Video Summary

The Unlawful Internet Gambling Enforcement Act of 2006 was signed into law by President Bush, effectively banning online gambling companies from taking payments made in violation of state or federal law. However, the act also created a loophole by exempting fantasy sports from its definition of “betting and wagering.” This exemption made fantasy sports a lucrative market, with companies like FanDuel and DraftKings emerging as leaders in the industry.

FanDuel, in particular, played a crucial role in shaping the daily fantasy sports (DFS) market. The company's daily contests and cash games allowed users to compete against each other for cash prizes, with the potential for significant wins. This format proved wildly popular, with FanDuel's first rounds of funding topping $1 million and eventually reaching $11 million by 2013.

As DFS grew in popularity, so did criticism from regulators and academics who questioned the extent to which DFS differed from sports betting. Despite this, FanDuel and DraftKings continued to thrive, partnering with major sports leagues and teams to further legitimize their business.

In 2018, the Supreme Court ruled that sports gambling was not the exclusive domain of the federal government, paving the way for states to legalize sports betting. Eight states legalized sports betting in 2018, with 10 more joining in 2019. The industry's lobby groups, including FanDuel and DraftKings, played a significant role in securing legalization, promising states millions of dollars in tax revenue and arguing that people were already betting illegally anyway.

By 2022, 30 states and Washington D.C. had legalized sports betting, with the industry generating significant revenue. The growth of sports betting was fueled by the proliferation of mobile devices, which allowed users to bet on games and outcomes in real-time. The industry's revenue more than tripled between 2018 and 2021, reaching over $4.3 billion in 2021.