A small segment of fantasy football providers that advertise huge cash payouts they cannot deliver could force more regulation of an otherwise thriving fantasy industry.
The games, which can charge entry fees in the thousands and offer payouts of as much as $1 million, have caught the attention of Players Inc., the licensing and marketing subsidiary of the NFL Players Association. The organization last month filed a lawsuit against one unlicensed game and has sent cease-and-desist letters to others.
Fewer than half of the roughly 12 high-stakes games on the market have licenses with Players Inc., which requires that licensees send all promotional material to them for approval. Clay Walker, senior vice president of Players Inc., said the roughly 10 high-stakes games offered last year accounted for no more than 5,000 of about 5 million people who participated in licensed fantasy football games. The concern is that the unlicensed providers could create disgruntled consumers and attract negative attention to the industry as a whole.
“We don’t want to get hurt by a small percentage [of renegade leagues],” Walker said.
High-stakes game providers typically advertise prize money based on what the fantasy company hopes participation will be. The provider must make it clear the prize is based on maximum registration capacity and offer a full refund when prize goals are not met. But in an attempt to piggyback the hugely successful World Championship of Fantasy Football, which pays out more than $200,000 in prize money, more and more upstarts are touting maximum payouts they are unlikely to deliver.
One unlicensed provider, Payday Sports, originally promised a $1 million grand prize based on its goal of 600 participants at $3,600 per entry. Only 39 people signed up, Payday President Dave Cella said, forcing Payday to offer refunds to those who did not want to play for a reduced grand prize of $110,000.
“Just about every high-stakes fantasy league this year did the same thing,” Cella said.
Fantasy experts said that is exactly what is drawing negative attention from consumers and diluting the marketplace. As late as two days before the start of the NFL season, after the lower payout had been set, Payday’s home page was still offering registration for its “million dollar league.”
Such liberties likely would not be taken if Payday were licensed by Players Inc., according to Players Inc. business affairs attorney Joe Nahra.
“[Unfulfilled high-stakes promises] could be the black eye that could hurt the industry the most,” said Greg Ambrosius, president of the Fantasy Sports Trade Association and coordinator of Krause Publications’ licensed National Fantasy Football Championship.
Players Inc. executives so far have successfully lobbied Congress to keep fantasy sports out of its definition of gambling. Walker said they don’t want to give Congress a reason to revisit the industry, especially considering the relatively small size of the high-stakes market.
