Hearings to start with future of sites at stake
IT’S IMPORTANT if you want DraftKings and FanDuel to ever resume operating in New York again.
And it’s important if you ever want to place a bet on a sporting event in the future, if you ever want to make a wager on the Super Bowl or enter a March Madness pool.
Because on Wednesday, the federal government will hold its first-ever hearing on fantasy sports. And while DFS sites like DraftKings and FanDuel, which stopped doing business in New York this spring under legal pressure from the state, will be a central part of the conversation, lawmakers are also going to hear about traditional sports betting, and the conversation will shift to all-out legalization and regulation.
The House Subcommittee on Commerce, Manufacturing and Trade will conduct a hearing titled “Daily Fantasy Sports: Issues and Perspectives” at the Rayburn House Office Building. It is designed to be an informational session as lawmakers consider whether or not the federal government should have a role in regulating daily fantasy sports.
DraftKings, FanDuel and the pro leagues that invested and partnered with the sites all declined invitations to participate. But the hearing will touch on issues much larger than DFS because it’s impossible to separate fantasy games from traditional sports betting at this point.
Here’s what you need to know about the hearing and why it’s important:
Will DraftKings & FanDuel attend?
The two sites control 95% of the daily fantasy market, but they declined to testify. They’re letting the Fantasy Sports Trade Association, of which they are members, speak for them. The NHL, MLB, NBA and NFL, which have all invested in or partnered with the sites, also declined invitations to testify. So who is going to testify? The subcommittee will hear from the following witnesses:
l Steve Brubaker, Executive Director, Small Business Fantasy Sports Trade Association
l Kurt Eggert, Professor of Law, Chapman University Fowler School of Law
l Jordan Gnat, Senior Vice President, Strategic Business Development, Scientific Games
l Mark Locke, Chief Executive Officer, Genius Sports
l John M. McManus, Executive Vice President, General Counsel and Secretary, MGM Resorts International
l Ryan Rodenberg, Assistant Professor, Department of Sport Management, Florida State University
l Peter Schoenke, President, Rotowire.com, Chairman, Fantasy Sports Trade Association
l Lindsay Slader, Operations Manager, GeoComply
Why are the feds getting involved?
DFS legislation has been passed on a state-by-state basis. So far laws have been passed in Virginia, Indiana and Tennessee, but while the games are legal in those states, the Nevada Gaming Commission ruled that DFS is a form of gambling and determined if the sites want to do business there, they must apply for a license just like a Las Vegas casino does. Different state interpretations of gambling have created what observers call a “patchwork” of laws without any real consistency from state to state.
As a result, DFS continues to exist in a gray area of the law, legal in some places and illegal in others. Federal oversight would bring more uniform legal clarity to the industry.
“The heavily regulated casino gaming industry, we don’t do well in legal gray zones,” Geoff Freeman, the president and CEO of the American Gaming Association, said. “We need the environment to either be black or white. The gaming industry wants to see clear rules of the road that lay out where DFS is going to be legal and what’s going to be regulated and how consumers are going to be protected.”
The feds would establish that black-orwhite clarity.
It’s fantasy sports. What’s the big deal?
DFS is a billion-dollar industry that has attracted upwards of 60 million participants. In a short time, it became wildly popular. Perhaps you heard or saw an ad for DraftKings or FanDuel? The publicity caught the attention of lawmakers, and socalled “insider trading” schemes attracted even more attention as authorities continue to try to figure out if the business should be regulated and how it should be classified.
At its core, users pay a fee in an attempt to win a prize. Money can be won and lost. That’s the very definition of gambling, and while some states agree, others do not. There is currently some kind of DFS legislation working its way through upwards of 30 statehouses as the nation slowly establishes legal parameters for the games.
Is DFS different from sports betting?
The American Gaming Association, a powerful voice in the conversation doesn't know. But the organization has been calling for federal gambling reforms. The AGA says illegal sports betting is a $150 billion market, compared to a little over $4 billion wagered legally in Nevada. The AGA, which represents casinos, is in favor of the repeal of federal gaming prohibition because it says the law isn’t working.
AGA estimates Americans bet nearly $14 billion on the Super Bowl and March Madness, about 97% wagered illegally, “meaning it took place beyond the reach of law enforcement with no regulatory oversight, no protection for consumers and no safeguards for the integrity of games,” Freeman said.
Americans love to bet on sports and the demand is growing. So Wednesday could be a launching point for a broader conversation about an overhaul of sports gambling laws.
“The status quo of sports betting is unsustainable,” Freeman said.
So what’s going to happen today?
Any federal law governing fantasy games will be a long time coming. There will be task forces and committee meetings and any legislation would be months away. But the conversation is going to start on whether the government should have a role in regulating daily fantasy games.
But lawmakers are also going to learn about the connections between DFS and traditional sports betting, and the hearing could be a starting point for broader gambling reform. DFS will be a huge part of the conversation, but it is a discussion that will also include all forms of sports betting.
“We simply need to know the rules,” Freedman said.
And the clarification of any rules governing daily fantasy games will start with Wednesday’s hearing.