Iowa Senate Passes Daily Fantasy Sports Bill, as DFS as Skill Game or Gambling Debate Heats Up

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Iowa Senate Floor

Momentum for daily fantasy sports continued in Iowa, as a bill that would legalize real-money DFS recently passed a vote in the state Senate.

Full steam ahead

Senate File 166 passed last week by a wide margin — 32-16 — moving the matter in front of the Iowa House of Representatives, which is considering House File 281, a nearly identical measure. The bills add a single passage to Section 99B.11 of the Iowa code, making fantasy sports contests exempt from Iowa’s definition of gambling.

The bill that passed the Senate was amended, with added language that would prevent daily fantasy sports contests based on high school sporting events:

For purposes of this paragraph, “athlete” does not include an athlete participating in any extracurricular interscholastic athletic contest or competition which is sponsored or administered by an organization as defined in section 280.13.

That section of the Iowa code deals with interscholastic sports engaged in by public schools in the state.

The bill also sets up a study of the impact of allowing real-money fantasy sports contests in the state.

Support and opposition

Iowa is currently blocked by most – but not all – major daily fantasy sports sites. The bill attempts to take Iowa out of that category, allowing it to join the 45 states in which most DFS websites operate.

Sen. Jeff Danielson, the chairman of the Senate State Government Committee, spoke in favor of the bill on the Senate floor, opening by saying “We are currently in legal limbo. We have never really clearly defined what fantasy sports are in Iowa.” Some of his talking points:

You can watch video of Danielson’s comments and floor discussion of the legislation here.

Some of the other speakers:

Another aspect of the debate that concerned many of the lawmakers was Iowa’s future ability to capture revenue from DFS.

Kansas too?

Kansas also continued to build momentum for its own bill legalizing real-money DFS in the state. The House Federal and State Affairs Committee endorsed the bill dealing with DFS — HB2371 — meaning it moves on to the full state House.

The legislation in Kansas is slightly different, as it seeks to clarify the status of DFS in the state. The Kansas Racing and Gaming Commission holds that daily fantasy contests with entry fees constitute an “illegal lottery” under state law, although Kansas is generally not considered a gray state by DFS operators.

States’ legal worries?

All the DFS activity at the state level prompted an attorney involved in sports and gaming law to look at the issue more closely. In a blog post entitled, “Fantasy Sports Legislation by States May Run Afoul of PASPA,” Daniel Wallach takes a look at whether DFS violates the Professional and Amateur Sports Protection Act of 1992.

Generally DFS establishes its legality based on the aforementioned UIGEA carveout; PASPA has rarely entered into the conversation, and Wallach wonders why that is in his blog post:

PASPA plainly prohibits a “governmental entity” (defined to include a state) or a “person” acting pursuant to state law from sponsoring, operating or promoting any betting or wagering scheme based directly or indirectly on “one or more performances of . . . athletes” in games in which amateur or professional athletes participate. …

I am surprised by how little attention has been paid to this last sentence of PASPA. The sports legalization debate has focused largely (if not entirely) on the language pertaining to state-sponsored wagering schemes that are based on “one or more competitive games.” In other words, single-game sports wagering. But as states move to expressly legalize fantasy sports, increased attention should be paid to PASPA’s prohibition against wagering on an athlete’s individual performance, which is at the core of fantasy sports. To date, no one in the fantasy sports or sports betting legalization space has raised this issue (not even the opponents of state legalization efforts). Time will tell whether this arcane provision of PASPA will hamper ongoing state legalization efforts. So far it hasn’t.

Of course, daily fantasy sports operators would probably emphasize a different part of the PASPA language: “betting or wagering schemes.” DFS proponents hold to the fact that DFS is a game of skill, that it is not sports betting. Star Fantasy Leagues is even doing a study to prove that DFS contests are skill-based, not chance-based.

A shifting debate?

Increasingly, the issue of DFS is being framed in terms of whether it is gambling.

The status of DFS is a topic of discussion as the industry grows and more people — especially at the state level — take a closer look at DFS. What is clear is theres a lot of money, influence and momentum behind the DFS industry now. The latest example? Disney — and by extension ESPN — possibly getting into the DFS space by backing DraftKings.

The DFS industry will continue to insist upon its status as a skill game; framing the debate in favorable terms could be an important matter for the industry moving forward in Iowa, and beyond.