Business: YAHOO! Officially Enters The Daily Fantasy Sports Realm

Internet giant Yahoo Inc. said Thursday it will offer a new daily fantasy sports online game in which users will compete for cash prizes, adding another competitor to the growing market despite some uncertainty over the legality of such games.

Yahoo joins a growing market adding competition with leading daily fantasy sports, or DFS, companies DraftKings Inc. and FanDuel Inc. with a new platform that Yahoo said will be the first to scale DFS games so that users can compete against their own friends and win daily cash prizes.

The platform builds on Yahoo’s existing season-long fantasy sports games, where users select teams of professional athletes from a sport scoring points based on the statistical performance of those players in a given week, and can be accessed through an update on the computer or through a new app that will be available on the iPhone, the company said.

DFS differs from traditional season-long fantasy sports in that it allows users, who pay a fee, to build teams of fantasy players for shorter periods than full-season leagues with winners earning cash prizes. The company makes a profit by taking a cut of the cash pooled in these fantasy competitions.

Yahoo said its DFS games are a new opportunity for its partners to capture the growing market for fantasy sports in general citing a Fantasy Sports Trade Association study that said the market grew 40 percent last year alone, with more than 56 million players across the U.S. and Canada.

DFS games fall into an exception to the Unlawful Internet Gambling Enforcement Act makes fantasy sports legal where “winning outcomes reflect the relative knowledge and skill of the participants and are determined predominantly by accumulated statistical results of the performance of individuals” and the outcome is not based “on the score, point-spread, or any performance or performances of any single real-world team or combination of such teams.”

But shorter duration games and new styles of gameplay factoring in such things as point spreads are blurring the line.

DraftKings and FanDuel maintain they are 100 percent legal and have already reached deals with major professional sports leagues and sports media companies.

DraftKings, which has raised at least $65 million in venture capital, counts as a partner and investor Major League Baseball, an entity that is still enforcing a lifetime ban on Pete Rose for alleged gambling activity.

But ESPN Inc. parent the Walt Disney Co. reportedly backed out of a possible equity investment with ESPN, instead agreeing to a promotional partnership instead.

FanDuel has also recently announced it had reached exclusive multiyear deals with 13 National Basketball Association teams. FanDuel has already reached deals with the NBA and 16 NFL teams.

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Nick Ficorelli
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