Skill Or Chance? Question Looms Over Fantasy Sports Industry Daily fantasy sports companies are in a battle with New York's attorney general over the legality of their games. A judge there will weigh in on whether fantasy sports is based on skill or chance.

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Skill Or Chance? Question Looms Over Fantasy Sports Industry

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LINDA WERTHEIMER, HOST:

Today, a New York court will hear arguments from the state's attorney general who says that daily fantasy sports are games of chance, gambling, which makes them illegal under state law. They'll also hear from the industry's largest companies, which insists these are games of skill and perfectly legal. NPR's Nathan Rott reports on a case that has hundreds of millions of dollars riding on its outcome.

NATHAN ROTT, BYLINE: Mike Petta is what you might call a shark in the world of daily fantasy sports. He started playing three years ago just for fun using the old AOL screen name he made when he was 12 as an ID.

MIKE PETTA: I was Hoop2410, and now I'm stuck with it, unfortunately, no going back.

ROTT: The reason Petta says that's unfortunate, well, it's because Hoop2410 is now his full-time alias. He quit his job as an accountant last year, and now the 31-year-old father of two works from his home outside of Detroit playing daily fantasy sports for a living, which is more work than you might think.

How many daily fantasy games are you playing in a day?

PETTA: Anywhere between, like, 500 and 1,000, I'd say, on a daily basis.

ROTT: A thousand entries.

PETTA: Yeah, yeah, different unique contests.

ROTT: Now, Petta doesn't win all of those contests, but he's good enough to win a lot of them. And a lot of them is enough to pay the bills. He doesn't want to say exactly how much he's earned, but it's...

PETTA: Over six figures in the last year.

ROTT: Petta is an elite daily fantasy sports player, a shark, as research and consulting firm McKinsey and Company calls them in a recent report. In that report, analysts found that through the first half of last year's Major League Baseball season, 91 percent of the daily fantasy sports profits were won by just 1.3 percent of the players, people like Petta. Those findings, Petta says, makes the question of skill or chance pretty clear.

PETTA: The people that are good in this industry are winning at a much higher rate than the people that are not as good. So to me, it has to be a game of skill, and I don't really think there's an argument that can be made against that.

ROTT: Dan Eaton agrees. He's a lawyer and professor at San Diego State University.

DAN EATON: When you are talking about daily fantasy sports, this is not gambling.

ROTT: Eaton compares it to the stock market.

EATON: You do research, you analyze the market, you take advice from advisers, and you invest your money.

ROTT: From there, your portfolio is largely out of your hands, just like in daily fantasy sports.

TIMOTHY FONG: In my view, this is absolutely gambling.

ROTT: Dr. Timothy Fong is the co-director of the UCLA Gambling Studies Program.

FONG: One day performance, you have injuries. You could have one player just go completely off that night.

ROTT: All those things, he says, are based on chance, and chance equals gambling. But this is where it starts to get a little tricky. Fong admits that skill also plays a factor in daily fantasy sports, just like Petta, our shark from earlier, admits that chance can come into play for him. So the truth is daily fantasy sports are a mixture of both, and that makes their legal future murky. Darren Heitner is a sports attorney and contributor to Forbes Magazine. And he says that legality of daily fantasy sports will likely come down to state-by-state cases where courts will determine how much skill or chance is involved. And he says that's good for the industry in most cases.

DARREN HEITNER: In most states, you have to show that chance actually dominates over skill.

ROTT: In New York, though, where the court will look at this today, it's different. The bar is lower. New York law says that if the outcome of a contest depends on any, quote, "material degree" of chance, it's gambling. So, Heitner says...

HEITNER: All that the New York attorney general has to show is that chance is a material element to the outcome of these daily fantasy competitions.

ROTT: And boom, it's gambling and illegal under New York state law. Nathan Rott, NPR News.

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