For Underdog Fantasy, there are plenty of things going right. The app continues to grow in popularity. This year, the Underdog Fantasy Best Ball contest featured a $15 million prize pool, setting the record for the biggest fantasy sports contest in history. In many states, Underdog is leading the fantasy field.
However, it is the legal issues Underdog Fantasy is facing that dominate the headlines. States are reconsidering the nature of their DFS laws and questioning whether a game in which players select over or under athletes’s statistical performances qualifies as fantasy or should be categorized as sports betting.
Editor’s note: This interview has been edited for clarity and length
Underdog Fantasy CEO Jeremy Levine spoke with SBC Americas about the increasingly contentious relationship between DraftKings and FanDuel and why he believes these operators are hellbent on shutting down this category of DFS. He also gives some insight on the company’s plans to eventually cross over into the sports betting space.
SBCA: Underdog Fantasy is really pushing to grow but you are obviously doing it during this very contentious time when it comes to DFS. How do you balance aggressively growing with being mindful that the regulatory situation is somewhat tense?
JL: I’m definitely spending more of my time than I wish on not focusing purely on our product and our customers, but we definitely don’t have any plans to slow our growth. Customers enjoying our products is what we build for and is the best thing we can do. Unfortunately, we’ve got two adversaries who are putting a lot of energy, effort, and resources into trying to oppose us that we’ve got to make sure that doesn’t happen.
That was a big part of the reason to come out publicly with with open letter that I did, just to make sure people understood why this was happening. You’ve had them now for a year really focused on trying to get our category shut down. The Florida one is obviously really interesting because that should encompass them but it doesn’t. And other than that, they’ve gotten Wyoming and Maine to send letters. A couple of the cease and desist, I think Maryland and West Virginia ones, were 2021 from before we had a legal team, and if we had the legal team we have now we’d be offering in those states.
(Editor’s note: There have also been steps taken in Michigan to limit prop-style fantasy, but Underdog does not operate there. Earlier this week, New York also adopted potentially limiting DFS regulations that Underdog plans to consult with regulators in the state on)
SBCA: What do you think is the biggest misconception about the pick’em product Underdog offers?
JL: The simple biggest misconception is the one FanDuel and DraftKings always try to spread that this is betting…The way almost every single sports betting law works is that it explicitly states if something is fantasy sports, if a contest is fantasy sports, it is therefore not betting…It can’t be both by letter of the law. As an example, you could take the salary cap format game, that FanDuel DraftKings offer and you could put it in a sportsbook and operate it as sports betting there that does not make the other incarnations of it sports betting just because you can put it in a sportsbook
Then the question is, what is fantasy sports? Well, for something to be fantasy, it’s got to be a game of skill. And we’ve got the same skill research and the same statistician who did it for DraftKings saying it is more skillful than the DraftKings salary cap game. It’s got to be based on cumulative player statistics for more than one team, which our games very, very clearly are. We’re doing what the laws they wrote say, so what’s the issue? Well, the issue is that we’re way bigger than them in fantasy today because they haven’t innovated and they know that we’re coming for sports betting and more. And they know what that looks like because we’re way bigger than they were when they started coming for sports betting five years ago. We have way more active customers and we’ll do way more revenue this year than they did five years ago.
SBCA: On that note, why do you think the Underdog product has resonated so much with people even in states where they could go sports bet if they wanted to?
JL: The answer is simplicity and better customer journeys for a set of things customers want to do. The whole thesis why we started Underdog is we believe there was so much more to be built for sports fans in America, and if we could be the best at building products, we could build the biggest company in this space. The sportsbooks that FanDuel and DraftKings offer, which are great sportsbooks, are the same products that were built for the UK and Europe. Those customers are totally different than the American consumer. The biggest difference is we didn’t grow up betting on sports in America. We grew up playing games. Sixty million people a year play some form of fantasy. There are all these ways we’ve created to express our opinions on sports and increase our enjoyment with sports that are totally distinctly American. As a result of that, we care a lot more about players and stats whereas overseas there’s a lot more loyalty to the teams.
If you think about the products we build, they’re focused on players and they’re more like playing games. That’s the intent even as we build sports betting products, it’s to build products that feel more like games rather than placing a transaction. We think FanDuel and DraftKings Sportsbooks are the right product for the top 1% of hardcore customers who know how to navigate it. But if you think Steph Curry is going to have a good game tonight, you land on FanDuel and you haven’t been there before, you don’t know how to navigate it. Good luck. Right? You’ve got to navigate market seven clicks deep and end up on a page of Steph Curry props and you’re paralyzed by choice. I just think he’s gonna have a good game because his wife’s in the crowd or he’s playing his former team, whatever the narrative. I can’t be confident there. I’m not going to enjoy that experience. That’s trading. That’s financial. We want it to be games and our products do a great job with that today and, hey, if you think if you think Steph Curry is gonna have a great game, it’s really easy to express that opinion on Underdog.
SBCA: You’ve mentioned a couple of times that the plan is to get Underdog involved in sports betting. What are the company’s plans in that space?
JL: The plan long term is to be the biggest company in the space. The plan is to continue to build all of our own technology and product and really think about, if you’re building a sports betting platform for Americans in 2023, what would that be? And the answer is it would be something entirely different thanwhat was built for customers in the UK 20 years ago. And the companies we’re competing against, they took the product that was built for 20 years ago for a different customer.
SBCA: Are there states and a timeline in particular that you are targeting?
JL: Next year. Don’t want to comment on the state yet.
SBCA: Pick’em is what is drawing the headlines but Best Ball has been a huge success for Underdog. Why do you think it has it been so popular?
JL: I think it is way overlooked. In the third year of our company’s history, we ran the largest fantasy tournament in the history of fantasy sports by $5 million, by 50% larger than any other fantasy tournament ever.
At my last company, Draft, we were serving fantasy customers and had this draft-based game and would always ask people what’s your favorite part of fantasy? Sometimes you would say winning, but if it wasn’t winning, it was the draft. And we said hey, why don’t we build this game just around the draft? And so we built Best Ball, which allows customers to do a draft and then, after the draft, have nothing they have to do. No management.
So it really beautifully becomes this game that casual players love and more and more are playing because if you do a season-long fantasy the management isn’t the fun part, and often people don’t come back to manage and that ruins the league. This solves for that. But also hardcore players who want to do tons of drafts in the offseason. They can do that too, because it’s a time-capsuled events. We have customers who do thousands of them.
SBCA: In salary cap fantasy we’ve seen that pros who enter tons of slates have made it difficult for amateurs to come in, succeed, and enjoy it at a casual level. Is that the case at all in Best Ball?
JL: I was running a company StarStreet, which in 2014 was the third-largest salary cap daily fantasy sight. And that’s when FanDuel or DraftKings really started their ad blitz and I knew the amount they were raising. And I saw the issues with that game where it was really hard for someone new to come on and have a good experience and win. It took a lot of time, it was a really hardcore experience. And ultimately, just thought that wasn’t the right experience for a large set of customers and didn’t think there would be three companies that would be successful doing exactly that.
I had this vision for a different game. This was the heyday Words with Friends, so the impetus for Draft was Words with Friends for fantasy. More social, less hardcore. Ultimately, what the data showed is your chances of winning on Draft were three times better than on FanDuel or DraftKings. It was easier to win because on the salary cap format, you need to know every single player and that one injury you may not know about may be the minimum price play you have to play that unlocks the rest of your budget and the ability to get superstars. It’s kind of bottoms up, where you need to know everyone. A snake draft, you’re starting from the top, so you need to know the best players. You don’t need to know that backup running back who may be starting to be successful in it.
SBCA: Last question. You’ve said fantasy sports is clearly not sports betting. Is fantasy sports gambling?
JL: Great question. Legally? No. Colloquially? It’s for people to determine. If you go to play a game of golf with a friend and bet money on it, is that gambling?
If you say yes, you may say that real-money fantasy sports are. If you say no, it’s probably because, per the terminology of the laws, it is not. And if you say that is not, then fantasy sports is not.
The SBC Americas editorial team discussed this interview and the status of DFS in the US on an episode of iGaming Daily: