Is Yahoo Quietly Exiting The Online Gaming And Play-For-Cash Fantasy Sports Marketplace?

 (Author's Update:  On April 21, 2015, Yahoo announced its plan to return to the fantasy sports marketplace with a daily fantasy game, targeted for launch this summer.  A full article on the newest announcement appears here).

While the online gaming marketplace is booming in the U.S., one of its major players seems to be making a concerted effort to end any direct involvement.

With less than two weeks to go before Major League Baseball Opening Day, Yahoo has still not announced the relaunch of its Pro Leagues -- a series of play-for-cash fantasy baseball contests in which Yahoo had previously collected entry fees and paid prizes to fantasy baseball league winners.

Yahoo's seeming departure from the play-for-cash fantasy baseball marketplace follows on the heels of Yahoo canceling its play-for-cash fantasy basketball leagues last November, and closing its free online Texas Hold'em poker gaming portal in December.

Yahoo's decision to scale-back its online gaming offerings marks a considerable change in strategy from just a year ago. As recently as last season, Yahoo offered one of the most popular play-for-cash fantasy baseball contests, which paid prizes to winners at rates ranging from 87.5 of entry fees to 91.6 percent of entry fees.

Yet, this baseball season Yahoo is offering only free leagues and custom leagues -- abstaining from the collecting of money altogether.

Yahoo's seeming departure from the play-for-cash, full-season fantasy baseball marketplace leaves CBS as the best know public company that still collects entry fees and pays out prizes in fantasy baseball leagues.  However, CBS's payout rate has always been far below that of Yahoo.  This year, CBS is paying just $150 in prizes for 10 team leagues with $24.99 entry fees -- a payout rate of just 60 percent.

One reason for Yahoo's likely departure from the play-for-cash fantasy baseball market may involve the legal risks involved in online gaming.

While some members of the Fantasy Sports Trade Association have proclaimed that risks to their games only exist in five states (Arizona, Iowa, Louisiana, Montana and Washington), such a view is sophomoric. Rather, even full-season fantasy sports and other forms of primarily skill-based gaming may carry some legal risk in additional states such as Arkansas, Florida and Tennessee.

Given these legal risks, albeit seemingly manageable, Yahoo may truly prefer to sell advertising space to other companies that offer online paying and play-for-cash fantasy sports.  Indeed, for now it seems Yahoo is scaling back to offering just free games: a variety that carries even less legal risk.

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Marc Edelman is an Associate Professor of Law at the City University of New York’s Baruch College, Zicklin School of Business, where he published “A Short Treatise on Fantasy Sports and the Law.”  He also is a fantasy sports attorney and legal consultant for a wide range of sports and gaming companies.  Nothing contained in this article should be construed as legal advice. Follow him on twitter @MarcEdelman