Fantasy Football: The Beauty of Capitalism and the Dangers of Government
We are in the midst of the NFL preseason, which means its fantasy football draft-time for the tens of millions who play fantasy football every year. The growth of the game is truly extraordinary, not only has it become a major device for growing public interest in professional football, but its revenue is now higher than the NFL’s.
Unfortunately, the success of fantasy football has made it a perfect target for politicians and government bureaucrats looking to either get a slice of the pie, or outright ban their constituents from enjoying fantasy products on Sunday. Proving once and again that nothing is sacred to government, not even football.
Just as the success of fantasy sports is a perfect illustration of how wealth is made by serving the demands of customers, the resulting meddling of politicians is a great example of how interventionism leads to wealth destruction.
Fantasy Football and Capitalism
Ludwig von Mises described capitalism as “a social system of consumers’ supremacy,” and the incredible growth of the fantasy industry is a testament to the economic power of consumers.
With an estimated 57.4 million players this year in North America alone, a whole generation of fantasy sports-entrepreneurs have risen to offer a variety of products for fans of all sorts. While most of the fantasy industry headlines have revolved around daily fantasy leagues, such as Fan Duel and Draft Kings (which took in over $3 billion in entry fees last year), these only represent a portion of the various products and services that have emerged on the market.
For example, many fantasy players are still drawn to season-long leagues, usually formed by a group of friends competing against each other. Since many of these leagues involve some sort of entry fee and championship prize, the site LeagueSafe.com emerged as a way to specifically facilitate easy money collection and distribution.
And because everyone who puts money in fantasy football wants to win their league, an industry has emerged for fantasy football analysis, offering recommendations for how players should build their teams. In fact, an entire market has emerged for players to be able to buy full fantasy lineups for daily leagues.
The fact that individuals are able to make a living doing nothing but writing about fantasy football is a testament to the wonders of the division of labor that emerges from a free market.
As Mises wrote in Planning for Freedom:
Laissez faire does not mean: let soulless mechanical forces operate. It means: let individuals choose how they want to cooperate in the social division of labor and let them determine what the entrepreneurs should produce. Planning means: let the government alone choose and enforce its rulings by the apparatus of coercion and compulsion.
It is only because the fantasy football industry has, at least until recently, been largely untouched by government that this sector has been able to thrive as well as it has. Can you imagine how many fantasy football sites would be able to operate if required to pay every writer $15 an hour? Would LeagueSafe be able to operate if forced to abide by thousands of pages of financial regulation? If a Department of Fantasy Sports attempted to homogenize the various league rules, in the name of “consumer protection,” it would probably mean the end of specialized products like MFL10 leagues, or “devy-leagues.”
The richness and diversity of the fantasy sports product is a wonderful illustration of what entrepreneurs can produce when allowed to do so.
Fantasy Football and Intervention
Unfortunately, the success of fantasy football has drawn the attention of government’s parasitic class. Since the government relishes in taking away consumer choices in having a good time — as evidenced from laws on sex, drugs, and sometimes even rock and roll — various state governments have taken action against the fantasy industry, and in particular daily fantasy leagues, leading to the industry pulling out in certain states.
Today, for example, is the first time residents in New York have been able to play daily fantasy leagues since the New York attorney general shutdown the games last November. Of course, the natural byproduct of state interference in the industry has been a growth in fantasy lobbyists. Any American concerned about the corruptive power of money in politics should look at what has happened in the fantasy sports industry and recognize that its the direct result of government intervention in an industry.
The episode is reminiscent of the early days of Microsoft, when Bill Gates used to brag that he was from “the other Washington” and the industry giant having little presence in the nation’s capital. This changed quickly when the Clinton administration went after the company for alleged “antitrust” violations, leading to Microsoft now having an army of lawyers and lobbyists stationed on K-Street.
Similarly, as government meddles more and more in fantasy sports, the money invested in lobbyists and politicians grows. And just as Microsoft used their bought political clout to go after rivals, many of the legislative efforts pushed by the new “Big Fantasy” help protect established industry leaders. For example, several states now require expensive licenses to operate daily fantasy leagues, which means higher barriers of entry for potential new services. In fact, the legal hurdles have become so treacherous that Fan Duel and Fantasy Kings are now discussing a merger.
Thanks to government, what once was a competitive market may essentially become a daily fantasy monopoly.
Or, as Mises put it in Human Action:
The monopoly problem mankind has to face today is not an outgrowth of the operation of the market economy. It is a product of purposive action on the part of governments. It is not one of the evils inherent in capitalism as the demagogues trumpet. It is, on the contrary, the fruit of policies hostile to capitalism and intent upon sabotaging and destroying its operation.
The success of fantasy sports is the perfect illustration of how capitalism unleashes innovation, and how government can manage to ruin anything it touches. Hopefully these new rules and regulations will satisfy most of the government busybodies who want to control fantasy football. Unfortunately, having followed both fantasy football and politics for several years now, there are two things I believe you can count on: government will continue to meddle, and Jamaal Charles won’t finish a 16 game season.