If you tuned into America's game Sunday, you may have seen the Seahawks almost pull off an epic comeback. But you couldn't miss ads for DraftKings and FanDuel, two fantasy sports websites that, together, control 90 percent of this emerging marketplace. Powered by huge infusions of venture capital, the sites pushed their message via 9,000 nationally televised spots last week, costing $27 million, according to iSpot.tv.
People gamble on sports, we all know, but I've never seen it paraded so prominently. But wait, these sites claim, it's not gambling — you simply pay an entry fee and you might win a prize. If not, they keep your entry fee. See? Not gambling! These businesses are carefully crafted to fit inside a loophole in the Unlawful Internet Gambling Enforcement Act of 2006. Maybe it's all in good fun, but five states, including Washington, don't think so and have additional laws that make the sites illegal.
If these sites were hoping nobody would notice how closely they skirt the law, 9,000 annoying ads was a poor strategy. The ads attracted the attention of New Jersey Rep. Frank Pallone Jr., who wants congressional hearings. But it's not because he hates gambling; no, he wanted legalized sports betting to benefit his state, but the courts ruled against it.
All of a sudden, these sites have been folded right into the fabric of sports, with big investments from Comcast (NBC), ESPN and several individual NFL teams. And they're growing fast, with DraftKings alone adding 1 million new players so far this month. IPOs are sure to be coming soon. As investors, how will sports media report on this?
NFL players, who put their brains on the line every day, are paid on the power of the league's lucrative TV contracts, and those contracts are funded by sponsors. Therefore, DraftKings and FanDuel are paying part of the salaries for the players their sites allow you to bet — sorry, "entry fee" — on.
Gregg Easterbrook, author of "Tuesday Morning Quarterback" on nytimes.com, wrote that "Cozying up to gambling can only bring the NFL woe." Consider the New England vs. Pittsburgh game last week. With two seconds left, Antonio Brown caught a touchdown pass, making the final score 28-21. The Steelers still lost, but it reallocated an estimated $100 million in bets, as they suddenly covered the point spread.
More money than ever is riding on games, and with players already feeling like they don't see as much of the NFL's riches as they deserve, the situation is ripe for corruption. I'm all for people having fun and smart businesses capitalizing on opportunities, but if this is truly America's game, America needs to pay attention to how it may be changing.♦