New version of DFS coming soon to racetracks, casinos?

Vegas could soon be seeing another form of daily fantasy sports emerge. Doubble Troubble/Getty Images

A Hall of Fame bookmaker and a former executive consultant for Del Mar Thoroughbred Club are teaming up to offer a new version of daily fantasy sports, based on an old form of betting (pari-mutuel wagering), that could be coming to a race track near you.

It's called U.S. Fantasy, and it could be the next iteration of the game in the United States -- one that will embrace, not shy away, from its gambling roots.

"There are no legal definitions anywhere of what fantasy sports is," said U.S. Fantasy commissioner Mike Knapp. "Everybody's version of it is a little bit different."

Knapp, a veteran of the Nevada sports betting industry, is an avid fantasy player and a lifelong horse player. He came up with his version of pari-mutuel fantasy sports roughly 10 years ago while consulting for racing officials in Montana. Knapp wanted to build off the popularity of the prop bets associated with the Super Bowl, but make it simpler and friendlier to the novice bettor. During his decade as sports book director at Harvey's Casino in Lake Tahoe, Nevada, Knapp had noticed once-a-year bettors getting turned off by how the odds were presented on matchup prop bets, with one player being, for example, a -150 favorite over another.

"I would explain to them that you had to bet $1.50 to win a $1 on the favorite, and they'd look at you like you were screwing them," Knapp said. "The public's desire over the last 25-30 years has moved toward bet-a-little-win-a-lot propositions."

Knapp developed mock odds with potential payouts and pitched the idea to the Montana officials and later to his connections at Del Mar with no success. The idea was on the shelf in recent years, before the explosion of daily fantasy sports and two legal clarifications in Nevada convinced Knapp to go see an old friend -- longtime Nevada bookmaker and gaming executive Vic Salerno.

The concept is simple: Imagine the odds on a horse race, posted on the screens at the racetrack or casino, but instead of horses there's a field of NFL quarterbacks, each with their own odds on who will throw for the most yards on a Sunday. You can bet on a quarterback to win, place or show. Pick-sixes and exactas can be created using other races like, for example, which running back rushes for the most yards. The end result is that you'll put up money in an attempt to win money by picking which players will produce the best statistics on any given day.

In October, the Nevada Gaming Control Board and state Attorney General Adam Laxalt ruled that daily fantasy meets the state's definition of a sports pool and would require a gambling license to operate. Earlier in 2015, Nevada passed gaming legislation clarifying that the state's licensed bookmakers were allowed to operate in other legal jurisdictions.

Salerno, a 2015 inductee into the American Gaming Association's Gambling Hall of Fame, saw an opportunity and recently became the first to apply for a gaming license -- one that will allow him to offer Knapp's version of daily fantasy. He hopes to have the licensing process completed by July, at the latest, he and plans to launch U.S. Fantasy in time for the 2016 NFL season.

While he awaits a license -- he also has a patent pending -- Salerno has been networking with racetracks in other states. He has spoken with tracks in California, Oregon, Minnesota and other jurisdictions that already have or are in the process of putting laws and regulations in place for daily fantasy sports.

"It's all been positive feedback," said Salerno, who also serves as Chairman of the Board for William Hill US. "Literally, we could go and do this tomorrow. The laws are already written -- regulations that have worked (in Nevada) for 70 years and with pari-mutuel for 60 years."

Salerno ran Leroy's Race & Sports Book for decades in Las Vegas, and he was one of the industry's pioneers in computerized bookmaking and odds-tracking systems. In the late 1990s, he introduced a similar form of pari-mutuel sports wagering called MegaSports. It was ahead of its time and didn't take off for a number of reasons, largely because it was only available in Nevada where traditional sports betting has a strong foothold.

"I believe the original product was ahead of its time, but even then [it] would have been a huge success in any other jurisdiction that didn't have sports betting," Salerno explained.

With the sports betting market evolving and expanding in the U.S., Salerno and Knapp believe the time is right for their version of daily fantasy to succeed -- and it will also position them for a time when traditional sports betting becomes legal in the U.S.

"Now, I'm not saying that sports betting would kill it (daily fantasy)," Salerno said, "but it sure as hell would be the 800-pound gorilla. That doesn't hurt us, though, because we can easily do both, and [we] have a little experience in bookmaking."

The pari-mutuel format does have its detractors. The odds fluctuate as money is bet into the pool. You may bet Tom Brady to have the most passing yards at 4-1 odds, but if Brady's odds drop to 2-1 before kickoff, your payout will be reflected. The takeout -- the amount of money from the pool kept by the operators -- can also be steep.

Salerno says US Fantasy aims to have takeout of around 10 percent, and he believes the pari-mutuel model is a better fit for daily fantasy overall. In the daily fantasy games currently offered by companies like DraftKings and FanDuel, the vast majority of the winnings are collected by a small percentage of elite players.

"In our model, it feels like 80 to 90 percent will get some money back," Salerno said. "It's almost the opposite of their model."