Fantasy Sports Post Growth, Creating $3.6 Billion in Revenue Online

Fantasy sports leagues, in which amateurs (“gamers”) choose professional players to participate in virtual (“fantasy”) teams are a huge success. Revenues are generated through league fees, transaction fees, web hosting, prize fees and challenge games. Gamers follow their chosen players’ on-field, real-life statistics throughout the season. Many bet against their friends’ teams, contributing to a pool of money. At the end of the season, the fantasy team with the best statistics wins the pot. The practice began in the early 1980s among baseball fans and has expanded to a wide variety of sports, both professional and amateur, including football.

An estimated 60 million gamers participated in the U.S. and Canada as of 2023, according to the Fantasy Sports & Gaming Association (FSGA). Online firms that enable and host these fantasy teams reap big revenues from gamers.

Players early-on paid a fee to fantasy site operators, but many leagues now allow play free of charge. Revenues come from the sale of draft guides, expert analysis and advertising. Operators typically pay licensing fees of 5% to 10% of revenues for the rights to professional players’ names and statistics. The largest of the operating companies pay substantial yearly fees for these rights. For Major League Baseball alone, millions of fantasy players participate, subscribing to any of a dozen fantasy sports magazines, hundreds of web sites (some free and some fee-based) and hundreds of amateur blogs.

Leading fantasy sites include FanDuel and DraftKings. FanDuel, early in its development, raised venture capital in a funding round led by units of Time Warner and Comcast, Inc. DraftKings raised venture capital led by Fox Networks Group.

At least 40 states have passed laws to regulate or legalize fantasy sports contests. In some cases, the states claim that the fantasy contests are actually gambling, while fantasy sports firms counter that their games are, in fact, legal, because they require skill, not just luck.

In 2018, the U.S. Supreme Court ruled that the 50 U.S. states may determine on a per-state basis whether or not off-site betting on sports events is allowed. This is expected to accelerate betting in many parts of the U.S. on nearly all types of sports activities.

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