Since it was announced that DraftKings had received licensing in the United Kingdom to launch its daily fantasy sports service there, gaming media have been critical of the move. Critical might not be the proper term; "hand wringing" might better describe what is being done.
DraftKings is one of two major competitors in the daily fantasy sports industry, alongside FanDuel. DraftKings launched its service 2 years after FanDuel and has been playing catch-up ever since. Though the Boston-based DraftKings is estimated by Forbes to be worth $1.2 billion in comparison to New York-based FanDuel's $1 billion, most have FanDuel as a slight leader in the DFS industry.
Applied in June 2015
Thus, it might have come as no surprise that DraftKings applied for a UK license in June 2015, hoping to gain early entry into a potentially lucrative new gaming region. With the rabid fandom in the UK for the English Premier League and a local DFS company (Mondogoal) in the business, it makes sense to get an earlier approval than FanDuel.
There is a big problem in doing so, though: it blurs the lines between DFS and sports betting. Fantasy sports received a carve-out in the Unlawful Internet Gambling Enforcement Act of 2006, mainly because big US corporations like Yahoo and CBS wanted to protect their investments in the fantasy football industries. The UIGEA said fantasy sports betting was not really gambling, though the legislators who passed the bill never envisioned DFS.
Is "Daily Fantasy Sports" Gambling?
Since one-day fantasy contests became popular, murmurs occasionally have been heard that DFS is gambling. It's hard to make a distinction, because people pay entry fees to enter contests and are paid if their team wins. The only difference is their "team" is comprised of individual players in football, baseball, or some other sports. People cannot bet on the Yankees or Cowboys or Lakers, as they would in traditional sports betting.
But DFS services use similar promotional methods to online poker sites and sportsbooks. They offer welcome bonuses and VIP rewards programs. They seek affiliates like those companies. When they have conventions, those events take place in Las Vegas.
DFS Execs Distance from Sportsbooks
At the same time, the executives of FanDuel and DraftKings try very hard to avoid the comparisons. They emphatically state DFS is not gambling and resent any suggestion they might be. This is especially true when they're collecting investments from traditional corporations from NBC Sports, Comcast, and Fox Sports. Those companies have bought into the concept, though the Disney Corporation declined to invest after talking seriously with DraftKings.
Disney's decision highlights an underlying concern: associate yourself too much with sports betting and the politicians could ban your business. That is why DraftKings' approval by the UK Gambling Commission is so dangerous.
UK Gaming: A Legal Trap?
In the United Kingdom, parsing of words to gain approval was not needed. A company applies and is given a license to operate. The UK allows sports bookmakers and sports totalizers, so everything seems simple. Yet it puts DraftKings in the position of admitting their product is sports betting in the UK, while denying their product is sports betting in the US.
Since the Internet exists, that could be a big problem for the online daily fantasy sports industry. It parts the veil. As Hailey Hintze of FlushDraw astutely noted, the case is reminiscent of a free speech case involving pornographic material which was shown in a Cincinnati theater in the 1960s, Jacobellis v. Ohio.
In that case, U.S. Supreme Court Justice Potter Stewart and fellow justices discussed what hard-core pornography was and Justice Stewart said, "I shall not today attempt further to define the kinds of material I understand to be embraced within that shorthand description; and perhaps I could never succeed in intelligibly doing so. But I know it when I see it."
"I Know It When I See It"
That is essentially how people are with gambling. Whatever the technical legal definition of gambling is and whether daily fantasy sports falls under that definition, people know gambling when they see it and DFS looks like gambling. The industry has flown under the radar this long, but if it gets too big and blurs the line too much, it is going to come into the crosshairs of the U.S. Congress, just like the online gambling industry did during the Poker Boom.
The American gaming community can hope that the federal ban on sports betting, PASPA, is struck down before that happens. Perhaps that happens in 2015, if the U.S. Third Court of Appeals rules on behalf of New Jersey against the US sports leagues. If PASPA remains in force over the next several years, then DraftKings decision to gain UK licensing as a gambling entity could be seen in retrospect as shortsighted.
