DFS Requires Legislators To Update Their Archaic State Laws

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Thursday, February 18th, 2016 | Written by Shane Larson

Daily fantasy sports is one of the hottest and most controversial topics in the world of gaming at the moment. Currently, many individual US states are investigating daily fantasy sports betting sites like DraftKings and FanDuel to determine whether or not using them amounts to gambling. While there is no clear cut answer as to whether or not putting money on a fantasy line-up is gambling, it is clear that the controversy is shedding light on the fact that many states need to rethink their outdated gambling laws.

The Central Question

When critics of daily fantasy sports betting say that the game amounts to gambling and should be regulated accordingly, DraftKings and FanDuel counter that their sites are skill-based games and should therefore not be categorized as games of chance. To win, a person needs knowledge about professional sports and must be able to make wise choices regarding their line-ups. Critics then reply that even though that’s the case, the outcome is still largely left up to chance, as an injury or weather conditions could easily affect who wins.

Why the Question Isn’t Enough

It’s easy to understand why the daily fantasy sports industry is fighting to show that its sites are offering games of skill; if they can convince legislators of this fact, then federal law would allow for the sites to exist without state regulation.

The problem is that gambling is more complex than just being a game of chance. After all, there are different types of gambling. Some types are passive. A person places a bet and then is at the mercy of how the roulette wheel spins or how the dice are thrown. Other types are active forms of gambling, such as in poker where a combination of both the luck of the draw and skill go into a win.

Daily fantasy sports betting is both active and passive, making it unlike any other type of gambling. It takes skill to put together a team, so in some ways it is an active form of gambling; however, once the team is picked, it becomes completely passive and fully out of the control of the bettor.

A Change in Language Is Required

Current laws regarding gambling are set up to regulate passive and active forms of gambling, and use whether or not chance is involved as the main criteria in determining whether or not something should be regulated. This antiquated way of looking at gambling just isn’t appropriate for evaluating daily fantasy sports betting.

Because daily fantasy sports betting lies outside the norm, trying to place it on either side of the gambling-not gambling line is difficult and becomes largely a subjective task. No matter how a state decides, there will be those who will argue and who may have a valid argument due to the language of the laws. As a result, in order to truly deal with daily fantasy sports betting and whatever other new skill-chance hybrid forms of gaming emerge in the future, state lawmakers may want to revisit and rewrite their own laws before trying to apply them.

DFS Industry Lobbying Hard

In the meantime, intense lobbying by the DFS industry has resulted in a number of states previously coming out against the game now considering legislation allowing for its exception. According to the Wall Street Journal, for instance, the industry is currently spending around $10 million lobbying for fantasy sport friendly legislation in 34 states across the US.

Such efforts have become increasingly important of late, in order to counteract the anti-lobbying efforts of a number of states who have acted aggressively against DFS companies such as DraftKings and FanDuel. The DFS industry’s attempts to prop up its legal position seem to producing some positive results, too, with legislation requiring operators to pay a $500,000 registration fee making headway in the Florida legislature. To date, however, the only US state to adopt positive DFS legislation is Kansas. Warning of the major legislative battles which still lie ahead, FanDuel CEO Nigel Eccles recently told The Associated Press:

“What you’re seeing is an industry that’s very quickly going from an unregulated state to a regulated state. Whenever you have that, there’s going to be turmoil.”