Did Excessive Advertising Lead Fantasy Sports to Become Too Big Too Fast?

Well, things continue to move quickly in the fantasy sports world. Just a few weeks ago we discussed how companies in this industry, such as DraftKings and FanDuel, were thriving with hundreds of thousands of participants and billions of dollars in revenue. At that time, we discussed how marketing was playing an enormous role in the growth of this industry, thanks in large part to the staggering amount these companies spend on advertising.

However, in our post we also noted this industry is coming under increasing scrutiny by the U.S. Federal government and state governments, who are questioning whether fantasy sports is a form of gambling and, thus, should be regulated. It is pretty clear that constant advertising is a major reason this industry has experienced wild growth. But it is also possible the industry would not have captured governments? attention if it had remained a small, niche market and not attracted well-known investors.

And it now seems like government scrutiny is shifting into even higher gear. According to this story from Re/code, another state, New York, has labeled fantasy sports as gambling and has ordered these services to cease activity in the state. As more states move to block fantasy sports, the viability of the industry has to come into question.

Expect DraftKings and FanDuel to respond by denying they are outlets for gambling. Yet, given the constant news about this industry, whether it makes much sense for these companies to continue to spend huge sums on advertising is a question that must be asked.