Proposed Ban on Weekly Fantasy Football Games could affect Entire iGaming Industry

No doubt you’ve seen the onslaught of commercials for FanDuel and Draft Kings. The two big weekly fantasy football sites have been hitting the ads hard for the past few months, and they’ve been focusing on getting airtime during the biggest primetime football games, too. Each ad tries to tempt players to join by offering a unique code that will double their deposit amount, up to $200.

To date, these two fantasy football sites have spent over $200 million on advertising (Source 3). The ads show smiling football fans holding up huge $1 million checks and gushing about how much they’ve won playing the weekly fantasy leagues. And while the sites are no doubt making gobs of money, both of them are facing serious legal issues that could mean the end of the paid weekly fantasy leagues.

On October 22nd, the U.S. attorney in Boston sent a subpoena to Draft Kings Inc., to gather information about an alleged cheating scandal. The investigation was prompted when Eric Haskell, and employee of Draft Kings, won over $350,000 in a FanDuel weekly contest. Haskell has been accused of using insider information from his employer to win the contest on the competitor’s site. This information was not available to the public, and expert players have said that it’s possible for fantasy football employees to use non-public information to tilt the game in their favor. If Haskell is found to be guilty, both sites could face major violations that could end up in a complete ban of weekly fantasy gaming. (Source 1)

Besides the Department of Justice, the FBI is also investigating both companies to find out if they are breaking federal law. Senator Harry Reid of Nevada has called these investigations a “warning shot” from Congress.If they’re found guilty, the possibility of a federal ban will be very real (Source 3). FanDuel has said that weekly fantasy betting is a game of skill and not chance, so their games are exempt from federal gaming laws. We’ll find out soon enough if the Feds agree. (Source 2)

As of right now, FanDuel is correct. Fantasy sport betting technically doesn’t qualify as online gambling, due to a loophole in the Unlawful Internet Gaming Enforcement Act of 2006. At the time, powerful NFL lobbyists convinced Congress that true, direct sports betting is pure luck, but fantasy betting is skill. This has allowed fantasy sports to operate for years without the legal troubles and limitations that the online gaming industry has faced as a whole (Source 4).

While a federal ban might be on the horizon, five states already have bans in place for pay-to-play fantasy sports – Arizona, Iowa, Louisiana, Montana and Washington (Source 1). Three of these states have NFL teams of their own – The Arizona Cardinals, the New Orleans Saints, and the Seattle Seahawks – so local fans of these teams are forbidden from taking part in any weekly fantasy sports betting. With the Seattle Seahawks appearing in two consecutive Super Bowls and the Arizona Cardinals dominating their division and looking incredibly strong, the fans in Washington and Arizona are most likely frustrated by not being able to take part in fantasy football leagues.

Also, three other states are actively reviewing paid fantasy sports to determine if a ban would be appropriate. Nevada, New Jersey, and Massachusetts are all contemplating a ban on the weekly leagues because they claim they are games of chance and not skill. (Source 1)

These state bans and the possible federal one would be specific to weekly fantasy sports, but other forms of online gambling might be indirectly affected. These investigations are causing a lot of buzz and bringing the online gambling industry as a whole into the public spotlight. The massive ad campaigns already got our attention, and it is probably safe to say that most Americans are at least aware of the weekly fantasy sites, so these legal troubles are rolling in at about the worst time possible.

A nationwide ban on weekly fantasy betting would be a huge blow to the industry, displayed for all of America to see. The questions raised would no doubt ripple across to other forms of online gaming. For instance, if weekly fantasy betting is in fact found to be a game of chance, why aren’t we banning slots and roulette, which are also games of chance? And what makes online poker a game of skill and not chance? These questions, however dangerous to the industry, will definitely be asked by politicians and citizens around the country. So even if a ban doesn’t directly affect these other games, iGaming opponents will certainly be sharpening their knives.

SOURCES:

1) https://www.bostonglobe.com/business/2015/10/21/nfl-teams-may-cut-ties-draftkings-fanduel-states-call-fantasy-sports-illegal/3WCe29Bem6wczw7lhBDvVI/story.html

2) http://www.wsj.com/articles/fbi-justice-department-investigating-daily-fantasy-sports-business-model-1444865627

3) http://www.theatlantic.com/politics/archive/2015/10/daily-fantasy-sports-nevada/410878/

4) http://kernelmag.dailydot.com/issue-sections/features-issue-sections/14172/is-fantasy-football-addictive/