The daily fantasy sports hearing in Congress that has been a possibility since last summer is just a couple of days away.
What are we likely to see and hear on Wednesday when the House Subcommittee on Commerce, Manufacturing, and Trade meets?
The basics of the DFS hearing
First, here’s everything you need to know about the hearing:
- The hearing will take place on May 11, at 10:15 a.m. Eastern.
- It will take place in the Rayburn House Office Building, Room 2123.
- The witness list and an analysis of why these witnesses were called.
- Witness statements.
- The background memo for the hearing.
- Live stream.
What is the goal of this hearing?
That’s the million-dollar question, of course, but it’s not altogether clear we’ll know the answer, even after it’s over.
This is an informational hearing. These types of hearings happen in committees all the time, without any concrete action being taken by Congress.
It could simply be a chance for some members of Congress to become familiar with an industry that grew exponentially in recent years.
Pushing the sports betting angle
The initial impetus for the hearing came from Rep. Frank Pallone (D-NJ), the ranking Democrat on the overarching House Energy and Commerce Committee.
Last year, Pallone had been wondering aloud why daily fantasy sports were OK, legally, while sports betting was illegal across most of the country. It was clear he was trying to draw attention to New Jersey’s efforts to regulate sports betting.
How much of the sports betting vis a vis daily fantasy sports argument will come up is a variable; but Pallone, as an ex officio member, is all but certain to bring up this line of questioning if he sits in. And he likely isn’t the only one.
Other than sports betting…
The background memo for the hearing gave us perhaps the best direction as to what exactly the committee may look at:
From the memo:
- What is the current regulatory environment for DFS operators at the federal and state level?
- What are the key consumer protection issues for DFS operators?
- What technology solutions exist in the marketplace to ensure that DFS operators meet existing consumer protection obligations?
- What are the varying products offered by daily fantasy sports operators? What similarities and differences are present in those products with season-long fantasy products? Are those differences recognized in any state laws or regulations?
Those lines of questioning give us some clue as to what the subcommittee’s aims are.
What we are likely to see and hear on DFS
Here are some of my best guesses as to what will come up on Wednesday and what will or won’t happen in the aftermath.
Where are DraftKings, FanDuel and the pro leagues?
While the witness list for this hearing has a lot of credible experts, it’s missing some of the DFS industry’s major players.
The glaring absences from the witness list also include the major North American professional sports leagues — the NBA, the NFL, the NHL and Major League Baseball — who reportedly declined invitations. All have meaningful relationships with DraftKings and FanDuel.
One would expect some chiding from some of the members because these important parts of the DFS industry are not appearing.
At the same time, there seems to be little upside for DraftKings, FanDuel or the leagues to appear, since the possibility of meaningful federal action on DFS is fairly low.
Peter Schoenke of the Fantasy Sports Trade Association is the only person at the hearing representing the interests of the two biggest DFS sites.
Lots of discussion of the federal laws in play
The intersection of federal law with daily fantasy sports is probably one of the things that will most interest members of Congress in this hearing.
The background memo spends a lot of time giving the overview of the possible laws in play, including:
- The Unlawful Internet Gambling Enforcement Act of 2006, which includes a federal carveout for fantasy sports.
- The Professional and Amateur Sports Protection Act of 1992, which prohibits sports betting in most jurisidictions.
- The Wire Act, which deals with transmission of sports betting information across state lines.
- The Illegal Gambling Business Act, which triggers a federal violation when a state gambling law is violated.
Legal expert Ryan Rodenberg is the witness who will tackle these issues.
Is there something the federal government can do now, without changing the law?
The subcommittee holding the hearing is concerned mostly with consumer protection matters. It includes oversight of the Federal Trade Commission. It is not a committee that generally would consider gambling issues in the U.S. (more on this below).
So far, the FTC has been loathe to get involved, even when asked by members of this committee. If the role of the FTC and daily fantasy sports is not examined directly in the hearing, I’d expect that to become a possible avenue of inquiry moving forward.
There is currently a large gap in consumer protection as it relates to DFS in the U.S. Three states have passed legislation — Indiana, Virginia and Tennessee — while the attorney general in Massachusetts instituted consumer protections as well.
Everywhere else where DFS operators are currently active, the industry exists unregulated. And even in the states above, regulation is still in the process of being implemented. And sites have no obligation to be a part of ‘x’ state’s regulatory scheme.
Immediate legislative action out of Congress?
If you’re expecting someone to propose a bill regarding regulation or explicit legalization of daily fantasy sports that will gain traction in Congress in the near future, I think you’re likely sorely mistaken.
Outside of the laws above, the federal government has shown little appetite for getting directly involved with any aspect of the gaming industry — especially as a positive force for change — as it is currently situated in the U.S.
The only action of late has been the Restoration of America’s Wire Act, a bill that would attempt to ban any sort of online gambling. That legislation, of course, has gone nowhere.
There’s also the matter that this committee isn’t the one that usually considers gaming issues. UIGEA and PASPA, for instance, are the domain of the judiciary committees in both the House and Senate.
Expecting real momentum for either a repeal of PASPA or taking a fresh look at UIGEA would be good outcomes, but are also unlikely in the short term.