Date of Award

Spring 2020

Degree Name

Bachelor of Science (BS)

Advisor(s)

Mark Conrad

Abstract

Fantasy sports has grown from humble beginnings as a small game between Harvard professors in the 1960s to a multi-billion-dollar industry today. Daily Fantasy Sports (DFS) specifically has exploded in the 2010s, thanks to widespread internet access and the massive growth of the overall sports market. However, the most successful and skilled DFS players, known as “sharks”, win the mass majority of DFS contests. These sharks use sophisticated mathematical and statistical techniques to create high variance lineups that are much more likely to win than an amateur lineup. It should be noted that DFS and Sports betting differ significantly. Sports betting focuses on single specific real-life sporting events, while DFS must consider multiple games and particularly focuses on players rather than the team as a whole. The legality of DFS is also a widely debated topic. The crux of the issue falls on determining whether a DFS contest is a game of chance or of skill. New York has become a significant legal battleground state for the legality of DFS, especially considering the case of White v. Cuomo. On a Federal level, the DFS industry must most prominently concern itself with the Unlawful Internet Gambling Enforcement Act (UIGEA), the Wire Act, and the Illegal Gambling Business Act of 1970. UIGEA provides a crucial carve-out that currently applies to both DFS and seasonal fantasy sports, as of this writing. Previously, other works by legal scholars Marc Edelman, Alicia Jesop, and John Holden have only mentioned loose connections between DFS and the Stock Market. However, this paper intends to expand that idea with a special focus on the creation of investment funds for DFS. Because DFS could be extraordinarily profitable for skilled players, an investment fund centered around DFS contests could likely generate significant profits as well. Securities laws including state “Blue Sky” laws, the Securities Act of 1933, and the Securities & Exchange Act of 1934 seemingly allow for the securitization of a DFS investment fund. The landmark case of S.E.C v. W.J. Howey Co. further enforces that a DFS investment fund could be securitized allowing for easy investment to be made by interested investors. A DFS investment fund should be able to incorporate and form based on the Investment Company Act of 1940 with some adjustments to reflect the particulars of the DFS industry. Finally, the Coronavirus pandemic has created new problems and could present a serious setback to both the DFS industry and sports generally. This paper will examine the short-term, medium-term and long-term impact that Coronavirus may have on the DFS industry. Nevertheless, the authors believe that a DFS investment fund would be able to survive such a crisis and that the profits of DFS during conventional times far outweigh the risks of crises such as the Coronavirus pandemic.

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