Fantasy companies offering Pick’em contests are increasingly finding themselves in the crosshairs of legal sports betting regulators and forced to defend a product the watchdogs deem more and more as event wagering.
The latest salvo against a Pick’em provider includes a six-figure fine issued for Underdog Sports on October 20 by the Maine Gambling Control Unit following a monthslong investigation.
Underdog was sanctioned by the Maine sports betting regulator to the tune of $391,850, or $50 for each of the 7,837 people who participated in the company's pick'em contests since they began being offered in the state in January 2021. Underdog was also ordered to immediately stop offering Pick'em contests to Maine consumers.
"Failure to comply with this directive shall be grounds for further sanctions," wrote Milton Champion, the executive director of the MGCU.
Go with the Game.
— Underdog Pick'em (@UnderdogPicks) September 7, 2023
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Underdog, a licensed fantasy operator in Maine, can appeal the decision. However, it is not just Maine taking a harsher tone with providers of Pick’ems, wherein users can try to correctly predict two or more sports outcomes, such as players going over a point total, to win a payout from the house.
That form of contest is increasingly falling out of favor with some regulators, who are starting to see their providers as online sports betting sites, or just someone offering something that is not fantasy. As a result, Maine and others are arguing that Pick’ems violate state law.
"Fantasy contests must involve more than one contestant and wagers cannot be made against the operator," Champion wrote. "Pick'em [contests] allow participants to place wagers against the operator."
States' rights (and wrongs)
Florida, Michigan, and Ohio are among those that have taken action against Pick’em providers. Another state singling out that form of fantasy as, well, not fantasy is North Carolina, which is preparing to launch online sports betting next year.
There, the state Lottery Commission is hosting a public hearing on Friday to accept public comments on proposed North Carolina sports betting rules. Those rules suggest Pick’ems are not fantasy contests, which means providers would have to seek a sports-betting license to offer them in the state.
Fantasy contests cannot be “based on proposition wagering or contests that involve, result in, or have the effect of mimicking proposition wagering or other forms of Sports Wagering,” the proposed rules state.
The Coalition for Fantasy Sports, backed by Pick’em providers PrizePicks, Sleeper, and Underdog Fantasy, said the North Carolina legislature "ensured" their contests could continue to be offered as fantasy sports when a sports-betting bill passed earlier this year.
"We are confident that the Lottery Commission will reach common sense rules that reflect the letter and spirit of that bill," a coalition spokesperson told Covers in an email earlier this month. "We look forward to participating as stakeholders in the rulemaking process, just as we worked alongside with legislators this past session to protect the fantasy sports that North Carolinians have played for years."
Care to comment?
The coalition members may have to defend themselves out west as well, as Colorado regulators are also proposing rules that could target Pick’ems. A hearing for the proposed rules is set for Monday, with the Division of Gaming arguing the tweaks will better align fantasy regulations with those for Colorado sports betting.
Those proposed rules contain a definition of authorized fantasy contests banning "parlay style wagers that are stacked wagers on single athletes against fantasy contest providers.”
Still, that may not be enough for some folks. DraftKings, a major online sports betting and daily fantasy operator, wants an additional tweak to the rules “that makes it expressly clear that fantasy contests based on proposition style picks must be peer-to-peer,” rather than against the house.
At least one Pick’em provider has claimed DraftKings and FanDuel are helping to drive the pushback against the contests, even as they have operated in some grey areas of their own with daily fantasy. Furthermore, the Pick’em providers argue their offerings comply with the laws where they are offered.
“Until recently, no one (at least no one within the industry, legislatures, or in regulatory bodies) questioned the legality of these offerings,” Underdog General Counsel Nicholas Green wrote in September. “What has changed, however, in recent months is that the incumbents have identified Underdog and others as actual competitive threats in both fantasy sports and, in the coming year, in sports wagering. Motivated by this competition backstory, FanDuel and DraftKings have suddenly taken a keen interest in characterizing our contests as illegal and have leveraged their significant industry and political connections to spread this erroneous narrative.”
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