Star Fantasy Leagues Giving Traditional Sports Betting a Run for its Money
ROCHESTER, N. Y. -- The hottest things in sports right now are commercial sports fantasy leagues, where fans of major sports can create and manage their own imaginary teams and, in the process, earn cash prizes depending on the teams' success.
And it's all legal, because the Federal government of the U.S. has officially decreed that participating in fantasy sports involves skill, not luck, so it's not considered gambling.
Football is by far the most popular sport when it comes to fantasy leagues, but leagues for basketball, baseball, hockey and soccer are also quickly gaining a following not just in America but around the world.
One of the most successful fantasy leagues around is called Star Fantasy Leagues (www.starfantasyleagues.com), which is based in Rochester, N.Y., and run by a young entrepreneur named Seth Young, who is the company's chief operating officer.
Gambling 911 caught up with Young last week at the Star Fantasy Leagues headquarters in Rochester and asked him, among other things, why fantasy is becoming so popular, who's playing it, how much you can win and why the company is located in an obscure small town in upstate New York.
Here is a transcript of that interview:
Gambling 911: How does does Star Fantasy Leagues work and how is it different from the many other fantasy leagues out there? What states and countries are you legal in and how do you stop players who are not in those locations from joining? And what is the age limit to join and how do you verify that?
Seth Young: Star Fantasy Leagues is a daily, weekly and season-long fantasy sports website that offers individuals a platform to play fantasy sports for money in the United States and Canada. The daily and weekly contests are salary cap-style games, meaning the individual customer acts as the general manager for a virtual fantasy team, drafting different players from each day's or week’s contests to make the best team they can while staying under the allotted salary cap. Whoever gets the most points wins the most cash. The SFL season-long contests are traditional season-long fantasy leagues. Individuals draft a team at the beginning of the sports season, then manage that team throughout the entire season. You can trade, add players from the waiver wire, drop players, manage your team easily and play for real money against your friends in private leagues or challenge like-minded opponents in public leagues.
Star Fantasy Leagues is one of the only places in the world where you can play daily, weekly and season-long contests in one place, and the technology that powers the games is outstanding. In the U.S., the contests offered on SFL are considered skill-gaming contests under the 2006 Unlawful Internet Gambling Enforcement Act, therefore not subject to Federal gambling law. However, each state views real-money gaming differently, and SFL does not operate within the borders of states who may consider these games to be illegal gambling or illegal lottery.
At the point of registration, SFL collects information from customers that is used to verify the age and identity of the registrant through IDology, an industry leader in age and ID verification technology. In addition to SFL's own geolocation checks, SFL is also provided with geolocation data from IDology at the point of registration. Through IDology and other business methods, SFL is able to effectively pinpoint the age, identity and location of each customer, and through performing geolocation checks on each customer session login, we are able to prevent users from playing within the borders of prohibited jurisdictions. You must be 18 to play in the U.S., except for Alabama, where you must be 19. You must also be 19 to play in Canada. This sign-up process and focus on compliance on all state levels is one thing that sets SFL apart from other fantasy operators providing a similar service. This process and others are in place to prevent underage gaming and ensure each user only has one account, allowing us to claim we have the fairest real-money fantasy contests on the web, true skill games where everybody starts from the same level playing field.
G9: How much does it cost to join and what do you get for your money?
SY: It’s free to join and you can even win real money without making a deposit by playing in SFL freerolls or by playing for Star Points, the SFL virtual currency. If you earn enough Star Points, you can use those points to join larger real-money contests. It’s not all about the money, though. Fantasy sports games are a ton of fun to play against your friends for bragging rights.
G9: Why is Star Fantasy Leagues legal and why isn't it considered gambling? Is there really any difference between guessing which team will have a good day and win a game, which is gambling, and guessing which players will have good days, which is legal fantasy play?
SY: The 2006 UIGEA specifically carved out fantasy sports as a game of skill, and in our contests that’s truly what they are. Fantasy scoring is calculated much differently than traditional sports betting. There are a ton of individual player stats and factors to measure when crafting the lineup you’d like to enter into a contest, and you’re going to draft your teams differently for different size contests. It’s like comparing apples and oranges. I’m not saying that sports betting doesn’t have its own skill involved, but building a lineup for fantasy sports can require a different analytical model. Some of the highest volume fantasy players do some really interesting predictive modeling to craft the most optimal lineup for every individual day or week in each individual sport and each individual contest. A good way to describe the skill involved is comparing it to analyzing trends in the stock market, then executing your picks based on your knowledge of each individual player, their matchups, weather factors, contest size, you name it. As a matter of fact, I’ve written a book about how one might approach drafting a fantasy team for fantasy football contests, and the SFL chief executive officer Zach Stanley has written one for basketball. Both will be published shortly.
G9: How did you get into the fantasy sports business? Can you tell us about your personal background?
SY: I started my first business online at the age of 13, designing and hosting websites in the early days of the web. One of my first websites was a fan page for the New York Saints, which I parlayed into an internship with the team. I was able to learn a little bit about the business of sports and then went to college at Brandeis University with the aim of attending law school. I helped design a special Internet Studies program at the school and stayed abreast of the changing technology landscape while I pursued a degree in political science. I was then accepted to St. John's University School of Law, which I attended for a year before withdrawing to pursue an opportunity with TexasHoldem.com, which at the time was growing in size as poker boomed. Around 2011 I started buying domain names related to fantasy sports with the intention of developing the affiliate market and owning the search traffic for all terms related to the market. In late 2012 I began speaking with Zach Stanley, the CEO of Star Fantasy Leagues, and we came together to bring SFL to the next level. Together we have roughly 500 fantasy sports domain names and we’ve been developing these properties alongside the SFL product.
G9: How is Star Fantasy Leagues preparing to compete against the commercially successful DraftKings and FanDuel? Both companies have attracted significant investment monies recently, so is Star Fantasy Leagues preparing to do the same?
SY: Star Fantasy Leagues recently closed on a significant investment with International Investment and Underwriting, founded by Dermot Desmond, who is one of the world’s most prominent businessmen. We welcomed the chance to work with him and his team to shape the landscape of fantasy sports. We operate a real-money fantasy sports platform at StarFantasyLeagues.com, but we also license our technology to groups who are interested in offering a fantasy sports game to their existing audience. Last year our trade association, FSTA, revealed that 41 million people in the U.S. enjoyed playing fantasy sports, and we believe that number will grow exponentially to the hundreds of millions as knowledge of these games expand globally. We believe our focus on legal compliance and building scaleable, flexible technology gives us an advantage to easily work alongside groups around the world who also value this approach. We have an incredible platform built by talented people to offer a second screen experience for sporting events. As long as there are sports there will be fantasy sports, and we’re very comfortable with our approach to the market.
G9: You attended the G2E Conference in Las Vegas this year. What was the overall reaction to fantasy sports? MGM has said they want to offer a fantasy product. Do you believe the gambling industry is embracing fantasy? Do they get it?
SY: G2E is always an incredible spectacle. Fantasy sports are extremely fun, but it’s also big business. I think it’s fair to say that there are plenty of eyes on the market.
G9: What has been the growth rate of your business since last year? What is the driving force behind that growth? Has the media coverage fantasy is getting this season translated into a boost for your own business? And how many paying customers do you have right now?
SY: We’ve grown in a major way in the last year and that doesn’t appear to be slowing down. While some operators have invested heavily into marketing their own brand, we’ve invested heavily into our technology to ensure that it is scaleable and flexible for us to work within the gaming rules of any jurisdiction. We made a choice to walk before running to make sure that we get it right and can grow without looking over our shoulder, so to speak. Fantasy sports have been around for a long time and we’ve been focused on creating the best way for people to continue to enjoy the games they love, while building deliberately to ensure that we can easily adapt our technology to work within the ever-changing global landscape of gaming. The media coverage has been nice, and that’s largely due to the investments being made into the space by groups who understand that sports are global and have always had staying power. Fantasy sports are enjoyed by so many people, and our primary focus is and remains to build and maintain best in class technology that can continue to be introduced to new audiences.
G9: What is an average fantasy player worth? How much will he or she spend on daily fantasy games in a given year? How does this compare with season-long contests?
SY: There’s no hard and fast answer to this. Plenty of people enjoy playing for free just to have new people to root for every week. Plenty of people play in fantasy sports within their office or against their friends for bragging rights and plenty of people just play for the camaraderie. Other people see this as a serious way to make money, since they believe their sports knowledge is strong enough to beat the average player in a contest, and some can spend tens of thousands of dollars in entry fees on any given day or night in fantasy sports contests. Our platform allows us or any partner the opportunity to build a business by monetizing all types of customers without compromising the gameplay for the individual player using the software. In some instances a free player can be worth more than a paying player, and vice-versa. At this point, it’s generally accepted that of the 41 million people that played fantasy sports last year, under 5% of them engaged in daily or weekly contests. That’s one of the reasons we’ve decided to integrate a season-long platform to our website, and we’re continuing to build in new gameplay elements that will help introduce a traditional season-long player to the daily and weekly games.
G9: Can you compete with the likes of ESPN and Yahoo! should they enter daily fantasy sports, as is rumored?
SY: We have a competing season-long product, but in a lot of ways it’s already more flexible than what they offer, and we’re continuing to make it better every day. The beauty of a large consumer base means that every customer has a choice where they’d like to play, and we remain committed to providing a world-class game experience.
G9: Would it make sense for a fantasy company like Star Fantasy Leagues to team up with an online sportsbook partner, such as Bookmaker.eu or Sportsbook.ag out of Costa Rica or one of the European books such as Paddy Power of Ireland or William Hill of the U.K.? Such a partnership would give you a ready-made customer base of sports-betting fanatics, so have any such companies approached you or vice-versa?
SY: I think everybody in gaming sees the value in having a fantasy sports product for their business and we’re uniquely positioned to provide the best technology for the market both on the front end for the end user and on the back end for any technology partner. We’ve left no stone unturned when building the product, it’s top level from front to back.
G9: You are based in Rochester, New York. Why there? And are you considering branching out into other locations?
SY: Zach and Justin Stanley, the two founders of Star Fantasy Leagues, were born and raised in Rochester. They started the company with capital inherited from their late father and grandfather, who were both prominent businessmen in this city. Fact is, it’s a really great place to build a business. Every single member of our development staff hails from Rochester Institute of Technology, which is regarded as the one of the best, if not the best, computer science and software engineering schools in the country. The standard of living here is very high and market rate for extremely talented employees is a fraction of what you’d pay in New York City or San Francisco. Rochester offers a completely different lifestyle, and the people that work at Star Fantasy Leagues all share the same vision. Our entire staff is headquartered here in our gorgeous office and the city is important to us.
G9: What do you see as the fantasy highlights thus far of 2014, both the highs and the lows? For example, what players have crushed your customer base and who are the big money-makers so far?
SY: It’s NFL season right now, and that’s extremely exciting week to week. NHL just started. NBA starts in a matter of weeks. The best part about our weekly contests is the fact that you can draft a new team every week, so injuries play less of a factor in crafting your lineups throughout the season. Player injuries also makes for an extremely interesting season long dynamic, as you have to be skilled enough to pick and choose who you pick up from the waiver wire, who you trade for and who you start week to week. There are different types of skill involved for different types of contests. Adrian Peterson’s legal troubles, for example, would not necessarily affect you in a weekly contest. In a season-long contest, though, he may have been a high-round draft pick for you. I don’t buy the argument that one injury can ruin somebody's entire fantasy season. These are things you have to think about when you draft high-value players. One of this year’s highlights so far has been seeing DeMarco Murray obliterate his competition, he’s on pace for a record-setting season. I happen to be a DeMarco Murray owner in almost all of the leagues I’m in, so I’m enjoying that.
G9: What is the most money anyone has ever earned playing in the Star Fantasy Leagues?
SY: We have players who have won well into the five figures across some of our contests. It’s a lot of fun to join a game every day for a few dollars, sit down to watch sports as you normally would and have something else to root for besides your favorite team winning. Even if you don’t win, it’s hard to argue that it’s not worth less than the price of a beer to buy in to one of these contests and enhance your experience as a fan.
G9: Do you have many female players? What percentage of your customer base is female? Are there any significant differences in the way female customers play fantasy as compared to male players, as far as strategy, tactics and expectations are concerned?
SY: We certainly do. Women love sports as much as men do. My wife is a bigger hockey fan than most people I know. I wouldn’t say I’ve seen a difference in how men and women draft their lineups, if that’s what you’re asking. Every individual has their own strategy. I wouldn’t say gender is a factor.
G9: What is the basic demographic of your paying customer? If it mirrors the demo of the average American sports bettor, it would be white and male with a high level of education and income, although the age for fantasy players would be lower on average than the age for sports bettors. How accurate is that assessment?
SY: For some higher-volume paying customers that may be a fair assessment, but fantasy sports are so broadly enjoyed that the demographic for our games is really anybody that’s a sports fan and eligible to play in our contests. The demographic really runs the gamut.
G9: Where do you expect fantasy in general and your company in particular to be a year from now? Do you expect legal sports wagering to become more widespread in the U.S. in the coming years? If you do, how would that affect fantasy?
SY: I think you’re going to see a much bigger market for fantasy sports than you see today, as these games expand globally, and see a market that’s much larger domestically than it is today, as daily and weekly games gain awareness. They’re undeniably fun to play. In the event legal sports wagering becomes more widespread in the U.S., I would see fantasy sports existing side by side with it. There are some obvious parallels with the sports betting demographic, but it’s an entirely different dynamic than traditional sports wagering. As for us, we’ll be here doing what we do best--continuing to create the best fantasy sports experience in the world.
By Tom Somach
Gambling911.com Staff Writer
