California has yet to take the deep dive into legal sports betting. However, action-seekers can still dip their toes in the shallower waters of daily fantasy sports.
The rapid expansion of sports betting in the United States has diverted attention away from daily fantasy sports (DFS). California sports betting may soon become legal, as competing initiatives are on this year’s general ballot.
Voters will decide on two sports betting ballot initiatives in CA’s General Election on Nov. 8.
But the Golden State has a population exceeding 39 million people, easily making the California daily fantasy sports market the largest in the U.S.
California has no laws either explicitly permitting or prohibiting paid-entry DFS contests. DFS giants, such as DraftKings and FanDuel, operate in California, as do a handful of other providers. Customers can pay entry fees for a variety of fantasy sports options and win real money playing online or through a mobile app.
Legal ‘grey area’ of daily fantasy sports
What makes DFS different from sports betting or other forms of legal gambling? After all, the concept of wagering money on an unknown outcome is the essence of both gambling and DFS.
Well, that depends on who is answering the question.
DraftKings CEO Jason Robins once likened his company’s daily fantasy sports product as being “almost identical to a casino.”
However, as an official position, DK maintains that daily fantasy offerings are games of skill.
A federal judge in New Jersey also made a distinction between daily fantasy sports contests and gambling. The judge determined that an entry fee is not the same as a wager and that predetermined prizes were not akin to winning bets.
In the eyes of the law, daily fantasy sports are defined as a game of skill. Therefore, the industry is not considered gambling.
California embraces daily fantasy sports
Absent the ability to legally bet on an NFL game or MLB playoff series, Californians flock to DFS sites. Most industry followers estimate California represents more than 10% of all U.S. entries in DFS contests.
That percentage is heavily influenced by the state’s population, and the fact that legalized sports betting is unavailable.
GoldRush 2.0 awaits California sportsbooks…maybe
The crossover demographic of DFS and sports gambling has helped propel DraftKings and FanDuel to market leaders in both segments. When single-game sports betting was permitted nationwide following the 2018 U.S. Supreme Court decision, DK and FD already had databases of millions of users willing to pay money on the outcome of sports-related contests.
DraftKings and FanDuel are hoping for a similar head start in the country’s most populous and wealthiest state. They are among seven online gambling operators backing California’s Proposition 27, a ballot referendum to legalize online and mobile sports betting.
The digital gaming companies have spent a collective $150 million in support of Prop 27 and against Proposition 26, a competing initiative that would permit in-person sports gambling at California tribal casinos.
Projected to be the country’s largest sports betting market, California sportsbooks have the potential to handle as much as $40 billion in legal wagers. The state could generate upwards of $200 million annually in tax revenue.
The various factions fighting over the fate of legal sports betting in California have already raised more than $372 million, making Prop 26 and 27 the most expensive ballot initiative contest in U.S. history.
