The DraftKings-FanDuel Merger And The Intersection With Sports Betting

Posted on November 21, 2016

[toc]The American Gaming Association’s signature issue in the past year has been a push for the legalization of sports betting in the US.

So when the giant daily fantasy sports merger between DraftKings and FanDuel was announced last week, it came as no shock at that the AGA latched on.

The industry association for casinos in the US issued this statement from Sara Rayme, senior vice president of public affairs:

“DraftKings and Fan Duel have sped up the debate on legalizing sports betting by demonstrating its popularity and mainstream nature. Fans have a desire to be invested in games. We’re building on the momentum created by DFS to remove the federal ban on sports betting across the majority of the country.”

It was a simple statement from the AGA with a lot of truth behind it.

Gambling, skill and who cares?

One of the central questions that attorneys general, state lawmakers and lots of other people have grappled with over the past year is this: Is DFS gambling or is it a game of skill?

It’s an important question in terms of the current law in the US, and one that is still unsettled in a variety of jurisdictions that haven’t passed laws. Other than the Unlawful Internet Gambling Enforcement Act and laws in 20 percent of the states, DFS and the larger fantasy sports industry are not directly addressed.

The gambling vs. skill debate is not not likely to go away any time soon for a variety of reasons. But whether DFS is technically “gambling” is barely worth discussing when trying to figure out what to do with it in the future. (That comes with one caveat, in my mind: responsible gambling protocols are best deployed in the DFS space.)

For the US moving forward, the AGA hits it on the head. People are engaged by DFS because they have a monetary interest on the outcome.

And the professional sports leagues in the US have said they are OK with this.

The leagues are going to be invested in a single DFS company

Three major professional sports leagues in the US — the NHL, NBA and MLB — all have equity positions in either DraftKings or FanDuel. The other major league — the NFL — has plenty of ties to both DFS operators without having an equity position. Two NFL owners are involved via investment arms, however.

That all means the leagues will play a role in how the industry moves forward when FanDuel and DraftKings become a single entity. (That assumes that they will get past anti-trust scrutiny and don’t hit any other bumps in the road.)

Much like the DFS sites themselves, the leagues will argue that DFS is wholly apart from straight-up sports betting. They aren’t entirely wrong.

But the parsing of the words “gambling” and “skill” belies the fact that the sites facilitate the movement of billions of dollars between fans. That movement of money comes at a velocity far greater than in the traditional season-long fantasy sports industry. People can win –and lose — large amounts of money playing DFS. That’s the truth whether DFS is considered gambling or not.

DFS and the leagues’ involvement has paved the way for sports betting?

Here’s what DFS has done: It’s normalized putting money down on sporting events. Previously in the US, you could really only do this via Nevada sports betting or on a much smaller scale via season-long fantasy.

The leagues will argue that the difference between DFS and sports betting is the latter’s potential impact on the “integrity of the game.” That’s fair enough, as it’s nearly impossible to affect the outcome of a DFS contest by somehow affecting the real-world games.

At the same time, there are already hundreds of billions of dollars wagered on American sports, by Americans, at offshore sportsbooks. If people wanted to attempt to fix games or performances via an unregulated sports betting market, they could. It’s to the point with the amount of money players make and the scrutiny on pro sports that fixing a top-level US game is nearly impossible, too.

If we look at the march toward sports betting in the US as a step-by-step process — a slow march though it may be — DFS has been a step forward. It has shown that having money on the outcomes of events has not brought about the end of sports nor civilized society.

The leagues, by giving their stamp of approval, have pushed the argument for sports betting forward, whether that was their intent or not. If people want to have some money riding on a game — because they have more skill than others or just because they want a chance to win some money — fewer people have a problem with that.

And the leagues certainly don’t; after all, they have a slice of the pie, playing a role in what will be the single dominant force in the DFS market.

Does all that mean expanded sports betting in the US is inevitable? The AGA and proponents of legal sports betting certainly hope and believe so.

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Dustin Gouker

Dustin Gouker has been a sports journalist for more than 15 years, working as a reporter, editor and designer -- including stops at The Washington Post and the D.C. Examiner.

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