The fantasy sports industry is expanding remarkably, poised to reach a market value of $28 billion in 2023 and predicted to be worth over $50 billion by 2028. Around 20% of the adult American population, or one in five, engage in fantasy sports.
Like any industry experiencing growth, its continuous success hinges on consistent innovation. Yet, this growth and innovation often draw governmental interference which could stifle progress.
Innovation remains a crucial catalyst for the U.S. economy. For continued economic prosperity, innovation needs to permeate all sectors. Thus, any governmental interferences that stifle this process should be a universal cause for concern.
The computer and sports gaming sectors have a rich heritage of innovation, dating back to the 1960s. In more recent times, the rise of mobile computing has revolutionized fantasy sports, making it more accessible and user-friendly, thanks to the convenience of handheld devices.
Over the past few decades, sports gambling has also seen immense growth. Technological advancements and innovations have made it increasingly easy for anyone to place bets on their preferred teams or outcomes. These games of chance rely mostly on random luck, with gamblers having minimal control over the outcome. The thrill of uncertainty is what makes it appealing.
However, fantasy sports, often compared to sports gambling, operate differently. Factors such as strategy, proficiency, research, knowledge, and the ability to spot overlooked factors significantly influence the outcomes in fantasy sports. The player’s skill, not chance or randomness, is what fuels the excitement in this field. The sector’s exponential growth has witnessed the advent of several new players keen on exploiting this profitable domain through continuous innovation.
Despite these positives, this growth and innovation often attract the scrutiny of both competitors and regulators. Traditional entities in sports betting, wary of their authority being eroded by the rising tide of fantasy sports, are contemplating collaborations with governments to sidestep competition—an act referred to as “rent-seeking” in economic terms. This sort of manipulation invariably stifles innovation and negatively impacts consumers.
“Rent-seeking,” refers to a situation where firms manipulate government regulations to safeguard their existing market position or accumulate wealth, instead of competing fairly. This action not only inflates government power as it becomes the means to seize or safeguard market shares, but it also compromises innovation and consumer interest. The repercussions of government interference lead to an inconsistent and unjust distribution of resources which impairs the creation of capital that would spur further economic growth.
Many are pushing for regulations lumping fantasy sports with sports betting in a bid to secure their position. They are making use of their existing rapport as a regulated industry to lobby for changes in laws and regulations, effectively transforming fantasy gaming into a form of gambling. This would subject the fantasy sports industry to inordinate regulations typically reserved for games of luck not those of skill.
Some states are exploring ways to collaborate with gaming firms to curb popular fantasy sports. However, the solution is straightforward—government authority should not be harnessed by successful companies to obstruct competition or innovation in the sector.
It’s essential to distinguish between games of skill and chance as they appeal differently to players. While some seek intellectual challenges, others enjoy the thrill of a surprise win. Both have their places and merits. However, subjecting both to the same regulatory pressures does not serve consumer interests. Regulating them in the same vein only benefits governmental agencies and established industries attempting to quash competition.
