Don't Let Fantasy Sports Tackle Wallet

Odds are, as you read this, people you know may be poring over statistics, obsessively reading expert analysis and plotting against friends, family and strangers all over the country. No, they're not trying to become the next Bernie Madoff; they're just excited because it's fantasy football time again. But could they also be in danger of putting their finances on the injured list?

For most people, fantasy sports offer harmless, relatively inexpensive fun, says Marcus DiNitto, managing editor of

"If you are disciplined enough to not get yourself in trouble and not to chase your losses, and you treat things as an entertainment expense, and you sort of build that into your budget, then I think it's justifiable," DiNitto says.

However, fantasy players can find themselves in dangerous territory if they aren't careful. Leagues can be expensive, and it's easy to spend recklessly or run afoul of tax law.

And if players become so wrapped up in fantasy sports that it eats into their productivity at work, it may even put their jobs at risk, says Judy Lawrence, author of "The Budget Kit: The Common Cents Money Management Workbook" and publisher of The Money Tracker Web site.

"If someone else is having to pick up the slack on your team, or someone's having to cover for you, that's going to have some kind of an impact on co-workers and ultimately ... on your career," Lawrence says.

Ballpark Numbers

In fantasy sports, fans across the country form leagues and draft real-life players from their favorite games -- from baseball and football to basketball and hockey -- to become part of their "fantasy" team for that specific sport.

These fantasy teams then compete against each other on a weekly basis. Real-life statistics are used to compile points. For example, a fantasy team owner who drafts quarterback Peyton Manning will score points in his or her fantasy league if the real-life Manning throws touchdown passes during that weeks' NFL game.

At the end of the season, a champion is crowned based on how the fantasy teams performed during the year.

In a few short years, fantasy sports have gone from a fringe hobby for sports enthusiasts to a staple of countless water-cooler conversations. An Ipsos study commissioned by the Fantasy Sports Trade Association found 27.1 million Americans played fantasy sports in the sports seasons stretching from 2007 to 2008.

For fans, it's easy to see the appeal behind this massive growth. Fantasy sports transform an average Joe or Jane into a combination of coach and general manager. Fans get to pick their teams from a star-studded list of their sport's best players and decide who to play and who to bench on game day.

As with most hobbies, the cost of playing fantasy sports is largely up to the individual. The Ipsos study found the average fantasy sports player spent $467.60 per year playing in an average of six leagues from various sports.

"There's a full range, from a few dollars to several thousand dollars," DiNitto says. "The average fantasy player is probably playing in leagues with entry fees from $50 to $100. Some leagues have transaction fees if you add or drop a player. To pick up a free agent, it might cost you a couple dollars."

Fantasy sports enthusiasts who want to start their own leagues may have to pay a little more upfront, DiNitto says, but league "commissioners" can then recoup the cost when they sign up the other fantasy owners in their league.

Many popular fantasy sites -- including Yahoo,, and -- offer free versions of their statistics-based games.

"You can play for free for an entire season," says Jeff Thomas, founder and CEO of World Fantasy Games, which recently launched the new fantasy Web site "Half of players generally play free."

Players who don't mind paying extra can "get all the bells and whistles," DiNitto says. These perks may include real-time scoring, customized video highlights, detailed statistics and expert advice.But for most fantasy football sites, a shot at a hefty cash prize is the most expensive premium feature. Many pricier niche leagues owe their high price tags to a significant pot of gold for winning players at the end of the season.

"There are high-stakes competitions where it might be $1,500 (entry fee) for a team and they have a $300,000 prize," says Thomas.

Many fantasy players also create informal pools or prizes for the league's winners, similar to the ubiquitous office pool for the NCAA's March Madness college basketball tournament. It's important to note that such pools aren't officially sanctioned by fantasy Web sites, says Thomas, so don't expect the sites to take any part in these sorts of friendly wagers.

Fantasy Sports, Real Cash

To Uncle Sam, fantasy sports are strictly entertainment, not gambling. The Unlawful Internet Gambling Enforcement Act of 2006 specifically exempts fantasy sports from legally being considered gambling.

Still, for many, fantasy sports hold an allure similar to gambling, DiNitto says.

"You are risking a certain amount of money with a chance of making more money and you're risking that on the outcome of a sporting event," he says. "If that's not gambling, I don't know what is."

People who play fantasy sports and restrain their spending to the annual average of $467.60 shouldn't experience significant financial distress. However, it's all too easy to let spending get out of control. That's why it's important to fit fantasy sports into your budget the way you would any other expense, Lawrence says.

"If you have some sort of a budget in place and you know what your other obligations are, then you can also factor in (fantasy sports)," Lawrence says.

While you may be comfortable with your fantasy sports outlay, the spouse may have different ideas if your $1,500 fantasy team comes in dead last -- especially if he or she finds out after the fact.

"Is this an open activity or is this a secretive activity?" Lawrence asks. "Are you honest about the amount you actually spend or are you fibbing on the actual amount?"

Fantasy players who spend amounts that significantly dent the household budget are headed for friction, especially if they haven't been upfront with their partner, says Lawrence.

Lawrence says an open and honest conversation about any money spent on fantasy sports can help avoid a blowup later on.

"It's critical that there's some kind of conversation or understanding with that partner," Lawrence says.

Avoid Getting Flagged by The IRS

Once you've alerted the spouse to your fantasy activities, don't forget to inform one more person: Uncle Sam. The winner of a fantasy football cash prize has to deal with tax issues, especially if the prize is paid out through a bona fide fantasy sports provider.

Fantasy football winnings are considered regular income, says Kay Bell, Bankrate contributing editor and author of "The Truth About Paying Fewer Taxes."

"There's a line on the (1040) that says 'other income,' and that's where you enter the amount," she says.

Thinking about having a convenient memory lapse around tax time? Be careful.

"Depending on how much you earn, you're probably going to get a form from the payer called a 1099 miscellaneous, which means that you definitely have to tell the IRS, because when you get one of those forms, it means they've told the IRS," says Bell. "Six hundred dollars is usually the threshold amount, but some entities issue them regardless of the amount."

The same rules apply to amounts won in informal bets or pools surrounding fantasy sports.

"Technically, you should report those winnings," Bell says. "But realistically, nobody does -- it's just one of those sad things for the IRS that people are going to gamble informally and ... just see it as found money."

Fantasy Sports at Work

Fantasy sports leagues are a staple in many workplaces. How does playing with co-workers affect your career?

On the plus side, it can help you get to know the people you work with better, especially co-workers from other departments.

In the Ipsos study, 54 percent of fantasy players said fantasy sport participation increases the camaraderie among employees in their workplace. Another 16 percent said it allowed them to make valuable business contacts.

"Fantasy football was social networking before anybody even knew what social networking was," Thomas says. "You may never meet your senior VP of marketing in a big company, but if you get in a fantasy football league with him, you've not only met him, you're talking smack with him every week."

Some companies actually sanction company-wide fantasy football leagues and even put up leader boards in their offices as a morale-building tool, Thomas says.

Still, there's a fine line between benefiting through friendly interaction and being seen as a time waster. Too much time spent chatting with co-workers and researching teams and players online could cause your work to suffer.

"It's good for camaraderie; it's a fun thing to talk about," DiNitto says. "Where you have to be careful is lost productivity."

Lawrence adds that smart workers will try to find out how the boss reacts to losing before playing fantasy sports with him or her. After all, you don't want to win the fantasy battle only to lose the career war.