Daily Fantasy Sports FAQ

Daily fantasy sports are contests that are fundamentally very similar to traditional fantasy sports. As with the traditional contests, they involve creating "fantasy teams" by selecting real players from a draft. Points are then scored based on how those players do in actual games.

There are a few differences between daily and traditional fantasy sports, and one particularly major one. A traditional league takes place over several months as the relevant sport's season plays out, which is a big commitment for some people, but daily contests are much quicker.

With daily contests, you can enter a league, set up a roster, and find out whether or not you've won or lost in 24 hours. In the case of football, where games take place over several days, you might wait as many as four days, but that's still a lot quicker than the several months it takes to play out a traditional season-long league.

Another difference is that when drafting, your opponents might have some of the same players as you do. In fact, they could even have the exact same roster. Because of the nature of this version of fantasy sports, drafts have to take place quickly. This means it's impractical to eliminate players from the draft pool as they're drafted. Most people don't want to invest several hours in setting up their lineup for a DFS contest.

One of the frustrations that many poker players and other internet gamblers have dealt with over the last decade is the questionable legality of their hobby. This is especially true for residents of the United States. It's therefore only natural to ask if daily fantasy sports are legal before playing.

The good news is that the main federal law governing internet gambling, The Unlawful Internet Gambling Enforcement Act (UIGEA), specifically exempts fantasy sports from its provisions. After all, Congress didn't want to alienate the estimated 37 million fantasy football players who vote. This left the door wide open for this new, more concentrated form of fantasy sports. It's legal in most other parts of the world too.

The most telling evidence of the safety and legality of daily fantasy sports is the attitude that companies like PayPal and Visa have taken toward these transactions. PayPal is notoriously unfriendly toward any kind of transaction related to gambling, yet they have no issues at all processing payments to and from daily fantasy sports companies. Major credit cards, like Visa and MasterCard, have traditionally been somewhat wishy-washy about online gambling transactions, but you're unlikely to hear of anyone having a problem using a credit card to fund their fantasy sports account.

You can divide daily fantasy sports contests into two broad categories; cash games and tournaments.

Cash games are low variance contests where you can expect to win money around 50% of the time, assuming that you're an average player and your opponent is too. Examples of cash games include head-to-head contests and 50/50 tournaments.

In a head-to-head contest, you're playing in a miniature league with only two players—you and your opponent. A typical entry fee/prize payout structure for a head-to-head contest might involve each of you putting $20 on the line. The winner gets $36, and the loser gets nothing. The missing $4 is the percentage that the site takes in exchange for hosting the contest.

A 50/50 contest is similar, but it has more players. The players with scores in the top 50% of the field get paid out, and the players with scores in the lower 50% lose. You might risk $20 to win $36 in this contest, too, even though you're playing in a league with multiple players.

A tournament, on the other hand, has multiple players and a prize pool for just the top 10% or 20% of the players. Tournaments often feature guaranteed prize pools. For example, you might play in a tournament where your entry fee is $20, but the prize for first place might be $2,000, with a second place prize of $1,000, and multiple lower prizes as you move down the list of scores.

In most season-long fantasy sports leagues there is no salary cap. Players are drafted one at a time, and once a player is drafted, he's not available to the other managers. In daily fantasy sports you don't have this limitation, but a salary cap is included to keep the contests challenging.

A salary cap is the equivalent of an in-game budget that you use to "buy" the players on your roster. Players' salaries are based on their past performance and their projected future performance. The exact formulas vary slightly by site, but the salaries for individual players—as a percentage of the salary cap in use—tend to be similar.

You might get a salary cap of $50,000 with which to draft a fantasy football team. Choosing players who are a good value relative to their salary will give you an edge over contestants who choose players that are a bad value relative to their salary.

Getting started is easy. You first need to choose which daily fantasy sports site to join, and then open an account. This involves filling out a registration form with all the usual information like your name, your address, your phone number, and your email address. You'll also need to put some money into your account. Deposits can be made via PayPal, Visa, or MasterCard at most sites. Some places have other deposit options as well.

Once you've set up an account and added money to it, you'll usually receive a signup bonus. This is additional money you can use to enter more contests. These signup bonuses are an incentive for new players to try the hobby at a particular site. The bonus amounts are released as you participate in contests.

The lobbies of the major sites are user-friendly, and make it easy to filter which sports you're interested in and which types of contests you're interested in. You can also order these contests by how much the entry fees are. Entering a contest takes you to a page where you get to choose the members of your team. This page includes lists of players in each position along with the salary they each cost. Everything from this point is usually fairly intuitive.

On most sites, if there's a tie between multiple players, they usually share the prize money equally. This doesn't result in a push situation like it does in a blackjack game, though, because of the commission. Here's an example.

In a larger tournament, you might encounter a situation where a tie is still profitable. Here's an example of how this might happen.

Most daily fantasy sports sites encourage their players to refer new players to their site. As an incentive for these referrals, the sites share a percentage of the revenue generated by these referred players. These incentives vary by site, but here's how a typical referral bonus might work.

It doesn't sound like a lot of money, but when you get players participating in dozens of contests every day or week, it can add up quickly. If your referral plays in larger buy-in contests, the site's commission and your referral bonus increase accordingly.

Most daily fantasy sports websites offer frequent player points to players for participating in contests. The amounts awarded for various activities on the site vary by site, but they all work in a similar manner. You can cash your frequent player points in for stuff in the site's frequent player store. Usually you'll use those points to buy merchandise like apparel.

Sites usually include shipping and sales tax in the frequent player points cost of each item. So when you send off for your baseball cap or whatever, you don't wind up paying some unexpected amount to cover shipping or sales tax.

Some sites also allow you to cash these points in for entries to freerolls. A freeroll is a tournament that a site holds which has cash prizes, but you don't have to pay to enter the contest. In the case of a freeroll entry resulting from frequent player points, it's just an incentive to keep you playing on the site.

VIP programs are just a fun way to get rewarded for doing what you'd be doing anyway – participating in your daily fantasy sports hobby. Serious players might try to take into account the dollar value of these VIP programs when deciding how profitable a certain site might be, but recreational players don't worry about it too much.