Is daily fantasy sports cutting into state lotteries?

A research firm says states have a right to be worried

By Mark Huffman

 

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It’s been an eventful few weeks for daily fantasy sports enterprises like DraftKings and FanDuel.

First, there was an uproar over concerns that employees of the two fast-growing companies were unfairly profiting from inside information when they played games on competing sites.

That concern resulted in the launch of a formal investigation by New York Attorney General Eric Schneiderman.

Next, the Nevada Gaming Commission ruled that daily fantasy sports games constitute gambling, and therefore need to be licensed if they want to operate in Nevada.

Now, there’s concern that these highly popular games could be cutting into the revenue consumers spend on state-sponsored gambling – lotteries.

A survey by research group Leger asked people who play daily fantasy games – where they can win money by forming teams of actual players and get points based on how well the players perform.

Buying fewer lottery tickets

Among the 15% of U.S. adults who claim to have played daily fantasy sports this season, 61% said what they spend on fantasy games has reduced what they wager on lottery games such as Powerball, Mega Millions, Scratch or Instant Games.

It turns out the people who play fantasy sports games are typically gamblers. In fact, 84% of fantasy sports players said they played a lottery game in the last month. Leger says that’s more than twice the level of all American adults.

“Specific to state lotteries, this is an external factor contributing to a perfect storm,” said Lance Henik, Senior Account Manager at Leger.

Smaller jackpots

First, he says, you have to consider the reduction in blockbuster jackpots from Powerball or Mega Millions that may have impacted cross-play for other games in many state lotteries.

Then, there’s the preference among younger players for online gaming, especially for those platforms that allow players to put their “skin in the game.”

The bottom line, he says, is daily fantasy sports may pose a long-term threat to state lotteries, which the states depend on for revenue.

Incidentally, the Leger data shows that daily fantasy sports is cutting into the casinos. Leger says that could well explain why the state of Nevada ruled that daily fantasy sports games constitute gambling and should be licensed.

“It appears Daily Fantasy Sports is serving up a double economic whammy for state governments right now.” said Simon Jaworski, Senior Vice President at Leger. “These fantasy behemoths are not currently filling the local coffers with tax, due to their private ownership, which when coupled with potentially lower tax revenue from the DFS player’s reduced lottery and casino spending, it is certainly a situation worth monitoring.”

Story provided by ConsumerAffairs.

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