Daily fantasy sports
(DFS) sites allow punters to wager on the success of teams they’ve created.
Simple, right? Not so fast. DFS sites have been confronted with a miasma of
issues over their basic legality. Is DFS sports betting? Or perhaps para-mutuel
betting? Is it based on skill or luck? Who decides, the state or federal
government? And then who governs it? The root of the problem goes back to
decades-old laws established before the emergence of the internet, and the
insufficiency of those laws is glaringly evident in the DFS question.
Legislators across the
U.S. struggle with the concepts and legalities of the convergence of sports
betting, daily fantasy sports, skill-based gaming and I-gaming. And New
Jersey’s hearing on February 17th is likely to have an effect beyond
state borders. Here’s the lowdown on the current state of DFS:
Sports Betting – Is currently controlled by PASBA, the
Professional Amateur Sports Protection Act passed by U.S. Congress in 1992. The
Act effectively outlaws all sports betting with an exception of licensed sports
pools in Nevada and sports lotteries in Oregon, Montana and Delaware. Congress
provided a one-year window of opportunity (until January 1, 1993) for states
that had operated licensed casino gaming for the previous ten year period to
pass laws permitting sports wagering. This exception was clearly crafted
with New Jersey in mind; New Jersey failed to take advantage of the
opportunity. Now, 23 years later they have taken their case to court to
re-gain sports betting licensing. Their case is scheduled for hearing
February 17th of this year. The case is against the
professional sports leagues that want to stop New Jersey from allowing sports
betting.
The ruling on this case
will likely set the future path for legislation on sports betting and fantasy
sports betting throughout the US. A win by New Jersey would also be a win for
Pennsylvania, Delaware, and the US Virgin Islands, all three in the same court
jurisdiction as New Jersey. Other states including California have also
expressed an interest by beginning public hearings on legalizing sports
betting. A loss by New Jersey can be a damaging blow to fantasy sports.
Fantasy Sports – Beginning with the basics, participants in
daily fantasy sports and sports-season long gaming. Participants in
fantasy sports assemble teams of athletes from a range of clubs in a given
sport – with football being the most popular – and earn points based on the
athletes’ subsequent games. They pay entry fees and can earn cash. Last
year illegal insider activities between two major companies, FanDuel and
DraftKing brought the concept of fantasy sports to the attention of regulators
and lawmakers. Now lawmakers throughout the US have been handed this “hot
potato” to determine whether it is legal or not.
To add to the
complexity, each state must decide on the legality of DFS within their state.
And each state’s laws define gambling differently. But New Jersey's decision
could affect other states' decisions.
So a number of questions
arise: Does fantasy sports betting violate state gaming laws? Does
it violate PASPA federal law? Is season long legal and daily
fantasy sports illegal? If it is legal how does each state regulate it,
or is the need to have a consumer protection oversight versus extensive
regulatory oversight?
Skill-Based Games and
Gaming:
Skill-based gaming is at
the forefront of discussions among legislators, state gaming commissioners and
control boards, casino operators and owners, and gaming equipment
regulators. As we have discussed, the concept of skill-based is at
the heart of fantasy sports. It is equally discussed as a concept for casino
equipment play. With skill-based casino games, electronic gambling
machines that offer players an element of skill are seen as important to
capturing the next generation of casino players who have grown up playing
sophisticated games. The discussion is at the heart of tapping into the
Millennial- age group.
What will New Jersey
decide tomorrow, and will it affect the outcome nationally? We'll look into
these issues in more depth in the coming weeks.
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