Participation in and betting on fantasy sports has exploded over the past few years. Fantasy sports are defined as any sports competition with imaginary teams where the “participants own, manage, and coach” their teams, with the games “based on statistics generated by actual players or teams of a professional sport.” ((Fantasy Sports, Dictionary.com, http://dictionary.reference.com/browse/fantasy+sport (last visited Sept. 20, 2015.)) Websites such as Yahoo and ESPN host season-long fantasy sports leagues and sites such as DraftKings and FanDuel host daily fantasy sports leagues.
What makes gambling on these fantasy sports legal, whereas sports gambling is illegal in all states except for Nevada, Delaware, Montana, and Oregon? ((Eugene Kim, Draft Kings not Illegal, Business Insider, http://www.businessinsider.com/draft-kings-not-illegal-2015-4 (Apr. 6, 2015, 4:28 PM).)) The legal distinction, outlined in the 2006 Unlawful Internet Gambling Enforcement Act, establishes fantasy sports as a “game of skill” and not a “game of chance.” ((Id.)) However, this legal distinction is not entirely persuasive, and many consider daily fantasy games as de facto gambling. ((Joe Drape & Ken Belson, Sites Don’t Offer ‘Gambling.’ Critics Say That’s a Fantasy, N.Y. Times, Sept. 17, 2015, at B11, available at http://www.nytimes.com/2015/09/17/sports/football/draftkings-fanduel-fantasy-sports-games.html.)) In this two-part blog post, I will examine the details of the legal distinction between fantasy sports games and sports gambling, as well as the policy and financial implications. In this first post I will outline and analyze the relevant Unlawful Internet Gambling Enforcement Act provisions. In the second post, I will discuss the arguably hypocritical stance of the NFL on sports gambling, as well as the financial implications of online fantasy sports betting.
According to the Unlawful Internet Gambling Enforcement Act, gambling on fantasy sports is legal if all winnings “reflect the relative knowledge and skill of the participants” and are determined by the real-world performances of individual athletes in multiple sporting events. ((31 U.S.C.A. § 5362 (2006).)) This is in contrast to sports gambling, which the Act strictly prohibits, and defines as any winnings “based on the score…or performances of any single real-world team or any combination of such teams…” ((Id.)) Draft Kings explains the distinction similarly, stating “daily fantasy sports is a skill game and is not considered gambling.” ((Why is it Legal?, Draft Kings, https://www.draftkings.com/help/why-is-it-legal (last visited Sept. 20, 2015).))
This distinction, between games of skill and games of chance, is how Congress has separated fantasy sports games and real-world sports betting. Sports betting has long been outlawed in the United States, dating as far back as the infamous 1919 conspiracy to fix the World Series. ((Will Hobson, Sports Gambling in U.S.: Too Prevalent to Remain Illegal?, Wash. Post, https://www.washingtonpost.com/sports/sports-gambling-in-us-too-prevalent-to-remain-illegal/2015/02/27/f1088e4c-b7d3-11e4-9423-f3d0a1ec335c_story.html (Feb. 27, 2015).)) The concern regarding game fixing, as well as the moralistic strain of American sports have long helped foster a widespread disdain of sports gambling. ((See id.)) However, it is unclear whether this Act truly distinguishes fantasy games from sports gambling. A sports bettor could conceivably argue that successful sports’ betting requires high levels of skill to predict which teams to bet on. Alternatively, fantasy games don’t always require any degree of skill: while a participant picks which individual athletes to play in any given week, there is the same level of chance in terms of how those individuals perform.
Although fantasy games are currently legal, there has recently been Congressional activity indicating that change may be imminent. ((See Joe Drape & Ken Belson, Sites Don’t Offer ‘Gambling.’ Critics Say That’s a Fantasy, N.Y. Times, Sept. 17, 2015, at B11, available at http://www.nytimes.com/2015/09/17/sports/football/draftkings-fanduel-fantasy-sports-games.html.)) As participation in fantasy games increases there is likely to be some clarification on the issue. This change may come in the form of making fantasy games illegal, or, alternatively, legalizing all forms of sports gambling. As the law currently stands, the NFL endorses fantasy sites such as Draft Kings, but strictly prohibits sports gambling. ((Id.)) The NFL chooses to endorse such practice due to the large financial returns they see. ((Id.)) In the next post I will explore the financial and policy implications of the current legal distinction between games of skill and games of chance as they pertain to sports gambling.
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