If Congress Tackles Sports Betting, Leaving Fantasy Sports Out Of It Would Be A Good Idea

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Don't mess with DFS

Rep. Frank Pallone (D-NJ) recently unveiled his latest attempt to allow for legal sports betting in the US.

One of the early major problems I see with the proposed legislation is its handling of daily fantasy sports. If the language in the bill remains intact, it could end up being a non-starter.

The GAME Act

The Gaming Accountability and Modernization Enhancement Act — or GAME Act — is not even officially introduced yet. The draft bill from Pallone seeks to update gaming law at the federal level.

But at its core, it has one major component: legalizing sports betting by repealing the Professional and Amateur Sports Protection Act. PASPA is the federal law that prevents single-game sports wagering from being legalized outside of Nevada.

That’s a worthy goal, and one that Pallone would like to see for the benefit of his home state of New Jersey. The ongoing NJ sports betting case involves the idea that PASPA violates the US constitution, a notion courts have rejected so far. (We should find out this month if the US Supreme Court will take up the case.)

The bill, though, seeks to get everyone on the same page when it comes to federal gaming law. But the passages that involve DFS would serve to divide many on the legislation.

DFS is ‘gambling’ in the bill

Currently, there is one federal law that mentions fantasy sports — the Unlawful Internet Gambling Enforcement Act. The UIGEA explicitly carves out fantasy sports from its definition of gambling. That language, of course, gave rise to the DFS industry led by FanDuel and DraftKings.

But the GAME Act does the opposite. It explicitly includes fantasy sports in its definition of a bet or wager:

The term ‘‘bet or wager’’ means the staking or risking by any person of something of value, including virtual currency and actual or virtual items that can be sold or otherwise exchanged for cash at the gaming facility or elsewhere, upon the outcome of a contest of others, a sporting event, a game subject to chance, or a game in which the outcomes reflect the relative knowledge and skill of the participants, upon an agreement or understanding that the person or another person will receive something of value in the event of a certain outcome.

That definition goes on to include paid-entry fantasy sports (emphasis added):

(iv) Participation in any fantasy or simulation sports or e-sports game or contest, including those in which (if the game or contest involves a team or teams) no fantasy or simulation sports team is based on the current membership of an actual team that is a member of an amateur sports organization or professional sports organization and including those that meet any of the following conditions…

Why this is a bad idea

If Pallone or Congress is serious about legalizing sports betting, either would be best served to leave fantasy sports out of it entirely.

Legislation repealing PASPA would almost certainly need the support of the major US professional sports leagues, including the NFL, NBA, Major League Baseball and the NHL.

Those same leagues have a vested interest in protecting fantasy sports. First, it doesn’t want fantasy contests of any type being called “gambling.” They also all have an interest in DraftKings and FanDuel succeeding: Of the above, all but the NFL have equity in one of the two companies.

So starting off the sports betting debate by saying DFS is gambling would appear to be a very bad idea on its face. Repealing PASPA is a tough enough chore in Congress without employing the pro leagues as vocal opponents.

The battle is over on DFS

The idea of handling DFS like other forms of gaming in the US is certainly one with merit. But that’s a war that’s all but over, and one no one is likely to win, at this point.

So far, 11 states have passed laws declaring paid-entry fantasy sports to be a “game of skill” under their laws. More are on the way. No state is likely to pass legislation calling DFS “gambling.”

Should governments call DFS a “bet or wager” for the purposes of the law? That would probably be a best practice. But the ship has already sailed, and it says here that it doesn’t matter what you call a gaming product, as long as you regulate it to some extent. (Of course, the “regulation” that exists in some states is pretty minimal, but that’s a topic for another time.)

The bottom line: Congress should not pair the effort to legalize sports betting in the US with a parallel effort to lump DFS in with other forms of gambling. That’s just shooting oneself in the foot, something sports betting proponents could do without.