Congressional Hearing Set to Discuss Daily Fantasy Sports

Should the federal government of the United States get involved in regulating Daily Fantasy Sports (DFS)? That’s one of the main questions that will be under consideration on May 11 when the Subcommittee on Commerce, Manufacturing and Trade will hold a congressional hearing to discuss it among other similar topics.

The fate of DFS figures to be resolved sometime this year, at least to some extent in order to determine whether or not it should be classified as gambling or an actual game of skill.

DraftKings and FanDuel, the two largest companies in the DFS space, have been scrambling to find ways to legalize their business on a state-by-state basis ever since Nevada declared the games to be no different than gambling, shutting them down for residents until they are licensed to operate as a sports betting pool.

The Nevada decision sparked the debate in several other states, with Illinois, New York, Texas, Hawaii and Alabama also ruling that DFS contests are indeed considered gambling. Meanwhile, Massachusetts and Virginia have since legalized DFS with plans to regulate it, something that will definitely be under consideration at the federal hearing.

It is worth noting that DraftKings is based in Boston and has the backing of New England Patriots owner Robert Kraft along with Dallas Cowboys owner Jerry Jones. Overall, 28 of 32 NFL teams have some type of sponsorship or marketing deal with either DraftKings or FanDuel, with the former also working with MLB and the NHL and the latter dealing directly with the NBA.

In fact, NBA commissioner Adam Silver is a proponent of DFS and sports gambling in general, standing by his opinion that the federal government needs to intervene and regulate it rather than continuing to ignore it.

The congressional hearing is an important next step towards legalizing DFS, online gaming and sports betting in the United States. Right now, there is some ambiguity based on the Unlawful Internet Gambling Enforcement Act (UIEGA), which prohibits the electronic transfer of funds from unlawful gambling as defined under state laws. That is why individual states have taken it upon themselves to decide whether or not DFS is indeed gambling or a game of skill.

The act became a law in 2006 following a provision to the Federal Wire Act four years earlier that prohibits electronic transmission of information for sports betting across telecommunications lines. The U.S. Department of Justice still takes the stance that the Wire Act covers all forms of gambling, making it illegal.

While many online sportsbooks no longer take U.S. customers as a result of UIEGA, legalization and regulation of DFS and gambling remain the country’s best bet to resolve the issue. Regulating the gaming businesses can potentially bring in a windfall of tax revenue and also hurt the underground illegal activity that currently makes up a majority of all sports betting across the country.

It can best be compared to the prohibition of alcohol, in which the sale, production, importation, transportation and obviously consumption of it was deemed illegal in 1920 and later repealed in 1933. Making alcohol legal again opened the floodgates for money-making opportunities, including marketing and promotions that are still widespread in American society.

The same could happen with DFS and sports gambling, but for the time being you will not likely see nearly as many commercials or ads until they are properly addressed.