November 11, 2015, Queens, NY New York State Attorney General Eric Schneiderman ruled that fantasy sports are gambling and issued a cease and desist letter to Draft Kings and Fan Duel. Five weeks ago, New York State opened an investigation to determine if insider information was being shared for profit. The two fantasy sites have five days to comply. Four weeks ago, the Nevada Gaming Control Board ruled that fantasy sports are gambling and can not continue until they obtain a gambling license.
On Good Morning America, Scneiderman said, “We became aware of these sports gambling sites a little over a month ago, began an investigation, determined after reviewing a lot of documents, and their lawyers have been in and out of our offices and met with us many times, that this was clearly gambling within the meaning of New York’s constitution and New York’s laws. This is people betting on contingent events that they don’t control, and the patterns are similar to the patterns in a lot of other forms of gambling. There’re a lot of people who believe because of the advertising campaign that misleads people into thinking that it’s real easy to win. It’s almost like a lottery. They believe they have a good chance to win. In fact only a few people win.”
The ramifications of the ruling are huge. Both FanDuel and Draft Kings have impacted traditional sports betting siphoning hundreds of millions from Las Vegas and other bookmakers. What makes fantasy sports wildly popular is that it can be done over a phone via an app or at your computer in an instant.
Opponents of fantasy sites claim that it’s gambling, while proponents claim it’s a game requiring skill. The fact that very people win probably points to the latter having more merit than the former.
Six states have taken action against these fantasy sites: Arizona, Iowa, Louisiana, Montana, Washington State, and of course, Nevada. More states are likely to follow suit. FanDuel is in New York City, and Draft Kings recently opened an office in Manhattan. Both companies are valued at $1.2 billion, and their payoffs for this year total $3 billion.
FanDuel issued the following statement: “Fantasy is a game of skill and legal under New York State law. This is a politician telling hundreds of thousands of New Yorkers they are not allowed to play a game they love and share with friends, family, coworkers, and players across the country. The game has been played–legally–in New York for years and years, but after the Attorney General realized he could now get himself some press coverage, he decided a game that has been around for a long, long time is suddenly now not legal.”
FanDuel and Draft Kings advertise heavily on television and the internet, especially during NFL games and on networks like ESPN. There are movers and shakers behind the scenes, (including Dallas Cowboys’ owner Jerry Jones and New England Patriot’s owner Robert Kraft who have a stake in Draft King), who will leverage their power to ensure other states don’t follow suit and that current rulings are overturned.
This is beef at the highest level. Don’t be surprised to see this play itself out in the Unite States Supreme Court. Thus far, round one goes to New York. The bell is about to ring for round two.
Professor Clifford Benton can be reached at @cliffordbenton.