The Federal Government Should Stay Out of Fantasy Sports Scandal

Atop the pile of accusations now confronting FanDuel and DraftKings, the fantasy sports websites that have taken the sports-watching world by storm, perhaps we should add still another – false advertising.

How do we know those guys you see looking up at unseen television screens, supposedly sweating out the end of some game so they can win their $1 million fake wooden check, are customers of the two sites?

They easily could be regulators, and those screens they’re watching could be carrying not football games but news of whether they will be able to pounce on the two sites with all their rulemaking might.

Pressure is building on Congress, state legislators and judges to rein in the sites, on which users essentially play fantasy sports – drafting teams of players and rising or falling on the success of those players – for money online.

There’s a lawsuit in Ohio filed by two sad sack losers. There are attorneys general and gaming officials looking into the sites in Ohio, Illinois, Florida and Nevada. There is an investigation in New York into whether an employee of one of the sites used inside information to win $350,000 on the other site. And the NCAA has asked the sites to quit putting on games that involve college athletes.

There also is increasing discussion at the federal level on whether the sites offer games of skill, which are legal, or games of chance, which can’t be conducted online because of federal law. Rep. Frank Pallone, D-N.J., has requested a congressional hearing to clear up what he calls the “murky” legal landscape surrounding the sites.

Three laws are involved – the Federal Wire Act of 1961, which prohibits using “wire communications facilities,” including the Internet, to transmit bets; the Professional and Amateur Sports Protection Act of 1992, which prohibits betting on games, and the Unlawful Internet Gambling Enforcement Act of 2006, which using the wires, again including the Internet, to participate in unlawful gambling. The 2006 law explicitly exempts fantasy sports betting from its guidelines.

Given the legal maxim that when laws contradict each other, the most recently passed one prevails, what DraftKings and FanDuel are doing is clearly legal. Unfortunately, that may not remain the case.

There is big money involved. Both FanDuel and DraftKings already have topped the $1 billion mark in revenues, and they and their fantasy sports game competitors have attracted up to 57 million customers. Casino owners, such as Sheldon Adelson, have proven they don’t like competition from online wagering of any sort and have no problem using their friends in high office to eliminate upstarts.

They are making all the familiar arguments.

People might cheat – the $350,000 winner allegedly used inside information on how many fantasy participants had selected certain players to make picks of less-used players and thus drive up his purse. His lawyers say his lineup was locked in 40 minutes before he accessed the information.

But people do cheat at such things, especially where big money is involved. They also cheat at golf and marriage. Do we outlaw them?

Some will lose and go broke chasing good money after bad. In my hometown of Shreveport, La., there is a casino with a glass-enclosed display of $100 bills totaling $1 million. Casinos can make artwork of $1 million and put it on their walls because the house always wins. Otherwise, there would be no house. Everyone knows this.

They argue these fantasy games could compromise the leagues. The leagues don’t share this fear. Both DraftKings and FanDuel advertise constantly on sports programming. Fox, Patriots owner Robert Kraft and the NHL are investors in DraftKings, and NBC and the NBA are investors in FanDuel.

Similarly, teams might fix games, suggested the Chicago Tribune in an editorial that invoked the 1919 Black Sox scandal. But this is far-fetched to say the least. Winners aren’t determined by team outcomes but by individual performances. In any given game, FanDuel or DraftKing customers could be cheering for members of both teams.

Regulators and their compatriots in Congress are champing at the bit to get involved. But if they would trust the system, it likely will produce the outcomes they seek.

Some states probably will consider FanDuel and DraftKings to be gambling and outlaw them. Some will not worry about that distinction and allow them to continue. The sports leagues will establish their own arm’s-length relationship, and if they get it wrong, tut-tutters will materialize to address the situation.

The companies themselves already are moving to squelch possible problems. Both FanDuel and DraftKings announced after the employee’s big win that they will prohibit their employees from playing fantasy sports on their site or others going forward.

Gambling law ought to be state law. States can sort it out. Leagues can make their own arrangements. Adults can make their own decisions on how to spend their money. And maybe, if they’re lucky, they can win one of those wooden checks.