"When you just think back to the enormous Powerball fervor that gripped the entire country—that's okay," says daily fantasy player Brian Greenwood. "But for me to develop a lineup and enjoy the aspect of becoming a general manager for a team for a day and essentially risking something by putting in an entry fee—that's not okay. That doesn't really hold water for me."
Greenwood is a professor, husband, and father. He also represents the typical fantasy sports player. Last year, over 56 million Americans participated in fantasy sports play. And since the first sites went online in 2007, daily fantasy has grown to a multi-billion dollar business with DraftKings and FanDuel leading the industry.
Unlike traditional fantasy leagues that span over the course of an entire season, daily fantasy contest typically last a single day. While sports betting is mostly illegal in the United States, fantasy sports has a special exemption under the Unlawful Internet Gambling Enforcement Act of 2006. But even with the federal carveout, the shortened span of daily fantasy contests combined with each state's ability to define gambling in their jurisdiction has left daily fantasy in a legally murky area.
"A contest is considered to be illegal gambling if three elements are met: consideration—which is an entry fee, prize, and chance. While that standard is the same in all 50 states, what differs state-by-state is the definition of chance," states Marc Edelman, a professor at Baruch College—part of The City University of New York (CUNY) system—and contributor to Forbes magazine. Edelman is a law and sports business expert who has covered daily fantasy since its emergence in the early 2000s. "If one wants to be honest, daily fantasy sports represent a gray area under the law."
Despite questions of its legality, fantasy sports sites set up shop and operated mostly under the radar until late 2015, when a DraftKings employee was reported to have used insider information to win a $350,000 cash prize on rival company FanDuel's platform.
News of potential wrongdoing drew the attention of New York's attorney general, Eric Schneiderman, who promptly launched an investigation to determine if DraftKings and FanDuel constituted illegal gambling. In comments made to CBS this Morning in November, Schneiderman stated that daily fantasy sports "is not some new version of fantasy sports, it's really just a new version of online gambling."
In a cease and desist letter issued to both FanDuel and DraftKings on November 10, 2015, Schneiderman demanded that the companies stop accepting illegal wages in the state of New York and claimed that FanDuel and DraftKings engaged in illegal activity as they "promote daily fantasy sports like a lottery, representing the game to New Yorkers as a path to easy riches that anyone can win."
And though Schneiderman sees daily fantasy as a "massive, illegal gambling operation" and describes it as a lottery, in New York the lottery is legal—as are other forms of state-sponsored gambling including horse racing and Indian casinos. And these state-run gambling institutions are often prone to the same corruption that occurs in private sector operations. So why are those forms of gaming okay, but not daily fantasy sports?
"I think to an extent recent state actions are about protecting innocent victims and ensuring player protection, but another big piece of that has to be protecting their monopoly to regulate and offer gambling services within their state," explains David G. Schwartz, director of the gaming research center at the University of Nevada, Las Vegas. He says that America has a complicated history with gambling that have led to cycles of legalization and recriminalization.
"Since the early days there's been two different competing feelings in America. One is that people like to gamble so let them do it," Schwartz says. "The other one is well, everybody except for me can't really handle gambling. So to me this is just the latest wrinkle. This is going back to the first dice, as long as technology is advancing, people are going to use it to gamble."
The fantasy sports industry is quickly mobilizing in response to Schneiderman's crusade to shut them down. Steven Miller, who played part in the effort to legalize online poker, has organized the Daily Fantasy Sports Players Alliance to represent players across the country.
"No one wants to play a game where the rules of the game change state by state," states Miller. "Prohibition doesn't work. It didn't work in poker. It didn't work with alcohol. It doesn't work with a host of other ranges of industry. Prohibition with daily fantasy sports is not the answer."
Supporters of daily fantasy include Dallas Mavericks owner and business mogul Mark Cuban, who appeared as the keynote speaker at the Fantasy Sports Trade Association Winter Conference this January in Dallas where he decried the hypocrisy of gaming laws.
"While today really seems bad and it seems like you're under attack, that's the good news," Cuban stated. "Because when they're attacking you, everything needs to be cleaned up. They need to get their act together."
While the daily fantasy sports industry is under attack as Cuban describes, could increased awareness of the country's complicated gambling rules be an opportunity to enact saner gaming laws?
"What is really important to remember at the end of the day is that people have been gambling for a really long time," states Schwartz. "There's been laws against it, there's been laws legalizing it, and the question is how do you want people who don't have problems with gambling to gamble?"
Approximately 9 minutes.
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