People like to give hot takes at conferences and when they appear on panels. Those takes often become even hotter when it comes to daily fantasy sports and sports betting.
One particularly flaming red-hot opinion caught my eye this morning, as a lawyer appears to believe — or at least said — that all 50 states would “allow DFS very soon.”
Here’s the take in question:
big prediction from atty Irwin Kishner on our @CardozoLaw sports gambling panel just now: “I think all states will allow #DFS very soon.”
— Daniel Roberts (@readDanwrite) March 9, 2017
This, however, defies reality.
First, which states ‘allow DFS’?
Following what the states do with DFS is my raison d’etre. Or at least it is one of the things I am paid to do.
Let’s break this down. Even the most optimistic look at the state level says that 40 states “allow DFS.” And when I say that, that’s a generous interpretation of what’s taking place at the state level.
That number comes from the states where most DFS operators take customers for paid entries. DFS is not expressly legal in about 80 percent of all states. But the companies — DraftKings and FanDuel — argue that their contests are games of skill under many of these states’ laws, and do not run afoul of gambling code.
They have a good argument in a lot of states. But it’s far from a lock that they are 100 percent legal in every jurisdiction where the state legislature did not pass a fantasy sports law.
The very gray or black markets for DFS
Here is a look at which operators take customers in which states. And here’s the list of states where most DFS operators do not take customers because of the current legal climate:
- Montana
- Iowa
- Washington
- Louisiana
- Arizona
- Texas
- Alabama
- Hawaii
- Nevada
- Delaware
- Idaho
There are caveats to this list:
- Nevada actually allows DFS, but you need to get a license under the existing gambling license structure. This is not something DraftKings, FanDuel and other operators are interested in. (Of note: One company offering a DFS pari-mutuel product — USFantasy — does operate in Nevada.)
- In Texas, DraftKings takes customers but FanDuel does not.
Even DFS industry lobbyists would likely admit to you privately that passing new laws in all 10 (or 11) of these states has no chance of happening. The ‘very soon’ designation obviously has some wiggle room, but even using a horizon of two to three years, I don’t see any chance of all of these states — or even most of them — expressly legalizing DFS.
The states fall into two categories:
States where DFS has never been legal
The first five states in the list above are jurisdictions where there has never been paid-entry DFS. That’s because those states’ laws are not conducive to it. Here are those states and what’s going on:
- Montana: The state operates fantasy contests as a monopoly. There’s been no move to change that in a material way.
- Iowa: There is a currently active bill, and this seems to be the best chance out of any state on this list to reverse the legal climate.
- Washington: Legislation has been introduced the past two years, but both efforts died with no progress.
- Louisiana: The state made real progress toward a new law in 2015, but there has been little movement since.
- Arizona: Efforts have largely failed because of concerns of the state’s gaming compact with tribes.
I’d say it would be a giant victory for DFS if it pulled any one of these states out of the black market category, let alone all five, in the next few years. The chance of the latter happening approaches zero percent.
Also, Montana is such a small market that it’s not likely to be a focus of lobbying efforts given the stakes in other states.
States where DFS operators pulled out
The other five states (or six, if you include Nevada) in the list represent places where the legal climate changed in the past couple of years. All of those came when the states’ attorneys general opined that DFS is illegal gambling under state law.
These states certainly represent a better chance to turn around a negative climate than the other five. After all, DFS succeeded in passing laws in three such states where AGs gave negative opinions: New York, Mississippi and Tennessee.
But there are still problems in these states:
- Texas and Hawaii have very little in the way of legal gambling. And despite the narrative that DFS is not gambling gaining traction in a lot of places, it’s not clear the industry will win that battle in those states.
- Nevada officials have shown little interest in changing their laws to allow DraftKings, FanDuel and others into the state under a regime apart from its gambling laws.
- Idaho and Delaware are small markets like that aren’t likely to attract real industry lobbying efforts.
- Alabama is the best candidate to reverse the AG opinion with a new law. But a legislative effort failed in 2016.
The other 39 states and DFS
All of this doesn’t even take into account other states that are variables for DFS.
There were eight states that passed laws in 2016. Maryland passed a fantasy sports law in 2012; however, its legality has been questioned. Kansas passed a bill just legalizing, and not regulating, fantasy sports, in 2015.
That leaves a lot of other states with varying levels of grayness. Chief among those is Illinois, where FanDuel and DraftKings continue to operate despite a negative AG opinion. While nothing particularly negative has happened in Florida or California, the legal landscape is far from ideal for DFS in either state.
It’s also hard to believe that Utah — a state like Hawaii with no gambling — hasn’t acted on the subject of DFS.
Regardless, the analysis above takes into account just the current climate, not possible future events in other states.
Conclusion: No, 50 states aren’t going to allow DFS
Long story short: The hot take that every state is going to allow DFS within any short window of time is nonsense.
While the take that is the basis for this column is obviously just an opinion/analysis, it’s one that has little basis in reality.
The momentum for DFS legalization has been palpable in recent years. But it’s not to the point where its eventual legality everywhere is a foregone conclusion.
