Eric Schneiderman, the New York Attorney General, has declared that daily fantasy sports games are a form of illegal gambling, but I think his claim is spurious. Gambling is generally illegal if it is based on luck rather than skill, but the line between the two is unclear. I will focus on baseball because I know it somewhat better than other sports.
Everyone would agree that the real game of baseball is a game of skill. Try throwing a 93 mile per hour fastball or hitting one. The better teams tend to prevail over the course of a season. Yet baseball games are often decided by a matter of inches. Even the best of batters have little control over where a ball goes. To be sure a batter can deliberately hit some pitches to the right side of the infield, but nobody has the precision to hit the ball between the first and second baseman. When that occurs, it is simply a matter of luck. Many games and playoff results are decided by lucky turns of events of that sort.
Most states agree that season long fantasy baseball is not a form of illegal gambling. In fantasy baseball, owners assemble a team of current major league baseball players and they are scored on the basis of how those players (or others acquired during the season) perform in actual games.
There is skill involved. Deciding which players to acquire at the outset and later in the season depends on a lot of knowledge of the player pool, the parks in which they play, the tendencies of the managers of major league teams, an understanding of what combination of players will contribute statistics in categories needed under the scoring rules, the likelihood of injuries to particular players. In both national and local competition some people win more frequently than others. I won one of my most competitive leagues last year, and there was a lot of skill involved with a mixture of luck. But it was the first time I have won that league in 9 years. I just have to face the fact that some in the league have more skill than I do.
This brings us to daily leagues. There is more luck involved than in season long fantasy leagues simply because daily leagues have a far smaller sample size. Nonetheless, the same skills are needed in the daily leagues. And, let’s face it, it is not as if players participate only one day. They win or lose over time – over many daily games. There is no question that skill is rewarded. The Public Health Advocacy Institute reports that 90% of the winnings go to one per cent of the participants. See here.
To suggest that fantasy baseball is more luck than skill is unsupportable. This does not mean that daily games should be legal. Indeed, millions of participants need protection. Most participants who put down money do not realize that the pros have put in enough entries that algorithms favor their victories. The reason millions need protection is that a small percentage of participants have more skill and capital resulting in a disproportionate share of winnings. Daily games perhaps should be terminated or regulated more intensively. But Schneiderman’s claim that these games are currently illegal fails understand the importance of skill in the daily games.