Yesterday two of the biggest names in the NFL defended Daily Fantasy Sports (DFS), Jerry Jones, the owner of the Dallas Cowboys, and Robert Kraft, the owner of The Kraft Group and the New England Patriots. While NFL teams are not allowed to individually invest in DFS the owner groups can, and these two have invested in DraftKings specifically.
Currently DFS, DraftKings and FanDuel, are claiming that they are operating within the limits of the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA). The companies claim that the UIGEA has “carved out” a way to allow these games because they “reflect the relative knowledge and skill of the participants and are determined predominantly by accumulated statistical results of the performance of individuals,” thus DFS is not gambling, but instead it is based on skill of the players.
The UIGEA requires that DFS to announce the value of the prize before they know how many people will enter the pool. This requirement makes starting a new DFS company next to impossible without a lot of Venture Capital funding, like FanDuel and DraftKings have received. This requirement has created an extremely high barrier to entry for DFS, securing the industry for FanDuel and DraftKings as of right now.
Announcing the value of the prize has allowed the smartest players to use probability on their side when they pick the leagues they will participate in. The veteran DFS players will often wait until close to game time to enter those leagues that are filled under the companies’ profitable amount. This gives those players greater odds of winning prize money, while the company takes a loss.
The UIGEA also requires bets are placed on players across on multiple events, this is easy to do in a season long fantasy league because it consists of multiple games. This is even somewhat easy to do during a weeklong fantasy event because it would consist of multiple games. The biggest question here is if golf falls under this category with DraftKings’ newest option, betting on one tournament. DraftKings has taken a risk and decided to allow its consumers to play DFS golf by picking just one tournament. To abide by the UIGEA DraftKings has stated that it views each round of the golf tournament as a different event. This has yet to be challenged, but if this is allowed it is hard to see where it ends. Will the courts then allow each quarter of football games to be called different events? What about each inning of a baseball game? If this stands you will start to see live DFS gambling of each game as the game proceeds. The line of multiple events would become extremely blurred if DraftKings view is upheld and it is tough to see a court allowing this to happen.
DFS may have a spot within the UIGEA, but without regulation of the companies they will continue to push the limits of what is and is not allowed. Soon we will see how different states view DFS and eventually we may here from the federal level on the legality of Daily Fantasy Sports. So even with owners coming out in support of DFS there is a question of legality. Also, should DFS be regulated by the government or continued to be “self-regulated” as they are now?