DraftKings is Legit!

DraftKings is now the largest provider of daily fantasy sports contests, taking over competitor FanDuel, which was considered to be the largest such company in the fantasy sports industry in 2015.

In 2014, DraftKings acquired DraftStreet, which competed with both DraftKings and FanDuel. This acquisition may have caused DraftKings to outpace FanDuel in terms of customer base, but since DraftKings, Inc. is a private company, it will likely take some time before the specifics are known.

Despite the brand awareness of DraftKings and the great success of daily fantasy sports in general, there remains a significant group of potential clients who are reticent to try the service because they believe that it is illegal or they believe that DraftKings is a scam that will not pay out the winnings owed to them.

This could not be further from the truth, and the goal here is to establish the simple truth, through the evidence available, that DraftKings is completely legitimate. Read our DraftKings review below.

DraftKings Review

DraftKings, Inc. is a U.S. company that was founded in 2011 and is headquartered in Boston, Massachusetts. The brand was created from the onset with one-day sports leagues as its core concept, and that continues to be the brand’s focus. The fact that DraftKings is a completely American company with all assets within U.S. borders is an important one. Companies that offer services deemed illegal by the U.S. government, such as online casino providers, must exist outside the United States, and many of them even exist outside any country that has a trade agreement in place with the U.S. This ensures that the U.S. has no access to their bank accounts, which is one way the government can enforce the law.

DraftKings was founded by Paul Liberman, Matt Kalish and Jason Robins with $1.4 million in venture capital. Co-founder Robins is the current CEO of DraftKings, and he has had an immense effect on the industry. Many of the aspects of his vision for DraftKings were adopted by FanDuel, DraftSheet and other competing organizations. In fact, many business analysts have referred to his marketing strategies as “fearless” and “innovative,” and there is little doubt that the DraftKings approach to marketing helped shaped the advertisement campaigns and sponsorship agreements that FanDuel opted for.

DraftKings is Legal

A great deal of confusion exists among fantasy sports fans about the legality of their pastime. This likely has a lot to do with the way online gambling laws were enacted and the inability or unwillingness of lawmakers to explain them. The U.S. government made online gambling illegal via the Unlawful Internet Gambling Enforcement Act of 2006, which was added to the SAFE Port Act of 2006. The language of the act does not always seem clear to the average person and sometimes seems to contradict itself. What is important to note, however, is that the act includes a clear and explicit exemption for fantasy sports.

An example of perceived contradiction is an explicit exemption for fantasy sports, which is established in the document as a game of skill, and the explicit illegalness of online poker, which is considered by most also to be a game of skill. The difference according to lawmakers is that one is a game of skill based on the outcome of skilled-based event, such as shooting a basketball, and the other is game of skill based on the outcome of a chance-based event, such as the shuffling of a deck and subsequent dealing of playing cards.

It is worth noting that some states have passed laws legalizing online gambling, such as Nevada and New Jersey, and the federal government has allowed these laws to supersede their own. It is also important to mention that some states have passed laws illegalizing fantasy sports involving money. This is why DraftKings can only offer participation in free leagues to customers in Arizona, Iowa, Louisiana, Montana and Washington.

The Future of DraftKings

Perhaps the most impressive aspect of DraftKings’ success is that they entered into a sponsorship arms race with FanDuel and held their own and arguably won. Landing long-term agreements with MLB, NHL, UFC and WWE is significant, and it demonstrates what these successful brands assessed DraftKings long-term success potential to be as well as the legality of DFS services and products in general.

It also helps to consider that NBC Sports Ventures is a direct investor of FanDuel, and FanDuel marketing can be seen during games on NBC, NBC Sports and nbcsports.com – legitimizing the industry.

DraftKings also has traditional advertising that can be seen during sporting events on TV as well as on platforms such as Hulu Plus. Payouts in 2014 surpassed $300 million, which is comparable to the $400 million awarded by FanDuel, and industry experts forecast even greater growth for 2015.