Daily fantasy sports regulation gambling

Yahoo has joined a growing number of major companies attempting to break into the daily fantasy sports industry. (Image: Eric Risberg/AP)

FanDuel and DraftKings have turned daily fantasy sports from a little niche product to the fastest growing segment of the fantasy sports industry.

Now, with the valuations of each of those companies reaching $1 billion or more, the gaming industry is starting to take notice, with some believing that the daily fantasy games deserve the same kinds of strict regulation casino companies deal with on a regular basis.

According to officials at many major gaming firms, there’s nothing actually wrong with daily fantasy sports (DFS), and they don’t want to see the offerings banned or restricted from the marketplace.

However, they believe that regulation is an important part of any sort of gambling product, something they feel applies to DFS sites just as much as it does a casino or racetrack.

“I think daily fantasy sports betting should be legal, just like I think traditional sports betting should be legal,” William Hill US CEO Joe Asher told Reuters. “But let’s not pretend one is OK and the other is not. Drawing some artificial line between the two makes no sense as a matter of law or policy.”

DFS Embraced by Leagues, Media Titans

All major DFS sites state that their activities are entirely legal, and both DraftKings and FanDuel stay out of five states where they feel laws do not allow fantasy sports games to offer real money prizes.

That argument seems to have a lot of sway, as sports leagues and media companies are both getting on board en masse: most leagues now have partnerships with one or more sites, ESPN has a major advertising and content deal with DraftKings, and both Yahoo and CBS have launched their own DFS products in recent weeks.

But there are those who are taking a closer look at the growing industry.

In Nevada, the state gaming control board is analyzing the legality of DFS games, though the industry believes it is quite clear that the contests are legal under a fantasy sports exemption in the 2006 Unlawful Internet Gambling Enforcement Act.

“When you start offering daily fantasy contests, then you start to blur the line between skill and chance,” said Nevada Gaming Control Board Chairman AG Burnett. “When chance begins to govern the outcome more than skill, you have a form of gaming, and that’s when the need for regulation kicks in.”

Lobbyists for the fantasy sports industry dispute that characterization, however, saying that their games are clearly more about skill than luck.

“They’re not like games of chance, where no matter how skillful the players is, winning or losing almost always comes down to luck,” said Jeremy Kudon, a partner at Orrick who lobbies for the Fantasy Sports Trade Association.

For their part, FanDuel and DraftKings issued a joint statement for the Reuters report.

In that statement, they said that they work working with officials in the gaming industry “to educate them on the fantasy sports industry as our products are fundamentally separate from, and not competitive with, casinos and gaming businesses.”

Lawsuits Target Free Money Marketing Campaigns

But there are other threats to the industry as well.

DraftKings is facing class action lawsuits in at least three states, including Massachusetts, Florida, and Illinois, from players who feel they were deceived by the company’s aggressive advertising campaign, particularly due to misunderstandings over the nature of how deposit bonuses work.

And while the Fantasy Sports Trade Association believes daily fantasy games should be legal and do not constitute gambling, even they have expressed concerns over the marketing campaigns used by the two major sites.

“The money motivation was never a key element of fantasy sports,” said FSTA President Paul Charchian. “Now a lot of the marketing in daily fantasy sports is really excessively focused on monetary gain.”