In this Wednesday, Sept. 9, 2015, photo, Len Don Diego, marketing manager for content at DraftKings, a daily fantasy sports company, works at his station at the company’s offices in Boston. (AP Photo/Stephan Savoia)
If you’ve been watching sports on TV these days, chances are you’ve seen an ad for DraftKings.com or FanDuel.com. The daily fantasy sports ads are ubiquitous these days, and on Sunday in the Washington, D.C., media market (after “Meet the Press,” no less) FanDuel even ran a paid infomercial.
Fantasy sports is now a multi-billion dollar industry. The newest iteration is daily fantasy sports, which allows you to draft a new team every time teams take the field.
But there’s a rub: An estimated 57 million Americans are putting money down in fantasy sports leagues based on real-life games even though sports betting is illegal in most states. (And much like poker, the odds are against amateur players actually winning big like the commercials portray.)
Proponents of fantasy football say they’re in the clear because of a 2006 law that made an exemption for skill-based bets. But the fantasy sports industry could be a victim of its own popularity. As it’s boomed, so too has scrutiny over whether it’s really legal. Last week, Rep. Frank Pallone (D-N.J.) called for a hearing on the matter.
“Despite how mainstream these sites have become … the legal landscape governing those activities remains murky,” he said in a statement.
On that, almost everyone who follows gambling law can agree. We reached out to Chris Grove, editor of LegalSportsReport.com, to try to get some clarity.
FIX: First, the facts. What’s the deal with sports gambling in America? Where is it legal and where isn’t it?
GROVE: It is tricky to explain, but the very short version of the story is that a law in the 90’s froze gambling law in time, and that’s the sports-betting landscape we’re left with today, [with legal betting in] just a handful of states, most notably Nevada.
FIX: Is fantasy sports considered gambling?
GROVE: There are a few answers to that.
The first answer is what I loosely call the cultural answer: That if you ask a person on the street, my sense is people would identify daily fantasy sports as a gambling product.
The next question is whether this is a gambling product is under federal law, the 2006 Unlawful Internet Gaming Enforcement Act. This is where things start to get more complex. It’s important to remember that the fundamental legal definition of what does or doesn’t constitute gambling is generally set at the state level. I think this is not a product the federal government thinks is gambling. But daily fantasy sports is a product that post-dates UIGEA, so you can’t ask the authors what kind of fantasy sports they had in mind. And compliance with the UIGEA isn’t some sort of golden ticket; you still need to comply with all applicable state laws regarding gambling.
Federal law does not really wade into the waters of defining what gambling is, by and large. That leaves that question up to the states, and that’s where you get to very difficult questions of how you measure the distribution of skill and chance in an activity. We don’t have a machine you can drop a game into and it spits out a piece of tape that says, ‘This game is 52 percent skill and 48 percent chance.’ It is an inherently subjective standard, and we do not have a reliable way to quantify these kinds of elements.
Bottom line: There are more questions than answers when it comes to daily fantasy sports and federal law. The fact that daily fantasy sports is a rapidly evolving industry where new iterations are introduced on a regular basis only further muddies the waters.
(Editor’s note: Grove went on to explain that only one state, Maryland, has explicitly said that fantasy sports is legal. Five states — Arizona, Louisiana, Iowa, Montana and Washington — have banned fantasy football. Arkansas is in a gray area, and the head of Michigan’s gaming commission said in September he thinks daily fantasy sports are illegal under Michigan law.)
FIX: That sounds complicated.
GROVE: It is. Gambling law pre-dates the introduction not only of fantasy sports but of the Internet in general. A lot of gambling law was written around the time of pinball machines and crane games. It becomes far more difficult to apply those tests to modern gambling products.
The reality is, no one knows — and especially when we’re talking about emerging products like daily fantasy sports.
That’s why this conversation tends to stay at such a surface level, because it’s a difficult one to have with any specificity and any credibility. Even people who do this for a living can reasonably disagree on some of the finer points. The more I talk about it, the more confused I am.
In this Wednesday, Sept. 9, 2015, photo, an employee in the software development department of DraftKings, a daily fantasy sports company, walks past screens displaying the company’s online system stats in Boston. (AP Photo/Stephan Savoia)
FIX: So, what’s the argument for proponents to legalize sports betting?
GROVE: I think what advocates would like to see is for the federal government to no longer basically serve as a roadblock for states who are interested in authorized sports betting within their borders.
FIX: Is there momentum in Congress to make that happen?
GROVE: I think we have momentum coming from a few different sources. The first is the commercial casino industry, which would like to see sports betting expanded to some degree.
I also think advocates of regulated sports betting are going to seize upon the apparent contradiction of a wide-open, unregulated fantasy sports industry with a heavily regulated online gambling industry.
And then I think the third source of momentum is we’re seeing a deluge of ads right now for fantasy sports. I think that will have some unintended consequences (like from the Federal Communications Commission, which regulates ads for gambling), in terms of generating attention from corners that they might not have wanted to generate attention from.
FIX: Americans play a lot of fantasy sports. But with the possible exception of National Basketball Association Commissioner Adam Silver’s 2014 New York Times op-ed calling for legalized sports betting, it seems like the debate over sports betting regulation is off our radar.
GROVE: I’m not sure that it resonates with the rest of the nation yet, and I think that’s why you saw Rep. Pallone announce this request for a hearing in the way that he did. I think he recognizes there’s a groundswell of awareness in daily fantasy sports because of its ubiquity in marketing. This is raising questions about how the federal government apparently facilitated the growth of this kind of betting while at the same time maintaining that states could not regulate other kinds of sports betting.
That apparent contradiction is the story. I think Rep. Pallone’s request could capture a broader segment of the American public and could, in doing so, bring this question of how the U.S. federal government approaches sports betting to a far broader audience.
