It’s gambling

Daily fantasy gaming has finally gotten too big for its own good, and with that New York’s Attorney General, Eric Schneiderman, rightly labeled it what it is – gambling.

In the past year, most of us could not watch any of our favorite sports or ESPN without being inundated by ads asking people to join the fun.    Dressed up by Madison Avenue, the activity appeared completely legitimate, with the big checks raised and fans cheering on the games.  But what the ads did not show is how New York’s investigators found that just the top 1 percent of DraftKings winners received the vast majority of winnings.  The ads did not show how a portion of that 1 percent were employees of the industry, who have access to information the general public does not, such as which players the “bets” are flowing to, which is akin to insider trader.  The overwhelming majority of participants, of which there are hundreds of thousands in New York, are the palookas who keep the profits running up for what are essentially on-line casinos.  Just like a traditional casino, DraftKings and FanDuel get a mathematical percentage from every entry fee. They don’t particularly care if you win or lose, the key is getting you in their proverbial door.

{mosads}Lawmakers and the public need only consider the incentives from the major fantasy sites to easily understand what these sites are pulling people into.  At DraftKings you were able to turn your initial $600 dollar deposit into $1200 dollars worth of playing, as Draft Kings would match your initial commitment up to this limit. Similarly, Fan Duel, depending on the promotional code you could find, would double your initial deposit to a lesser degree.  Getting 100 percent on such an initial investment seems pretty savvy.  However, it doesn’t take a state’s top law enforcement officer to realize such inducements for free money sounds exactly like a neighborhood drug dealer offering you that first sample because he knows his commodity has addictive elements.  Genuine games of skill do not need promotions geared to hooking participants.    

If Congress continues to fail to reevaluate the Unlawful Internet Gambling Enforcement Act of 2006, which classified fantasy sports as a game of skill and permitted the fantasy industry to grow to the point it is at now, the individual states, just like Nevada and now New York, should continue to label daily fantasy sites as gambling and determine if they want the activity proscribed in their state.

It was by way of clever congressional lobbying by powerful interests that the ordinary fantasy players have little ability to ever connect with, which included professional league offices and team ownership, that fantasy sports was somehow classified as a game of skill, which is considered as different than gambling, and not inhibited for United States residents online.   Major League Baseball, the NBA, Jerry Jones and Robert Kraft are investors.  It is ironic that the 2006 federal law was intended to curb the spread of on-line poker, which is much more of a game of skill than fantasy sports because in poker, the participants actually have a voice in determining how their cards are played.   With fantasy sports, the players’ actions are subject to as many variables as picking a winner against the spread.

Whatever the indefinable mix of luck and skill that activities like poker, blackjack, traditional sports handicapping, and fantasy sports have, they are simply all best left in the broad category of gambling, subject to governmental regulation on where and when they can be played.  With such regulation, governments can tax, regulate payouts, and make a credible effort to maintain the integrity of the activity.  Unlike a for-profit entity that preys on human vulnerability, the government has an obligation to control the activity with the public good in mind.

New York’s Attorney General’s initial “shot across the bow” proclaiming that daily fantasy sports is gambling, even if proved effective in court, will not shut down the on-line operators of your office pools, where people play season long contests.  It will also not prohibit the public’s ability to find sites that take bets.  They are not hard to find and fund.  However, Eric Schneiderman has taken a laudable step toward puncturing the air of legitimacy that permits FanDuel and DraftKings from operating as something other than gambling sites. 

Strockyj is a New York-based attorney and legal commentator.