Daily fantasy sports (DFS) is currently permitted in 44 states in the United States due to the preconceived opinion that the contests are games of skill and not chance or luck. It’s a debatable technicality that allows platforms like DraftKings and FanDuel to operate online free of federal and local laws that prohibit Internet betting.
Arizona, Iowa, Louisiana, Montana, Washington, and just last week Nevada, have all implemented state-specific regulations that ban cash prizes being awarded online without explicit licenses or approvals.
In 2012, DraftKings Chief Executive Jason Robins posted in an online forum that his new company was a mashup of fantasy sports leagues and poker. His conversation is damaging to DFS operators that will likely be forced to defend their non-gambling components as heavy scrutiny from lawmakers is intensifying.
Poker & DFS Hand-In-Hand
A careful review of how poker and daily fantasy sports operate displays several similarities, but for reasons unknown poker is considered to be gambling while DFS is labeled skill.
By Robins’ own admissions, the formats are inherently comparable.
“There is no house advantage because the house does not participate in the game at all,” the DraftKings CEO said three years ago. “You are playing against other players, we simply act as the ‘points tally’ and ‘money distributor.'”
When players sit down at the felt at a land-based or online poker table, the dealers are also not actively engaged in the game but merely coordinators of the action. They too tally winning hands and collect and distribute money through chips.
Unlike blackjack, slots, roulette, and various other casino games where the house has an edge and wins when the gambler loses, the casino and DFS operator both simply take a rake or entry free with poker and daily fantasy sports.
“The concept is almost identical to a casino,” Robins declared.
Parents and educators alike routinely stress the importance of children and young adults understanding that the Internet is forming a digital trail of their actions. The same holds true for CEOs.
In 2012, DraftKings was a small startup that had just secured its first million dollars in funding from private investors and was a drop in the bucket compared to rival FanDuel. Three years and hundreds of millions of dollars later, Robins’ online comments could come back to haunt him just in time for Halloween.
Nevada has already pushed DFS away, the New York Attorney General has his office inquiring into the organizational procedures of DraftKings and FanDuel, a Florida grand jury is deliberating whether to bring charges, and Pennsylvania, Michigan, and Delaware are all investigating the market’s legal integrity.
Perhaps most importantly is the disclosure that the Department of Justice and the FBI are also pondering DFS as it relates to federal law.
Linking his company’s product to poker and gambling was certainly a mistake by Robins, dousing much fuel on a fire that is already raging with controversy. DFS lawyers will need to utilize all of their legal skills moving forward, and also likely require a little bit of luck to keep daily fantasy up and running.