The debate over whether daily fantasy sports does, in fact, constitute gambling is heating up.
In the wake of Yahoo’s recent entrance into the DFS market, Legal Sports Report’s Dustin Gouker noted that the Wall Street Journal and New York Times had little problem labeling DFS as either “gambling” or as legitimizing “a pastime that closely resembles gambling.”
Gouker also surveyed 152 articles covering the launch, concluding that (only) about one-third of the articles include either explicit or “soft” references linking DFS to gambling, while the remainder avoided the terms “betting,” “gambling,” or “wagering,” instead choosing to characterize DFS as a way to “win cash” or “compete for cash prizes.”
And Howard Stutz of the Las Vegas Review-Journal took stock of the “debate,” revealing that both gaming operators and regulators alike in Nevada widely believe that DFS “constitutes unregulated gambling.”
On the flip side, both FanDuel and DraftKings insist that their DFS products are skill games, and therefore are not gambling. As Stutz noted, the DraftKings website states that “We are a U.S.-based skill games company and all of our contests are operated 100 percent legally under United States and Canadian law.” Stutz also cited an e-mail from a FanDuel spokesman claiming that its product “is a daily fantasy sports experience, classified as a skill game and NOT gambling.”
The problem is – at least in practical terms – the argument that DFS is a skill game and therefore not gambling is completely non sequitur because the two things are not mutually exclusive.
What is gambling?
Gambling requires three things:
- Consideration. There must be a wager of some value in order to win something of value.
- Prize. What you get when you win, whether of monetary value or something else.
- Chance. There must be at least enough variance that an unskilled or lesser skilled bettor can win said prize, at least in the short run.
Other definitions are sometimes too narrow to be fundamentally correct. This is particularly true of legal definitions which may vary in definitions of the term “chance” by trying to insert the presence (or a “preponderance”) of skill into the equation.
You see, poker is a game of skill, but it is also clearly gambling. Even if you were to argue that a skilled poker player is “investing” and not gambling, then it would also be unequivocally true that a lesser or unskilled player must be gambling, even if he thinks he is playing with an edge but really isn’t. What the player thinks he is doing is irrelevant.
In essence, the very existence of skilled poker players – playing with an edge and for a profit – depends on the presence of lesser skilled players willing to gamble at a disadvantage against them. You can’t have a skilled poker player without a compensating gambler. Therefore, though poker is a skill game, it is also most definitely a gambling game, regardless of a preponderance of skill.
Thus, in my view, legal interpretations which attempt to qualify poker as being either a game of skill or a game of chance by virtue of predominance are insufficient practically speaking, because such interpretations only identify what the winners (the “skillers”) are doing, and not what the losers (the “gamblers”) are doing.
Similarly, the existence of skilled DFS players – playing with an edge and for a profit – depends on the presence of lesser skilled players willing to gamble at a disadvantage against them, whether they know they are playing at a disadvantage or not.
DFS meets all of the requirements of the fundamental definition of gambling. DFS has consideration (the player wagers money), prize (the player wins cash prizes), and chance (enough variance that any schmuck can win – and no DFS operator will tell you otherwise). Therefore, like poker, DFS is a gambling game.
The presence of skill is irrelevant.
As an aside, particularly in a game like poker where the competition has gotten tougher over time, a player who might once have been able to play professionally but can no longer beat the rake may now be gambling even if he still thinks he’s playing with an edge. And as I wrote last month, the same is likely to occur in DFS (see DFS and Lessons from Poker: How Bright is the Future? And for Whom?).
The preponderance by population argument: Gamblers vs. Skillers
This is what we know about poker: Simply by virtue of the rake, more money is lost than is won. We also either know or can infer that there are (and have been) far more losers than winners.
The same can be inferred about DFS. By virtue of the rake, there is more money being lost than won in DFS. And there are likely far more losers than winners, even if it’s possible two-thirds of DFSers think they are winning or break-even.
Now we’ve already established that in order for there to be skillers (winners), there must be gamblers (losers) willing to play at a disadvantage against them. We can also surmise that in DFS, there are likely many more gamblers (losers) by population than skillers (winners).
And if there are more people gambling than skilling, is it not reasonable to argue that DFS has a preponderance of gambling by population?
So why the “debate”?
By any practical definition, DFS is clearly a gambling product. So why are we having this “debate”?
It’s no mystery why FanDuel and DraftKings would argue that DFS is a skill game and therefore not gambling, even if the argument is non sequitur: It is in their best interest to do so.
The fact is that in the U.S., commonly recognized forms of commercial gambling are generally either regulated or banned. Currently, DFS is considered illegal in at least five states but unregulated and (apparently) non-illegal everywhere else – at least for the moment. As such, FanDuel and DraftKings have every incentive to encourage the idea that DFS is not a form of gambling in order to maintain the status quo.
Their argument is very not likely based on any moral conviction that their product does not constitute gambling, where the entire premise of DFS is to offer a sports betting product – and one that has a very particular bonus of being able to be offered in states where traditional sports betting is currently outlawed.
As a casual observer, I accept that DFS operators have every incentive to argue that DFS is a skill-based game, and is therefore not gambling. And I accept that they will continue to do so, even if – at least practically speaking – it’s a ridiculous argument.
Whether legislators will see it that way on a state-by-state basis is a different question. That said, I do suspect it inevitable that anything that looks this much like gambling is likely to draw increasing attention from state legislators. And though interpretations may vary by state, I also suspect there’s a reasonable chance that a form of gambling that has such striking similarities to poker may be treated much the same way as a poker on a state-by-state basis.