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Daily Fantasy Sports...Gambling or Not?

By Paul Langhorst on 11/11/2015

Update to this story below (Nov 11, 2015):  According to media reports released today, the attorney general of New York ordered Draft Kings and FanDuel to stop accepting bets in their state, arguing that daily fantasy sites were games of chance, not skill.  The attorney general, Eric Schneiderman, made the argument and distinction that daily fantasy sites require no skill, whereas season-long fantasy leagues are games of skill because they require an ongoing commitment and educated adjustments made to fantasy team rosters based on ongoing player performance.  

If you are into fantasy sports, especially the new daily fantasy sports sites such as FanDuel(c) and DraftKings(c), you will want toDaily Fantasy Sports Lawsuits pay close attention to this story. The FBI and Justice Departments have open investigations into whether daily fantasy sports sites are illegal gambling programs.  At issue is whether the sites are games of chance, which are illegal, or games of skill which are not. 

In July 2006, Congress passed the Unlawful Internet Gambling and Enforcement Act (UIGEA), which clarified the types of online activities that were illegal gambling, based on chance, or legal, based on skill.  As with most laws, this Act is very confusing to the average person. However it was a sure bet for the members of the fantasy gaming community because the exemptions created by UIGEA paved the way for daily online fantasy sports sites.  The result was an explosion of investment from big name companies and private investors into the space. Even Disney was thinking about getting into the game with a $250 million investment into DraftKings.  I assume someone at Disney eventually decided that mixing Fantasia and Fantasy Football did not make sense. 

The problems for the daily fantasy sports industry began in October when an employee of DraftKings, won $350,000 and posted information on his Twitter account about his winning team.  This lead many to speculate as to whether the employee had inside knowledge. The result, a class-action lawsuit has been filed and the Federal hounds are now on the scent.

Personally, I think it was only a matter of time before the Feds opened up an investigation and I believe the sites are closer to gambling than skill. The TV ads alone make it smell fishy...invest little, win big!  The daily fantasy sports industry is now generating hundreds of millions in revenue and is likely on its way to a multi billion dollar industry. Anytime there is this much cash flowing around, the government will eventually get involved - either to regulate it or get it hands in the pot.  

 

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Paul Langhorst

As a former softball coach and veteran business leader, Paul Langhorst is on a mission to help sports associations and leagues improve their operations and experience for players, parents, fans and their volunteer leaders.

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