TUVIA SANDLER—After a DraftKings employee won $350,000 in a Daily Fantasy Sports contest, the FBI and several states opened investigations into FanDuel and DraftKings, the two leading companies in the industry. In New York, after demanding the companies cease-and-desist operations, Attorney General Eric Schneiderman sued FanDuel and DraftKings alleging that the companies’ business violates the New York Constitution and New York law that prohibit businesses from profiting from illegal gambling.
The Case Against Daily Fantasy Sports in New York
Under New York law, gambling is defined as “staking upon the outcome of a contest of chance not under the better’s control.” Schneiderman argues that betting on Daily Fantasy Sports (“DFS”) falls under this definition because winning or losing depends on the performance of sports players not under the contestant’s control and on numerous elements of chance. Moreover, he is “deeply concerned” with the threat of addiction that these games pose to “populations at greater risk for gambling addiction, particularly male college students.” Finally, the lawsuit asserts that the companies have mislead the public by suggesting in their advertisements that anyone can win, when in fact evidence shows that professional gamblers with access to software and large bankrolls are the primary winners in these contests.
Interestingly, Attorney General Scheiderman does not object to betting on season long fantasy sports. Schneiderman admits that this kind of “traditional fantasy sports” is skill based because players conduct a competitive draft, compete over the course of a long season, and can adjust their teams to compensate for changed circumstances like injuries. Likewise, season long fantasy is not associated with money rewards; most players participate for “bragging rights.” DFS players, on the other hand, do not engage in a draft, do not compete for more than one week at a time, cannot adjust their teams, and compete primarily for money.
FanDuel and DraftKings claim that the distinctions between season long and daily fantasy leagues are inconsequential. Both are games of skill where players must select rosters based on “strategic factors, including matchups, days of rest between games, how a player’s performance may correlate with other players on his team, and predictions about how other DFS players are likely to make selections.” Further, they argue that the fact professionals who conduct research are more likely to win proves, contrary to Schneiderman’s argument, that skill is necessary to make the correct picks.
Implications for Florida
In Florida, it is a misdemeanor to bet on “the result of any trial or contest of skill, speed, or power or endurance of human or beast.” This language certainly seems to encompass betting on fantasy sports, whether season long or daily, because they are wagers on the “skill of humans”—professional sports players. In fact, previous Attorney General Bob Butterworth opined in a letter he wrote in 1991 that betting on fantasy sports would be a violation of Florida law. The skills versus chance arguments advanced in the New York lawsuits have no bearing on the issue in Florida because Florida law forbids any wager on a contest of skill, regardless of the amount of skill or chance involved. By the same token, betting on season long fantasy sports should be illegal as well because regardless of how much skill is involved in drafting and managing the team it is nevertheless a bet on the skill of sports players. Indeed, Butterworth’s letter dealt exclusively with betting on season long fantasy contests.
Word to the Wise
Legal discussion aside, the lawsuits against FanDuel and DraftKings are ill advised. Daily Fantasy Sports has gained widespread popularity in the last two years and fans have taken to the streets in protest of the lawsuits. The general vices associated with gambling are non-existent in the context of fantasy sports. There aren’t any mob-controlled bookies offering rigged fantasy bets nor is there an atmosphere of decadence surrounding the game. Moreover, when it comes to Internet betting, unless it is nationally enforced, State and local bans can be circumvented. Worst-case scenario, DFS betting will become illegal and an underground market will develop instead.
For now New York players are out of luck. As of November 13, FanDuel stopped accepting entries from New York pending the outcome of the case. In the meantime, other States would be wise not to follow New York’s example, instead devoting their resources to prosecuting more important matters. Fantasy sports gambling isn’t going away. Keep it above board, regulate it, keep it honest and safe. To quote the great conservative writer, William F. Buckley, Jr., in his campaign for the mayoralty of New York City: “Gambling. Legalize it. Anybody who wants to bet anything with anybody may do so, and the prospective mayor wishes every single better the best of luck.”
Good luck.
