Since I embarked on my Star Tribune-backed $50 daily fantasy game experiment a few weeks back, one of the biggest questions on my mind — and the most frequent question I’ve been asked — is simply: How is this legal?
Why is it legal (at least in 45 states) to wager money online on what players will do while betting on what teams will do is illegal?
The short answer is the Unlawful Internet Gambling Enforcement Act of 2006. The gist of the UIGEA is that it made certain online gambling — like online poker — illegal in the United States. But it specifically created an exemption for fantasy sports, designating them as games of skill and therefore legal. The act was passed with some controversy (as well as reported lobbying on the part of the NFL). But it remains the law now.
The larger question is how long they will stay legal or at least unregulated, particularly in the wake of mounting controversy and criticism. the New York Times reported Monday that an employee of DraftKings (the site I’m using) won $350,000 on FanDuel (another major daily fantasy site) after having access to information about the players other participants were using that was not available to the general public.
ESPN followed Tuesday with a decision to eliminate DraftKings paid content from within its shows. The controversy also prompted a statement from Chris Eaton, Executive Director of Sport Integrity for the International Centre for Sport Security, which read in part: “Fantasy sports are, plain and simple, sport betting. Despite the subtle differences in the definition between the two industries, it is important not to disguise the clear relationship between fantasy sport and sport betting — and the need for both to be legalized and supervised by competent, independent and well-resourced regulators.”
The $350,000 payout is a drop in the bucket, considering what a massive business daily fantasy games have become. the New York Times noted: “Eilers Research, which studies the industry, estimates that daily games will generate around $2.6 billion in entry fees this year and grow 41 percent annually, reaching $14.4 billion in 2020.” Prominent NFL owners Robert Kraft of the Patriots and Jerry Jones of the Cowboys “have stakes in DraftKings,” the Times reported.
So yes, it could very well be ripe for regulation based on how much money is at stake.
Then again, Kansas recently passed a law fully legalizing fantasy sports, perhaps emboldening DraftKings, FanDuel and other similar sites.
“As advertising has grown, there’s been a lot of scrutiny,” Peter Schoenke, President of Rotowire.com and Chairman of the Fantasy Sports Trade Association said in a recent Star Tribune interview before Monday’s controversy. “But the industry is confident that when people look at it and see it’s a game of skill, there will be a similar outcome as there was in Kansas.”
For now, it’s up to individuals who play the games to decide how they want to proceed. It will put to the test just how powerful the lure of a possible million dollar payout is.