Fantasy Sports Sites Under Fire as MGCB Hunts Operators for Illegal Prop Bets

Daily fantasy sports is legal in Michigan, but it has been the subject of much deliberation and controversy in recent times. The Michigan Gaming Control Board also appears to be swinging its axe more harshly against DFS operators after allegations of illegal conduct. More specifically, sports betting giants in the states, most of whom have fantasy sports operations, have outed core DFS sites on allegations of illegally offering prop bets.

According to the MGCB, it is willing to ban sites and apps that offer such prop bets. However, the disagreement about whether fantasy categories that allow players to bet on over and under values, for example, are prop bet options continues.

Multiple reports suggest that DraftKings Sportsbook MI and FanDuel spearheaded allegations that PrizePicks and other DFS sites were offering illegal prop bets on their platforms. FanDuel is Michigan’s highest grossing sports betting brand by wagering handle and total revenue. DraftKings, on the other hand, has the second-highest lifetime handle in the state and the third largest overall revenue.

Considering the position of both sportsbooks, it is arguable that their attempt at whistleblowing stemmed from a fear that DFS sites could take over the prop bet market. But many DFS operators seem to consider that the antagonism has nothing to do with sports betting. Essentially, they argue that the bigger operators are picking on smaller sites in an attempt to completely eliminate competition across the board.

The argument credited to the smaller brands has some merit to it. A Vox report from early this year revealed that DraftKings and FanDuel enjoy 90% of the total DFS market share in the country. The report further revealed that DraftKings only recently overtook FanDuel as the number one daily fantasy sports operator. So, both operators could simply be protecting their fantasy sporting interests.

However, it’s impossible to completely rule out that illegal prop bets may also affect their sports betting margin. Thus, the need to tackle the development from a multifaceted angle.

Many DFS operators have also tackled the allegations head-on, contending that their daily fantasy sports bets adhere to existing gaming rules. Jeremy Levine, the CEO of Underdog Fantasy, a fast-rising DFS app outside Michigan, said that the over/under odds available on his app follow all applicable rules.

Generally, the contest about DFS offering illegal prop bets hinges on whether Over and Under (O/U) odds are prop bets and outside the permits of DFS sites. Levine believes that his company’s O/U daily fantasy odds adhere to existing regulations. According to him, the rule requires the contest in which the bet is placed to require skill. Most O/U odds are on two or more athletes whose skills and statistics eventually determine the outcome of the game. 
Levine agrees with Michigan operators citing FanDuel MI and DraftKings actions seek to undermine the activities of others on the market.

“FanDuel and DraftKings are coordinating their lobbyists, market power, partners and years of political contributions to try to stop us and other fantasy companies. Why? We’re beating them in fantasy, and we’re not stopping there,” Levine published on Twitter. 
In what appears to be a response to Levine and other critics, Jason Robins, Cofounder and CEO of DraftKings posted the following to Twitter.

“As a leader in sports entertainment, DraftKings welcomes competition. Competition forces everyone to keep up or get left behind. We prefer to be out in the lead. We’re natural competitors who always welcome the chance to improve our game. Competition only makes us stronger.”

The Michigan Gaming Control Board regulates all aspects of online sports betting in the state. And since the issue at hand relates to DFS sites mimicking sports betting activities, the MGCB has been forced to step in. It follows the footsteps of the New York State Gaming Commission which recently changed its language on DFS apps. The new rules in New York will prevent DFS sites from offering O/U odds that are obvious prop bets.

MGCB’s proposed alteration prevents DFS operators from “proposition selection or fantasy contests that have the effect of mimicking proposition selection.” Massachusetts is also considering a similar review on its DFS industry.