As the United States Congress prepares to debate a comprehensive ban on online gambling, questions have been raised about the legality of online fantasy football websites. The Unlawful Internet Gambling Enforcement Act created an exemption for horse betting, lotteries, and fantasy sports, but some wonder if the spirit of the UIGEA is being broken by some site operators.
Before all the fantasy football fans begin to write their local congressmen, it should be noted that no national politician is radical enough to suggest local fantasy sports leagues should be banned. An estimated 30 million Americans play fantasy sports each year, and most of those virtual team owners are quite dedicated to their hobby.
The games being questioned are the daily fantasy sports operations. These sites offer one-shot fantasy experiences, based on one single day's set of games. The term "daily" is a bit of a misnomer when it describes fantasy football, which has only one day a week which has the multiple games needed to support such gaming. But these sites also offer fantasy baseball, basketball, hockey, and NASCAR contests, too.
Traditional Fantasy Football League
Under provisions of the UIGEA, fantasy sports is considered different than sports betting, because it involves individual players in a multiple contests. In a traditional fantasy football league, a group of sports fans gather for a draft. These people set a draft order, then take turns selecting individual NFL players to add to their fantasy team. An owner might select the quarterback of the Green Bay Packers, the running back of the Minnesota Vikings, and the star wide receiver of the Chicago Bears. A running total of fantasy points is tallied, taken from game stats according to a predetermined scoring system.
These imaginary teams are then pitted against their league opponents throughout the NFL regular season, eventually proceeding to an imaginary playoff bracket with an fantasy bowl winner at the end. Local leagues often charge an entry fee, so the winners collect prize money. It's gambling, but over an emotionally draining 4-month period of competing with friends. Tempers flair and emotions run high, but it's considered harmless gaming by lawmakers. While a fantasy football owners supposedly could join a hundred leagues and gamble on them all (thus being a problem gambler), the contests are long enough and time-consuming enough to eliminate the danger of problem gambling, to a large degree.
Corporate-Controlled League Software Sites
Traditional fantasy football leagues existed before the Internet, but the Internet made fantasy football a mainstream hobby. These days, online leagues dominate the market, and major corporations handle much of the business. While niche fantasy league administration businesses operate, major corporations like CBS, Yahoo, and ESPN collect the largest player communities. ESPN has 14 million people play through their site every year.
How Daily Fantasy Football Works
A daily fantasy football league looks and plays much more like traditional sports gambling. The same game dynamic exists. The daily team owner selects multiple players from the pool of NFL players. These players must come from two or more NFL teams--players all from the Dallas Cowboys would not be allowed. This squad (a "starting lineup") would be pitted against 1 to 9 other opponents, with prize money given to those with the most points. Billion-dollar companies like FanDuel and DraftKings exist, which have major corporations investing in their businesses these days.
The problem for many anti-gambling crusaders is: these are single-day events. A gambler could presumably play every single day of the 162-game Major League Baseball schedule. They could play in multiple contests in a single day, paying an entry fee for each contest. The fantasy sports better can spend a lot of money wagering on the daily fantasy sports sites.
Though fantasy football requires a certain skill at projecting results and considerable knowledge of the latest player, team, and injury news, fantasy sports is still considered a game of chance by many people. Anyone who's ever played fantasy football knows the outcome of any given week's match-up comes down to many random events, from touchdowns being called back due to a ticky-tack penalty to whether a running back is called down at the one-inch line, instead of given a touchdown. Injuries early in the game can derail the best plans. In other words, a lot of luck is involved.
Questions over Legality
With legality a question, the daily fantasy sports operators remain a niche market. CBS and ESPN have no part of the business, and don't appear comfortable investing in the industry. Companies like FanDuel have communities of around 500,000 players, but they are not owned by a major corporation.
Marc Edelman, a Fordham Law School professor, has studied fantasy sport law. Edelman says, "There's importance in clarifying the law. As long as there's uncertainty about the legality of these games, some potential businesses that might enter the marketplace stay out."
ESPN and CBS Keep Their Distance
Kevin Ota, a spokesman for ESPN, says his company may not be involved, but it keeps a watchful eye on the industry. Ota recently told Mercury News, "We have the most popular fantasy football game going. It's been incredibly successful, and we're focused on improving our game every year. We always keep our eye on opportunities to serve sports fans better."
Corporations like ESPN and CBS have close ties to the NFL, with billion-dollar broadcasting deals that draw in millions of viewers. The NFL wants to keep the gambling industry at an arm's length. Such companies want no part of online gambling, if it might sour their relationship with America's most popular sports league.
Therefore, the debate over the next year could be a pivotal one for daily fantasy sports. The industry might find itself declared a form of gambling, and subject to UIGEA restrictions. The industry might find the UIGEA "carve out" reinforced, thus opening the door to corporate investment. Whatever the case, the industry will be affected in a profound way by the decisions being made by lawmakers.
