Is The Legality Of Fantasy Sports A Sure Bet? – Forbes

In 2006, the federal government was determining what to do about an issue that was perceived to be a lingering problem concerning gambling on sporting events.  That perception has been one held by the four major North American professional sports leagues and the NCAA for decades.  Only recently has there been a gradual shift in thinking among some of the leagues, with the National Basketball Association and its Commissioner Adam Silver vocally questioning whether a sports gambling ban, at least to the extent that it current exists, is necessary in today’s day and age.

However, the National Football League and NCAA remain adamant that such a sports gambling ban (with certain exceptions, the most sweeping being within the borders of the State of Nevada) remain in place, oftentimes highlighting that there is a need to keep the status quo in order to maintain the legitimacy of the game.  Yet, fantasy sports flourish and the NFL, as well as the NBA, Major League Baseball and the National Hockey League benefit tremendously from fantasy game play both with regard to increasing fan interest in the respective sports as well as producing new sources of revenue for the teams and leagues.   How come betting on the outcome of individual sports matches threatens the legitimacy of sporting events while engaging in fantasy operations with guaranteed prize pools is not a concern?

Many suggest that it simply boils down to an issue over economics.  The various professional sports leagues have figured out how to monetize and exploit fantasy sports.  The same cannot yet be said about gambling on games.

Screenshot of DraftKings website, where it makes the bold claim that its service is 100% legal.

The actual disparity dates back to the adoption of a federal law titled the Unlawful Internet Gambling Enforcement Act, also known as UIGEA, which explicitly states that it shall be considered “unlawful Internet gambling” when a person stakes or risks something of value upon the outcome of a sporting event.  However, nestled within UIGEA is a long section of what the restriction does not include within its parameters.  The ninth and last subsection of exclusions in the UIGEA is the participation in any fantasy sports game.

There exists exclusions to the exclusion.  Fantasy sports games must:

1. prohibit participants from controlling “fantasy teams” of only athletes from one professional or amateur organization;
2. inform participants of all prizes and awards in advance of the fantasy games;
3. establish all prizes and awards in advance of the fantasy games;
4. refrain from tying the value of prizes and awards to the number of participants or the amount of fees paid by the participants
5. refrain from tying the outcome of the fantasy sports games to the score, point-spread or performances of any single real-world team or combination of teams; and
6. refrain from tying the outcome to being solely based on a single performance of an individual athlete in any single real-world sporting or other event.

The six aforementioned parameters are precise, concise and largely lack overbreadth or vagueness.  However, there remains one additional requirement, which by its nature leaves the entire analysis open to interpretation.

Section 1(E)(ix)(II) of the UIGEA requires that “[a]ll winning outcomes reflect the relative knowledge and skill of the participants and are determined predominantly by accumulated statistical results of the performance of individuals (athletes in the case of sports events) in multiple real-world sporting or other events.”

As of April 2015, hundreds of millions of dollars in venture capital has been invested in daily fantasy sports, with the vast majority of that money going to industry leaders FanDuel and DraftKings.  Large and respected institutions like NBC Sports Ventures and Disney have delivered money to these platforms, because they realize the immense potential for further growth in fantasy sports and believe that daily fantasy games are simply the next iteration of an industry that has a track record of proven success.  The NBA has invested in FanDuel; MLB has made an investment in FanDuel rival DraftKings.  The NHL has a partnership in place with MLB and the one remaining outsider is the NFL, which is suggested to have an opportunity to fetch more than $50 million per year when it finally negotiates a league-wide daily fantasy deal.