Anyone that loves sports, especially fantasy sports, knows all about FanDuel and DraftKings. You can’t even turn on the TV without being bombarded by ads from the two.They are daily fantasy leagues which charge money for each one-day league you join. Leagues range from $1 in cost, all the way up to $1,000. It sounds very simple (because it is), but these daily leagues have been the subject of a lot of scrutiny.
There are currently dozens of lawsuits taking aim at the daily fantasy leagues. These lawsuits are meant to challenge the 2006 ruling which does not classify fantasy sports as gambling. Gambling, by definition, is based on chance and is relatively random; whereas fantasy sports are considered a game of skill, and based on knowledge rather than chance. This distinction between what is gambling and what is not gambling is an extremely important one. If fantasy sports were considered gambling, daily leagues would have to vacate states in which gambling is not allowed. They would also be required to apply for gambling licenses in each state in which they choose to do business.
Many states are attempting to keep these daily fantasy sites out of their state by moving to have them recognized as illegal gambling entities. This would be in contrast to traditional fantasy leagues who would still be classified as a game of skill.
The reason for this change in distinction is because of the relative lack of control which participants have. Though the participants get to choose their own teams, they are competing against hundreds, thousands or even millions of other contestants. This leaves even the most knowledgeable and skillful fantasy football players, at a major disadvantage. It leaves the contests to seem more like a lottery than a game of skill.
Though the cases are still ongoing, FanDuel and DraftKings are not allowed to operate in the following states: Arizona, Iowa, Louisiana, Montana, Nevada, and Washington State. Though it is not illegal by the federal government, these states have all passed, or are in the process of passing state laws deeming daily fantasy as illegal. FanDuel and DraftKings also no longer accept deposits from New York, which is the largest state in term of wagers. Recently, Texas also joined the fight in order to have DFS deemed illegal in their state.
If all of this was not enough, DraftKings was in hot water for the actions of one of its employees. For some inexplicable reason, employees of each of the major daily fantasy leagues were not banned from competing in daily leagues. This came to light after a DraftKing’s employee won $350,000 in a FanDuel league. It is claimed that the employee used insider information from his employer to determine which players should be chosen. This shows a clear lack of regulation and professionalism, which is sure to hurt these major companies in court. Since this issue came to light, each has banned its employees from competing in any daily fantasy leagues.
Though there seems to be a lot piling up against these two businesses, things are not as bleak as they may appear. Many states which are currently banning the two DFS, are also looking for possible deals or regulations which would allow them to enter the states once again. For example, many states are looking to have DraftKings and FanDuel acquire a gambling license, which would subject them to strict regulations, and make the leagues safer for the participants. Though this will be a good start, if they do acquire licenses, it would solidify them as a gambling entity, which could hurt them in the long run.
–Michael Hersey
