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That's why they're allowed to operate, even though online gambling is not legal in the US.
But as the New York Times reported Monday, that world is now being rocked by "what amounted to allegations of insider trading, that employees [of the main companies] were placing bets on information not available to the public."
This scandal raises many ethical and legal issues. One that's on our mind is why people gamble, and whether they play DFS for the same reasons as, say, playing a poker game or blackjack.
Despite not being legally regulated as gambling, DFS seems to fit the literal definition: "to play a game in which you can win or lose money or possessions," according Merriam-Webster.
In DFS you can't just rely on already known stars (otherwise everyone would have the same team). Instead, you have to pick real-world players you think the rest of the pool might undervalue. If your picks play better than your pool expected, you get greater "value" from them and are more likely to win money. In short: You're betting both that the players you chose will do well and that your rivals won't see this coming.
The scandal centers around an employee of an industry-leading DFS company. That employee reportedly won $350,000 playing on a rival DFS site after accidentally releasing data early about how other people playing that day had valued their players. (For more on the scandal and why that insider info would make such a difference, read this Tech Insider post.)
Your chances of winning at DFS aren't high and this scandal, if true, wouldn't help. About 70% of players report losing money every month, and one study found that the top 1.3% can take in 91% of the winnings.
But why do people bet on sports or gamble in general, even when the odds are clearly against them?
Neuroscience, psychology, and various social science studies have some answers for us. That research can also help us differentiate between casual or "fun" gambling and problematic gambling.
For anyone who finds some psychological appeal in "risk," the draw of gambling may seem pretty clear, even if others find it incomprehensible: Gambling, betting on games, and playing fantasy sports is fun.
Whether you are throwing money down for a Super Bowl Squares pool or playing blackjack in a casino, the chance to win some cash provides a spike of excitement, even when you know you are not likely to win. Rationally, and if you are only betting what you are prepared to lose, you could consider that bet essentially a payment for entertainment, for the added excitement that comes with a slim chance of winning.
Gambling = entertainment. The question is: Why?
Brain imaging studies show that any kind of gambling win activates the reward-circuit in the brain, releases dopamine, and makes us feel good. This isn't surprising, as almost any activity that could be thought of as "rewarding," including sex, a good meal, exercise, or drugs, has this effect.
AP Images
Always a bad bet.
More intriguingly, research shows that near-misses have the same effect. So even when gamblers lose money, it still feels good. And not only that, but these misses can increase someone's desire to bet again.
Most people can control these impulses, and about 80% of Americans have gambled at some point in their lives. But some number of people (one medical review notes between 0.2% and 5%) display some form of addictive behavior related to gambling, a claim now recognized by the American Psychological Association.
Researchers think problematic gamblers crave stronger and stronger "hits" from wins, which can send them into a downward spiral. So while betting can be "fun" for most people, for some it can be problematic or even devastating.
How do fantasy sports - especially daily games in the scandal - fit into the picture?
For most people, normal and non-daily fantasy leagues probably fit into the "fun" category. This is fairly simple to justify. I play in a fantasy league knowing I'm not likely to beat out my more knowledgeable friends, but throwing $20 down at the start of the season makes watching any game more exciting. That added element gives me something extra to root for.
Still, it's quite possible that anyone with a gambling addiction could end up in a problematic situation as the result of playing normal fantasy sports.
Microsoft/NFL
DFS games likely play on the same aspects of psychology as any other sort of gambling, making them fun for some and potentially disastrous for others.
Aggressive TV ads during football games tout the promise of winning thousands or even a million dollars, while really, the vast majority of players lose money. Those ads may have an effect. A study by Stanford Business School found that advertising increases the amount of money spent on casino gambling. So it's possible the relentless barrage of ads for DFS might have a similar effect.
Yet you have to be really good - "already a pro with Excel," as Tech Insider's Drake Baer puts it - to win these games. As a look into DFS at Slate notes, one notable fantasy "shark" who sees serious success studied math and economics, plus spends 15 hours a day using a spreadsheet to put together an optimal fantasy team.
Most everyone else, meanwhile, loses money playing DFS. Slate's Seth Stevenson points out that 80% of players lose less than $10 for each month they play. For them, that's probably a justifiable expense. But 5% of players - perhaps the same fraction of the population susceptible to gambling problems, though this is a correlation - is responsible for 75% of the money lost in DFS. This adds up a lot in an industry projected to be worth $14.4 billion by 2020.
The odds are against you in gambling, no matter what, and the same is true of daily fantasy sports games. Some people may find the betting fun, all the same. Others may be driven by near-misses to spend more money than they can afford.
But if the games aren't fair in the first place, as recent news implies, more may be going on than just a system that favors the sharks over the fish. If that's the case, these games may be unfair at their core - whether people find them fun or not.
DraftKings told Tech Insider that the employee in question did not have access to information about players' lineups until after his lineup in the other league would have already been set. Still, they say they've decided to prohibit their employees from participating in online fantasy sports for now.