WHEN IS FANTASY A GAME OF CHANCE?
I’m not a great sports fan, so it was no surprise that I had never heard of fantasy sports until it became headline news a few months ago. Of course I was aware of gambling on the outcome of sporting events, such as the office pool, and betting outlets in Las Vegas and other centers of gaming, but fantasy sports was an entirely new concept for me.
I have learned that fantasy sports is a multi-billion dollar industry with millions of participants busily forming fantasy winning teams for a gaming pool that can pay a winner as much as $2 million. Government regulators claim that these online operations are actually unlicensed gambling enterprises and have begun to take legal action to stop the operations. A recent action by the state of Nevada shutdown the popular fantasy sport websites claiming they cannot operate in the state without a gambling license.
Herein lies the problem: the advocates and players of fantasy sports say it’s a game of skill, not a gambling enterprise. The two largest websites that manage fantasy sports are DraftKings and FanDuel. Members pay an entry fee to compete in games involving professional or college sports as part of a much larger pool. They try to assemble teams and can earn the most points based on real-life statistics with a certain percent of top finishers earning a payout.
Sounds complicated? I guess you have to be one of those avid sports fans who follow several sporting events and are knowledgeable on all of the players’ qualifications and their sport record.
Here is the current legal status for the actions against the websites. The New York State attorney general has filed a lawsuit against FanDuel and DraftKings requiring them to give back all of the money lost by players in 2015 and pay a fine up to $5000 per case. It is estimated that at least 600,000 customers took in more than $200 million.
Nevada has already prohibited Internet fantasy sports without a gambling license.
In California, the fantasy sport operation was declared to be just fine as long as their profits are subject to state tax and their operations are transparent with protections against fraud and insider trading.
According to columnist George F. Will, Americans have been betting on sports since the first time a Puritan pilgrim boasted that his horse was the fastest in the Massachusetts Bay Colony. However, fantasy sports is potentially in conflict with the legislation passed by Congress prohibiting Internet gambling, including banks or credit card companies processing payments online for a gambling operation. The legal eagles have a lot to chew on with this conflict of interpretation.
The television advertising for the major fantasy sport websites draw attention to the issue whether it is a game of skill or gambling. DraftKings’ advertisements promise a new fantasy millionaire every week and the company says it will disperse $1 billion in winnings this year. FanDuel says its patrons win $75 million a week and might receive $2 billion this year, as noted in the commentary by George F Will.
Then there is the suspicion that fantasy sports encourage insider trading. With the technology available, an employee from one website can spy on another website to create the fantasy lineup for his own selection of a winner. Records reveal that active employees often invest in the pools and are the most frequent winners.
Three activist groups filed legal action claiming fraud, reported The New York Times. The Supreme Court declined to comment on the possible violation of federal insider trading laws, according to The Economist.
With several states opposing fantasy sports without a gaming license, the popular online sport might find itself in a tangle of litigation. Meanwhile, millions of dollars are circulating on the Internet while governments are fretting over loss of revenue and control.