Daily Fantasy Sports: Game of Skill or Unregulated Legal Loophole?

by , Aug 16, 2013 | 9:40 am

Sports fans are wagering thousands of dollars on the performance of professional athletes each day online, and it is all perfectly legal.

Known as daily fantasy sports, the games are part of an exemption to federal law banning online gambling. In daily fantasy sports, winners aren’t determined by the outcome of a single game or the performance of a single player.

Most fantasy competitions — football or baseball — last a season, but more and more players are looking for their daily fantasy fix. Critics argue that turning fantasy sports into a daily competition edges it closer to being a game of chance that’s essentially equivalent to placing a bet at race and sports books in Las Vegas.

“I’m not going to give a legal opinion,” John Kindt, an emeritus professor of business and legal policy at the University of Illinois, said Thursday. “But what I would say is that this was not the intent of Congress when it prohibited online gambling.”

The Unlawful Internet Gambling Enforcement Act of 2006 regulated online gambling by prohibiting gambling businesses from knowingly accepting payments in connection with a wager. The law excluded fantasy sports and legal intrastate and inter-tribal gaming.

“Fantasy sports interests argued that this was a season-long effort and substantially a game of skill,” Kindt said in a phone interview. “That appears to have changed with daily fantasy sports.”

Kindt also described fantasy sports as an “introductory venue” to sports gambling.

“Young people love sports, love to take risks and don’t realize that gambling can become problematic,” he said. “Fantasy sports on a daily basis is pushing open the door to these concerns.”

Today, there are 35 million fantasy sports players in the U.S. and Canada, according to the Fantasy Sports Trade Association. The fantasy sports industry generates $3.07 billion annually from entry fees and direct spending on subscriptions to magazines and websites catering to fantasy players.

By comparison, casino visitors in Nevada wagered more than $3.4 billion on sporting events in 2012, according to the Nevada Gaming Control Board.

The FSTA doesn’t separate revenue figures for daily fantasy sports. However, there are plenty of websites offering daily games for money, including FanDuel, Play Daily Fantasy Sports and Cantor Fitzgerald’s Top Line Gaming Labs.

Certain states continue to have more restrictive laws. But in Nevada and other states that allow fantasy sports to be played for money, the daily contests are essentially unregulated.

Kindt said although states can have parallel anti-gambling laws, Internet gambling is a federal issue. He said any outright state ban on gambling through fantasy sports would conflict with federal law.

He also argued that those advocating for the legalization of sports gambling don’t understand the consequences of opening the door to sports gambling nationwide.

“It would destroy amateur, collegiate and Olympic sports,” Kindt said. “The NCAA and professional leagues are still extremely concerned about sports gambling, and are seeking to protect the integrity of sports by keeping out gambling.”

Contact reporter Chris Sieroty at csieroty@reviewjournal.com or 702-477-3893. Follow @sierotyfeatures on Twitter.

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