If you follow sports to any degree, or even if you’ve just so happened to be flipping through the channels on your television, you’ve probably seen advertisements for DraftKings and FanDuel. These companies are part of a new craze called “daily fantasy sports” or “DFS” for short. Unlike traditional fantasy leagues, DFS take place over a week or day, rather than an entire season. Users must not only pay an entry fee, but also adhere to a specific salary cap when constructing their team. Part of everyone’s entry fee is placed into a pot that will be gifted to the winner. The rest is given to the host company as a rake-off fee.
FanDuel was only established in 2009 and DraftKings formed only a short while later, making this a very recent phenomenon that has gone on to make billions of dollars. Still, the potential to win up to $1 million in prizes in one night, along with the mobile accessibility and flexibility in the fact that contestants can change their teams every night rather than hold the same squad for an entire season, help keep the experience fresh and full of monetary potential. In essence, entering one of these DFS leagues feels a lot like online gambling.
Of course, I’m not the only one to point this out. This past Tuesday, New York attorney general Eric Schneiderman declared that daily fantasy sports companies like FanDuel and DraftKings constitute gambling, an act illegal in New York State. Schneiderman sent cease-and-desist letters to the companies and demanded that they stop accepting “wagers” from New Yorkers.
The companies responded by stating that their games were that of skill rather than chance. They have been getting quite defensive, claiming that New Yorkers have been playing harmlessly for years, engaging in a process that is not much different from regular fantasy sports. I can attest to the fact that I have never really thought of DraftKings or FanDuel as gambling. I’ve mostly just thought of them as annoying, yet I never really dug deeper. But at the moment, the scrutiny is building.
Schneiderman had opened an investigation back in October as well, claiming that employees from these sites used inside information from each other’s sites to win large sums of money. The FBI opened a similar investigation a week later based on that very premise. Since then numerous lawsuits have been filed with charges ranging from fraud, to racketeering, to negligence and false advertising.
Gambling is clearly illegal in New York, and that poses an issue itself. This past October, the state of Nevada declared in a court of law that sites like DraftKings and FanDuel do in fact constitute gambling, meaning that in order to continue running in their state, the sites would need to obtain a sports pool gambling licence. Thus, DFS should in theory be illegal in the majority of states in the US. However, the Unlawful Internet Gambling Enforcement Act has often overlooked other fantasy type games in the past.
The large issue here lies in the practices and ethics of these two monetary superpowers. The Nevada Gaming Control Board regulates all gambling activity in the state, making the sites’ activity there closely monitored. Still, in other states, the behavior of the companies goes unchecked as their status as gambling sites is now in a grey area. This along with behavior that includes employees playing on competing sites and thus the looming threat of insider trading are the real cause for concern.
Naturally DraftKings urged New Yorkers to fight Schneiderman’s potential ban on their site. The message was positive, calling to a love for football, camaraderie and the culture of fantasy sports. They also attempted to deflect the issue by claiming the state in essence has bigger fish to fry. They even created their own hashtag! This playful tone and avoidance of denial simply adds to the uneasiness of the situation created by countless accusations, investigations and lawsuits. Despite never having engaged with either service, I have to say, something just doesn’t add up.