Daily fantasy sites DraftKings, FanDuel could disappear in 2016

As quickly as the daily fantasy sports industry has exploded in popularity, it could just as quickly disappear.

In Week 1 of the 2015 NFL season in September, NFL viewers were bombarded with TV ads from daily sites DraftKings and FanDuel.The barrage hasn’t stopped in the least bit, as during just one NFL game last Sunday, 16 daily fantasy sports commercials were shown.

While advertising dollars are a sign, on the surface, of a healthy industry, there is also the possibility that DraftKings and FanDuel are simply scraping up every last dollar before the industry is shut down by the government.

“In DraftKings and FanDuels’ advertising spending, there’s not a lot of forethought on what’s going to happen 2-3 years down the road,” said Dr. Scott Jones, a professor of marketing at Stetson University (Florida) and an expert in Internet Commerce and Sport Marketing. “The spending on advertising is unprecedented. They are out-spending beer companies this year. Their approach is to spend as much money to make as much money as quickly as possible. That tells me they might know their days are numbered. The way they’re spending, that alarms me and it tells me they might think it’s over.”

Last week, it was reported that the FBI is investigating Boston-based DraftKings. Then the state of Nevada declared daily fantasy sports to be “gambling” and not a game of “skill,” as DraftKings insisted that it was last year in an article published by Metro.On Sunday, Yahoo! – which has been making its own push in the daily fantasy industry – said it will suspend operations in the state of Florida.

“I think the big question now is ‘how many state attorney generals will jump on this,” Jones told Metro. “It’s a matter of reversing precedent [for the AGs]. For the daily fantasy companies, they’respending a lot of money on lobbyists right now too.”

The old school gambling guard – the casinos in Nevada and representatives like Frank Pallone in New Jersey (who called for a Congressional hearing on daily fantasy but pushed for legalized sports betting in Atlantic City) – clearly do not want DraftKings and FanDuel to succeed.

“The old school gamblers, they’re accustomed to dealing with [betting] lines. The millennials – they love control, first and foremost. Fantasy is a completely different animal than old school gambling,” Jones said. “Fantasy players aren’t being told by the casino’s, ‘OK, here’s the line.’”

The NFL itself clearly wants DraftKings and FanDuel to continue their operations. ESPN reported last week that the league has been working “behind the scenes” to prevent a congressional hearing on daily fantasy.

“The 2006 Internet Gambling law put the kibosh on online poker sites and the popularity of that ended quickly,” Jones said. “You’re going to have attorney generals asking, ‘Why don’t we have a law that covers this?’in the next few months. So for DraftKings and FanDuel, the rug could be pulled out from underneath them very quickly.”

Jones added that if the major daily fantasy sites do become outlawed in the U.S. that it is completely possible that the sites could pop up as “off-shore” sites rather quickly.

“There’s still plenty of poker sites, they’re just not as popular. If people want to gamble their money that way, they can do it,” Jones said. “But the business model for daily fantasy could just be challenged dramatically. You’re already seeing new companies get into it in one form or another. Yahoo! moved in. The difference with a company like Yahoo! and one of these companies is that Yahoo! hasgot a nice portfolio to fall back on.”