The idea that regulation of the daily fantasy sports industry doesn’t run afoul of federal sports betting law has been in the background ever since bills started cropping up in 2015.
That concept would get a bit of a boost should Pennsylvania pass the Senate version of a DFS bill that started making progress this week.
The PA DFS bill and ‘sports betting’
The bill itself — S 1324 sponsored by Sen. Anthony Williams — entitles the law it would create the “Fantasy Sports Consumer Protection Act” and would promulgate regulation in the mold of bills around the country. It also specifically exempts DFS from violations of state code:
The provisions of 18 Pa.C.S. § 5513 (relating to gambling devices, gambling, etc.) shall not apply to a fantasy contest conducted in accordance with this act
Things get stickier for the bill vis a vis laws we’ve seen in other states, when one takes a look at the co-sponsorship memorandum that accompanies bills in Pennsylvania.
That memo from Williams has a subject line of “Daily Fantasy Sports Betting Regulation.”
It goes on to declare that the bill would call DFS a game of skill, as well. But still, the phrase “sports betting” sticks out like a sore thumb. And that’s where the Professional and Amateur Sports Protection Act could come into play.
What PASPA says
PASPA, of course, is the federal law that basically bans all forms of sports betting in the U.S. outside of Nevada and limited wagering in Oregon, Delaware and Montana.
What is not allowed under PASPA? From the law:
…a lottery, sweepstakes, or other betting, gambling, or wagering scheme based, directly or indirectly (through the use of geographical references or otherwise), on one or more competitive games in which amateur or professional athletes participate, or are intended to participate, or on one or more performances of such athletes in such games.
So no sports betting is allowed under PASPA, right? The memo in advance of the introduction of the bill would seem to set up a violation of PASPA on a tee for a potential litigant.
But where would such a challenge come from, and is that even likely?
Who would challenge a DFS law?
PASPA says the following parties can bring court cases as it relates to PASPA:
A civil action to enjoin a violation of section 3702 may be commenced in an appropriate district court of the United States by the Attorney General of the United States, or by a professional sports organization or amateur sports organization whose competitive game is alleged to be the basis of such violation.
Who probably isn’t bringing a PASPA case
The most obvious examples of plaintiffs under PASPA come from the ongoing New Jersey sports betting case, where the state is attempting to allow wagering within its borders. The plaintiffs there are the NCAA and the major North American professional sports leagues — the NFL, NBA, NHL and MLB.
However, most of these groups would not seem terribly interested in challenging a DFS law. The pro leagues and/or their teams all have relationships with the biggest DFS companies, DraftKings and FanDuel.
The NCAA would appear to be precluded from bringing action in any state where fantasy contests on college games are excluded, which is the case in the PA bill:
NO licensed operator may: … offer a fantasy contest based, in whole or in part, on collegiate or high school athletic events or players;
That’s not an exhaustive list of PASPA plaintiffs
As noted in PASPA, the U.S. attorney general could bring such a case, and in fact, the Department of Justice is a co-plaintiff in New Jersey. However, the DOJ’s desire to go it alone without the pro leagues on board might be mitigated.
Who does that leave? Well, the universe of potential plaintiffs could still include a “professional sports organization or amateur sports organization whose competitive game is alleged to be the basis of such violation.”
In reality, that universe might be larger than one might think. The PA Senate bill contains no language regarding “amateur” sporting events outside of scholastic ones.
So, any amateur sporting organization — or any non-NFL et al pro league for that matter — who wants to allege its sport could be affected by the law is a potential litigant. (That’s not to mention the PA bill, as written, could be authorizing sports betting far beyond the scope of much of the DFS industry as currently situated.)
And in states where college contests would be allowed — Virginia for instance — other groups and institutions are in play, as well.
The standard for claiming injury in a PASPA claim, as argued by the leagues and agreed to by a district court judge in New Jersey, is an “identifiable trifle.” Proving that standard could potentially be easy to argue.
If the scenario of some random group bringing a PASPA challenge seems far-fetched, consider the stakes involved with sports betting in the U.S.
Some have a vested interest in tearing down PASPA
There are a lot of people in the country who want to see sports betting legalized. That includes the commercial casino industry, which is pushing for legal and regulated sports betting nationwide and a repeal of PASPA via the American Gaming Association. (A number of states are eager to allow sports betting, as well, including Pennsylvania.)
Manufacturing a PASPA challenge based on a DFS law could push the matter of the federal law and sports betting to the front of the line. Three of the aforementioned pro leagues have equity in DraftKings and FanDuel, and have an interest in seeing the DFS product succeed moving forward.
If a case formally questioning the legality of a state-level DFS law under PASPA were to emerge, might the leagues rethink their stance of propping up PASPA as written? It’s at least a feasible scenario, although its likelihood is a matter of speculation.
Skill vs. gambling and ammo against PASPA
The “sports betting” phrase in the PA bill memo brings the issue of a possible PASPA challenge to the forefront. But there’s an argument, after all, that the amount of chance doesn’t even matter:
1991 Senate Report addressed skill v. chance issue in context of PASPA’s purported scope. cc: @DustinGouker pic.twitter.com/A9wFp34Rfh
— Ryan M. Rodenberg (@SportsLawProf) June 27, 2016
The labeling of DFS as gambling/betting or a game of skill might not matter at all, vis a vis federal law. In the end, calling regulation of DFS a “sports betting” regulatory scheme is more of a matter of appearance than a practical matter that has wide-ranging legal implications.
Yes, PASPA was designed to stop sports betting in an effort to protect the integrity of sporting events. (The efficacy of that ban, of course, is constantly in question with the hundreds of billions of dollars wagered in the US annually at offshore sportsbooks.)
The DFS laws, and the “sports betting” memo in particular, serve more to point out the inefficacy, selective enforcement and outdated nature of PASPA.
PASPA has reared its head at state level before
The PA bill is not certainly not the first time anyone has considered the intersection of fantasy sports regulation and PASPA. The federal law is usually brought up, at least in passing, in the various states where DFS bills have been considered.
In New York, it was taken a step further. New York Assemblymember Dean Murray introduced a bill that would have allowed the state to authorize “fantasy sports wagering” by amending the state constitution.
That bill, if passed, also would have raised the PASPA issue even more than the laws passed to date. (New York’s legislature ended up passing a bill that that exempted DFS from the penal code for gambling without a constitutional amendment.)
In the end — in New York, Pennsylvania and elsewhere — DFS regulation serves to point a spotlight on the idea that getting around PASPA can be a matter of careful wording and semantics. And the game of semantics regarding what is and isn’t gambling in the U.S., played both federally and at the state level, is one that has long outlived its usefulness.
