DFS 2.0: Gray Area between Fantasy, DFS & Sports Betting

Sports fans are known to be some of the most passionate types of people, and because of that there is a never-ending wave of ways to try and add more engagement and entertainment. That includes fantasy, daily fantasy sports (DFS), sports betting and even now a hybrid of fantasy and betting often called “DFS 2.0.”

Each of those products comes with their own inherent risks, especially given the lack of clarity between them at times. With that in mind, we’ve broken down the differences, their risks and ultimately, the support that is available if ever needed.

What are Fantasy Sports and DFS?

Before we can analyze the gray area between fantasy, DFS and sports betting, we must first understand what each one is individually. Beginning with fantasy, these are contests in which fans select players to fill a lineup, generally with a salary cap, draft or other form of value limitation.

Traditionally, these contests are competitions with other players, whether in a tournament with thousands of others, head-to-head matchups or custom pool sizes in between. Depending on how the players on your roster perform in their real sporting event, you earn points for your drafted squad.

The reason for distinguishing between fantasy and DFS is primarily length. Traditional fantasy sports are generally season-long contests with a set group of players, while DFS is just what the name implies - daily. While these can also be for contests that are more than just one day, such as a PGA Tour event, they are for a much shorter time horizon. In either situation, the most important distinction is that you generally must submit an entry fee to compete against other players.

What is Sports Betting?

That brings us to sports betting. While fantasy and DFS contests are usually competitions against other entrants, sports betting is competing against what is known as “the house.” In other words, that’s whoever is offering the odds, which is usually a sportsbook operator.

No matter the operator, they always build an advantage, or edge, into the odds. They can set the odds for an outcome such that they provide themselves with a bit of a safety net should the less advantageous outcome for them occur.

Based on the odds provided, fans can decide how much they would like to wager, rather than a set entry fee. If the outcome that was predicted with the bet occurs, the bettor is awarded the winnings. If not, they lose the amount that was risked.

Of course, there is a virtually endless variety of sports bet types ranging from simply predicting the winner of a matchup to the most niche of player prop markets.

What are gray-area DFS-betting hybrid games and products?

Given that both fantasy and sports betting products involve wagering on sporting event outcomes, they may seem like the same thing to some fans. However, there are important distinctions, and they have become increasingly more difficult to understand.

That is in large part due to the introduction of DFS 2.0, which as you can imagine, is the next evolution in daily fantasy that is even more like sports betting. Sites such as PrizePicks and Underdog allow users to focus on individual players, but rather than drafting teams, fans can predict outcomes that will occur, similar to sports betting.

So, how is this form of DFS and sports betting different? Well, there are legal distinctions between the two, which is why operators like PrizePicks and Underdog have to be very careful with the language they use. For example, in sports betting, fans will often predict “over” or “under” a set number of points for a contest. However, DFS 2.0 operators must ensure not to use such language and instead offer customers the ability to predict outcomes labeled “higher” or “lower.” As you can see, simply using synonyms for what is essentially the same prediction is why there is such a gray area between the two.

There also must be multiple predictions in one entry, which these operators argue constitutes a “lineup,” as it would be called in traditional fantasy. However, others maintain that these lineups are nothing more than player prop parlays in sheep’s clothing, and should be treated as such from a regulatory standpoint.

It is also important to note that because these newly-evolved operators are allowing users to make their own predictions based upon their set values, this is effectively betting against the house, rather than traditional fantasy where contests are against other players.

Are DFS 2.0 like PrizePicks and Underdog legal?

We mentioned the operators PrizePicks and Underdog above, as they are arguably the two most prominent DFS 2.0 platforms. They are indeed legal in some parts of the United States, but they must be very cautious with how they advertise their product for legal reasons to differentiate themselves from traditional sports betting.

These types of operators are widely available across the country, but there have recently been states that have sent cease and desist letters to these companies. Some of the most recent were Arkansas, Florida and Kansas, which did so in February 2024. Their argument is that these DFS 2.0 operators are offering a form of sports betting rather than a fantasy product.

This also begins to bring in the concept of taxes, as these DFS 2.0 platforms don’t have nearly as severe of a tax hit in comparison to traditional sportsbooks. With so many moving parts, you can see how distinctions between each concept becomes more unclear for casual fans.

Peer-to-peer vs. against the house game structures

Although it can be difficult to distinguish between fantasy, sports betting and DFS 2.0, their core concepts are perhaps the most straightforward. Traditional fantasy and DFS contests involve peer-to-peer contests, which can be among a group of friends or random members online.

For example, groups of friends often put together leagues for season-long contests where they can rotate players and have head-to-head matchups with one another, while DFS contests are generally entered by a pool of hundreds, or even thousands, of random members for a set prize pool.

As for against-the-house structures, that is where DFS 2.0 and traditional sportsbooks come into play. The oddsmakers employed by each operator set prices for outcomes to occur, and based on the odds they set, provide a payout in correlation to the amount risked. In this case, either the house wins the bettors’ stake, or the bettor wins the payout from the set odds.

When some states have attempted to shut down DFS 2.0 operators via cease and desist letters, some – like Underdog in Florida – pivoted from against-the-house formats to solely peer-to-peer products.

How popular are DFS 2.0 pick’em contests?

Given that DFS 2.0 platforms provide fans with both the fantasy aspect along with the sports betting component, they have become increasingly more popular. For, the PrizePicks app in the Apple Store had over a million downloads back in August of 2022.

The same can be said for Underdog, and both platforms have well over 100,000 reviews alone. While those are simply downloads and reviews, their estimated value is even more indicative of their popularity.

As of October 2023, both PrizePicks and Underdog were estimated to have valuations closing in on $500 million. Remember, these platforms don’t have the same type of tax responsibilities as traditional sportsbooks.

Additionally, some states have different age restrictions for fantasy (often 18+) versus sports betting (usually 21+). Therefore, hybrid DFS 2.0 products have been available to 18-20 year old consumers who could not yet legally bet on sports, allowing those operators to tap into a market of young people that sportsbooks couldn’t touch. In fairness, some operators have still limited their DFS 2.0 products to those aged 21+ in some states, even though the legal minimum age for fantasy was 18+ years old.

Can hybrid DFS games lead to gambling addiction?

After breaking down just how difficult it can be to distinguish the difference between fantasy, sports betting and the newer DFS 2.0 platforms, it likely comes as no surprise that these products can also lead to gambling addiction. While they have their differences, what remains the same is that they all involve risking money on sports predictions in hopes of turning a profit with correct picks.

These hybrid DFS games provide opportunities for fans to wager on outcomes just as often as traditional sportsbooks, and simply being something new and different can also lead to more addictive tendencies. Again, these DFS 2.0 platforms have often used an against-the-house structure rather than peer-to-peer, which means professional oddsmakers and analysts are setting prices with their own profits in mind.

Problem Gambling treatment and resources

To help combat the increasing gaming opportunities that are available to fans, Birches Health has assembled a full offering of free educational resources and a team of specially trained clinicians across the country who can help those who may be struggling with a gambling problem. In fact, 90% of Birches Health patients have reported an increase in quality of life following treatment, illustrating the effectiveness of the virtual services provided.

There are many options for taking a first step with Birches Health:

You can also simply call 833-483-3838 or email hello@bircheshealth.com to get in touch directly with the Birches team.