Don’t Hate The Player; Hate The Game

There is a gambling civil war brewing between OG daily fantasy sports companies and the new wave of DFS operators. The casus belli is the fine line between DFS and sports betting.

Note: Underdog is a sponsor of the Straight to the Point newsletter. The views expressed below are mine and were not influenced by anyone.

If you were to ask me, every DFS product is a sports betting product, and sports betting is gambling. Therefore, all these products should be regulated as gambling products. There is no need for artificially crafted special categories. As Stephen Crosby said, call it all gambling and let the regulators sort it out.

That said, no one is asking me. So, let’s return to reality, where a clear distinction between fantasy sports and sports betting exists.

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Nobody’s Right If Everybody’s Wrong

The gambling laws in this country are, politely speaking, complex. If we’re being less polite, they are idiotic. And that’s why we’re in the situation we are in.

I used to laugh at the use of entry fees and the parsing of skillfulness by DFS operators. I was frustrated by the nitpicking of the language in laws to justify the legality of a product.

And this cuts both ways. States use similar tactics to legalize these products like New York calling DFS a game of skill to avoid a constitutional amendment or saying online sports betting is just a different delivery channel of an already legal product. These workarounds are often applauded.

But, as The Dude would say, “That’s just like your opinion, man.” Or, in the words of another fictional character, “This is the business we’ve chosen.” No matter how poorly written and nonsensical, the laws are what they are, and we have to grin and bear it.

I still want all these products labeled gambling. But it’s not something I fret about, as I’m happy to see most of the space being regulated and licensed in some way, shape, or form. Yes, there are some bad actors and cowboys that go too far. However, most are operating with some manner of regulatory approval and add value to the market - a regulated market is better than an unregulated market.

So yes (in my opinion), these products are gambling. At the same time, I don’t believe they violate the (vague) definition of fantasy sports where they operate.

Statues clearly define sports betting, and wherever applicable, these definitions cross-reference fantasy sports. If it meets the (vague) definition of fantasy sports, it’s a fantasy product.

Yes, it could also meet the definition of sports betting, but the way the statutes are crafted, once it meets the criteria of fantasy, that’s what it is.

The Root Cause

This isn’t an issue exclusive to DFS. Sweepstakes gambling sites, Texas poker rooms, VGTs, skill games, Freemium social casinos, and an assortment of other gambling (or quasi-gambling or gambling adjacent) products exist because US gambling laws allow them to exist.

US gambling laws suffer from three ailments:

• They are antiquated. We have laws designed to deal with telegraphs and phones being applied to the internet.

• They are often at odds with other laws. Giving us situations where two things are accurate at the same time. 

• They are poorly written and full of carveouts for special interests. They are begging to be exploited by knowledgeable people far more innovative than those who wrote the laws.

And then there are the Fantasy laws. As Underdog General Counsel Nicholas Green wrote in a white paper, the way fantasy sports laws are written gives a wide berth to DFS products:

Underdog's Pick'em fantasy contests meet the letter of the accepted definition of fantasy sports because they are

• contests of skill,

• in which patrons create rosters of multiple athletes from different teams,

• who play in real-world athletic contests, and

• the winning outcomes are based on how all of the selected real-world athletes perform in the aggregate.

“Taken to an extreme, all paid fantasy sports could be construed as a form of sports wagering, which is plainly not the law,” Green said. “That is why legislatures have been careful to exclude paid fantasy sports from their description of what constitutes sports wagering.”

I would argue that these laws (most written pre-PASPA repeal) were crafted to allow DFS to be as close to sports betting as possible. In some areas, that line is quite blurry.

As Green notes, there are restrictions fantasy sports operators must abide by that sportsbooks do not. “Fantasy sports patrons cannot mix-and-match player predictions with wagers on team or game statistics.”

Simply put, if you consider it all gambling, a small bubble exists within the larger sports betting bubble known as Fantasy. But as long as they comply with the laws and regulations governing fantasy sports in the state, they can be regulated as such.

Why Now?