that so generously awarded Nevada its monopoly. “Some states have established grandfather clauses to give most favored company status to the companies that had gun-jumped and operated in the state before the new legislation was implemented — perhaps a feature of the fact that these arguable gun-jumpers such as FanDuel and DraftKings hired the lobbyists to help craft these bills,” writes Holden. “Most bizarrely, in New York State, companies that had entered the fantasy sports and daily fantasy sports marketplace prior to the November 2015 cease and desist letters were granted temporary permits to reenter the marketplace.”
Five years later, and the New York State Gaming Commission still has not designed an application process for companies to enter the DFS market legally (although it has approved licenses for sports betting). The only lesson to be learned, concludes Forbes, “is that perhaps it is better to launch a business that may violate the law and then beg for forgiveness rather than to avoid any such risk in search of honor and gratitude.”
The Gamification of Professional Sports
“Sundays without fantasy football are like a BBQ without burgers. Don’t have a BBQ without burgers.” –The NFL Twitter feed
Ultimately, daily fantasy’s rise to prominence as a quasi-gambling operation forever changed the sporting experience for later generations. “I like football, but I like playing fantasy and trying to outsmart people more,” admits one fan. “I think if I didn’t play fantasy, I don’t know how much sports I would really watch.”
The NFL agrees. Every major professional sports league, once loathe to embrace gambling, now sees it as an essential tool for engagement with future viewers. “With the legalization of gambling, you’re going to allow for the gamification of content,” says Steve Bornstein, former ESPN CEO who is now president of North America Genius Sports. “And to me, that’s ultimately how you’re going to connect with more fans and the younger fans is by gamifying content.”
“It’s for the continuation and growth of the game,” says Renie Anderson, chief revenue officer and executive vice president of NFL partnerships. “We’ve been around for 100 years, and we’re going to be around 100 more…. So, it’s really important that we focus on that younger fan. Because they’re the future, right? Not just of our country, but of football.”
About Colbeck: Colbeck is a strategic lender that partners with companies during periods of transition, providing creative capital solutions to meet their evolving needs. You can reach the team at inquiries@colbeck.com.
