Fantasy gambling has turned into a massive industry totalling over $7 billion USD each year. The vast majority of this money is in traditional finance fantasy gambling, but cryptocurrency with its blockchain technology does offer an alternative to traditional fantasy gambling.
The question, of course, is can cryptocurrency transform the fantasy gambling industry?
This article will answer that question and go into detail on why cryptocurrency has a big opportunity to make a dent on fantasy gambling.
The Online Fantasy Gambling Industry
To first understand how cryptocurrency can change fantasy gambling, one first must understand the fantasy gambling industry.
This section will go into great detail to explain the fantasy gambling industry.
Is Fantasy Sports Gambling or Not?
The first, and most important, question is whether gambling on fantasy sports is considered gambling or not.
Fortunately for those that play fantasy sports, gambling on fantasy sports is not considered gambling by most jurisdictions. Instead, gambling on fantasy sports is considered a game of skill.
This is important because most jurisdictions prohibit online gambling on a game of chance, but not a game of skill. It was specifically mentioned in the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA) that online gambling on fantasy sports was legal.
Due to that, it appears that fantasy sports gambling is safe from US regulators for the foreseeable future.
How Online Fantasy Gambling Works
The concept of online fantasy gambling is simple. A player joins a fantasy sports league by paying a buy-in amount, builds a team made up of individual players in a sports leagues, and the point totals the player accrued each week are used to determine the winner of each week’s match.
The winner of the prize is determined at the end of the season after a player wins a playoff competition with other players in the league.
Alternatively, daily fantasy sports work the same way with one important difference – the user picks a new fantasy team each week (or day depending on the sports league). This speeds everything up because prizes are paid out each day or week rather than at the end of the season. There is much less waiting involved with daily fantasy sports to determine the winner.
How Fantasy Gambling Sites Earn Revenue
Fantasy gambling websites have two different strategies to earn revenue. Sometimes these strategies are used together and sometimes they are not. It just depends on the revenue model that the fantasy website wants to use.
Cut of the Prize Pool
The most common method for fantasy sports websites to earn revenue is by taking a cut of the prize pool.
Basically, each player submits a buy-in of a certain amount of money. For instance, a player can join a 10 person fantasy league on Yahoo Sports for $20. Yahoo will then keep 10% of the total prize, which in this case amounts to $20.
The other strategy for fantasy sports websites to earn money is by ad revenue. This revenue strategy is not commonly used exclusively – most fantasy sports sites earn revenue by taking a cut of the prize pool and ad revenue.
The difficulty with this strategy for ad revenue is two-fold. Many internet users have some sort of ad blocker plugin, which will prevent ads from displaying. Ad blockers prevent websites from earning revenue.
The other problem with relying on ad revenue is that it does not pay nearly as much money as taking a cut of the prize pool.
For those two reasons, it’s unlikely that you will find a fantasy sports option that does not take a cut of the prize pool.
How Fantasy Sports Became Mainstream
Most people erroneously believe that fantasy sports came about with the invention of the internet.
This is false. Fantasy sports have existed long before the internet was popular. In fact, fantasy sports can be traced back to the 1960s. Albeit fantasy sports were not particularly popular in this time period.
The growth of fantasy sports went hand-in-hand with the growth of the internet with an explosion of fantasy sports during the dot-com bubble in the late 90s.
The internet has only caused fantasy sports to continue to grow. Additionally, the proliferation of smartphones caused another major spike in the fantasy sports industry.
At the moment, fantasy sports show no signs of slowing down. The number of people playing fantasy sports has increased every single year. Much of this current growth is due to the increasing popularity of daily fantasy sites such as DraftKings and FanDuel.
What Blockchain Technology Adds to Fantasy Sports
We have covered how standard fantasy sports operate, but we have not covered what blockchain can add to fantasy sports.
This section will cover the many benefits that blockchain technology brings to fantasy sports.
The primary benefit blockchain technology brings to fantasy sports is that it’s trustless. All the cryptocurrency fantasy sports options rely on smart contracts to payout winners.
This means that there is no central authority that controls the payout. Transactions cannot be reversed and everything is automated by the smart contract.
It’s a genius system. And the main advantage it has is that you do not have to worry about Yahoo or CBS Sports reversing your winnings for some unstated reason.
Another major benefit of fantasy sports on the blockchain is that the fees are much lower than standard fantasy sports options.
The highest fees you will pay on blockchain fantasy sports is around 5% for a small prize pool. This is much lower than the lowest fees you find on non-blockchain fantasy sports of 10% to 30%.
That is a huge savings that cannot be understated.
Fast Fund Transfers
The transfer of fantasy winnings on the blockchain are practically instantaneous, which is a huge upgrade from the traditional financial means that typically take 3-5 days to transfer.
This is a minor benefit compared to the others, but it’s still worth mentioning.
Fast Identity Verification
Users don’t actually need to verify their identity when using cryptocurrency fantasy sports. They only have to verify their email address.
This is extremely convenient for users that live in jurisdictions that forbid gambling on fantasy sports.
Blockchain Fantasy Sports Does Have Some Problems
Blockchain fantasy sports is not without its issues. Some of the issues include the following:
It’s Difficult to Use
The biggest hurdle that blockchain fantasy sports will have to overcome is that it’s difficult to use. Users must purchase cryptocurrency, place it in a wallet, and then deposit it on a fantasy sports protocol.
That process is easy for those familiar with cryptocurrency, but it’s a little too clunky for the average person.
Fortunately, the entire process will get easier as blockchain fantasy sports become more mainstream.
Coin Prices are Volatile
Another issue worth mentioning is that cryptocurrency prices are extremely volatile. For instance, it is not uncommon for Ether (ETH) to have price swings of 50% in the span of the NFL season.
This could pose a problem if the prize pool is in volatile cryptocurrency. However, many blockchain fantasy sports protocols rely on deposits of stablecoins that have a stable price. But this does have the potential to become a major issue if you do not use a stablecoin.
Cryptocurrency Fantasy Sports Projects
Here are some of the fantasy sports projects currently on the blockchain. At the moment, there are not many options because this is such a niche market.
However, all it takes is one project to launch fantasy sports to the mainstream.
NoLimitFantasySports is the largest cryptocurrency fantasy sports platform. It offers fantasy football, fantasy baseball, fantasy hockey, and fantasy basketball.
Those are all the major American sports leagues, soccer, and cricket. It’s a full fantasy sports platform, so you don’t have to worry about switching platforms to play different fantasy sports.
An interesting feature about NoLimitFantasySports, and other blockchain fantasy sports apps, is that you can create your own matches, leagues, and tournaments. You need not rely on a match, league, or tournament created by the developer.
We also like that NoLimit Fantasy has a utility token – NLC2. This results in a stable price for all prizes.
Overall, NoLimitFantasySports is probably the best fantasy sports option available with cryptocurrency. The only downside to this application is that it is not available in all US states.
FootballCoin is the most popular blockchain fantasy football (soccer) project at the moment. It operates in a manner similar to DraftKings or FanDuel with fantasy managers choosing a team of players for each week.
FootballCoin also has a utility token attached to it – XFC token. This token is used for player transactions on the platform.
All in all, FootballCoin is still a young platform with a lot of room to grow in the fantasy European football marketplace. It is certainly a project to keep a lookout for in the medium-term future.
That covers it for cryptocurrency fantasy sports. We know, it’s a young market without that many projects currently available.
However, it’s important to note that the fantasy industry is a multi-billion dollar industry with a lot of problems. The main problem, of course, is that all the traditional fantasy sports options have higher fees than the ones offered on the blockchain.
Due to that, we expect to see fantasy sports become an increasingly popular cryptocurrency industry.