Professor I. Nelson Rose interviewed by The Recorder on the future of fantasy sports regulation

The Recorder, November 23, 2015


DraftKings and FanDuel say they provide games of skill, not games of chance. Are daily fantasy sports a form of gambling?
The question is, whether having just daily fantasy games, whether that eliminates too much skill, too many of the elements of skill. It means that things like injuries of a quarterback, fortuitous events, would have a much bigger impact. With season-long sports, a player could trade the injured player but injuries would happen to everyone. It’s more likely that chance is going to drop out as the deciding factor.

But just because it’s gambling doesn’t mean it’s illegal. The operators point to this 2006 federal statute, the Unlawful Internet Gambling Enforcement Act, that does have a carve-out for fantasy sports. But when you read the statute, you don’t have to read it that carefully—it’s the first paragraph of the statute—it says that it is not designed to change any other federal law, let alone any other state law. It’s an enforcement statute.

So it doesn’t make something that is illegal, legal. The question of whether it’s legal or not depends on state law, whether a game meets the state standard for a contest of skill or whether it’s gambling.

How do you assess California’s proposed legislation?
I haven’t seen the California statute, but I think they will succeed in getting statutes passed that require the fantasy sports operators to be regulated because they have done such a poor job of self-regulation. Just common sense would say you don’t let your insiders participate in games where they might win $350,000.

If they were smart, the fantasy operators would voluntarily agree to be taxed because if they are generating revenue, they’ll have the state as an ally instead of an enemy.

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