America’s struggle over Daily Fantasy Sports (DFS) – the multibillion-dollar industry that has been hailed as “online betting’s newest empire” – is coming to a head with legal contests in three of the country’s five most populous states.
In New York, state attorney general Eric Schneiderman filed claims against DraftKings and FanDuel, the two websites that together control 95% of the national market. He is seeking a return of all money lost by customers who played in the state during 2015, along with a $5,000 fine per case. Earlier Schneiderman had ordered the two companies to close in New York but lawyers representing them convinced an appellate judge to stay the order, pending state legislation that would legalize their business. In Illinois attorney general Lisa Madigan declared her opinion that DFS constitutes illegal gambling under state law. DraftKings and FanDuel responded by filing suit there to have the courts say DFS is in fact legal. Lastly, California held a legislative committee hearing on DFS. The same committee will also consider a regulatory bill as attorney general Kamal Harris is expected to offer his own opinion on the legality of DFS.
In DFS contestants select real-life professional sportsmen to assemble their own fantasy teams, before paying a fee to enter such teams into a virtual tournament. Based on the daily performance of these real-life players, the most successful teams win a share of the overall entry fee pool. The industry argues its tournaments are games of skill and not chance, and therefore do not constitute gambling. If they are right then DFS may be regulated like other competitive games with alternative regulatory oversight.
DFS’s exploding popularity means the issue of how to regulate cannot now be ignored. Before New York, Illinois and California, Nevada had already declared DFS illegal gambling, and ordered the sites out unless they acquire gambling licenses. Over the past few months, bills seeking to oversee and not ban the industry have been introduced in a dozen or so other states, including Massachusetts, Maryland and Pennsylvania.
