Government Searches For Ways To Count Daily Fantasy Sports As Illegal

detectiveCurrently, the FBI and US attorney’s office in Boston have begun an investigation into DraftKings, FanDuel, and other fantasy sports companies. Their aim is to see if these companies are in violation of federal gambling laws. The investigation is still in its infant stages, and a spokeswoman from the US Attorney Carmen Ortiz’s office would neither confirm nor deny this fact.

During her career, Ortiz has been known to be involved in many different gambling cases. In 2010, she charged the wife of US Representative John F. Tierney with helping her brother manage the funds of an illegal offshore gambling operation. Since then, Ortiz has continued to pursue cases of potential illegal gambling. Currently, DraftKings and FanDuel, along with other companies, are not considered to be online gambling operations due to the exemption in the 2006 RAWA act. However, these companies have grown at a massive rate over the past few years, more than anybody ever considered when the act was initially passed.

Together, FanDuel and DraftKings have risen over $700 million in venture capital and are routinely handing out top prizes of $1 million. The total prize money that these companies are planning to pay out will be over $3 billion this year. Participation in daily fantasy sports has tripled in past years; largely due to the amount of money that is being offered. According to the Fantasy Sports Trade Association, nearly 57 million people participate in the sport here in North America.

In 2006 when the federal Unlawful Internet Gambling Enforcement Act was passed, the term “Daily Fantasy Sports” did not even exist. Jim Leach, a former US Representative from Iowa who helped coauthor the gambling act, says that he and other lawmakers had no knowledge of how daily fantasy sports would grow in the coming years, and certainly never imagined that the exemption would allow a multi-billion dollars “non” gambling industry to flourish. According to Leach, the exemption was simply in place so that backers of large sports such as the NFL and the MLB would favor it in a vote.

Leach stated that “Concern was raised that we faced an amendment process that we could lose control of if no accommodation was made for fantasy sports. Concern was also expressed that if the committee did not accommodate the concerns of the amendment’s advocates, we might not carry the floor vote, and even if we did, might have to deal with a delaying Senate amendment on the subject.”

So clearly at the time of the vote there were no intentions whatsoever to legalize large-scale sports gambling. As companies such as DraftKings and FanDuel continue to grow, it is not surprising that they are receiving government attention. For now it will be difficult for the FBI to prove anything illegal since these companies are indeed protected by the sports exemption of the RAWA act. The law clarifies a difference between betting on points, which is random, versus entering a skill-based competition “that reflect[s] the relative knowledge and skill of the participants.”

draftkingsJason Robins, CEO of DraftKings, explains why his company falls into this exemption. “If you randomly picked against the [point spread] you would be close to 50/50 almost every time. If you randomly picked a fantasy lineup and played against someone who put thought into it, they would beat you 9 times out of 10, if not more.” So it is quite clear that these companies are 100% legal.

Even though they are legal through a loophole that was not at all meant for this purpose, neither FanDuel, DraftKings, or any other daily fantasy sports company are going to want to let a law get passed that does not continue to favor them. As these companies grow, they are gaining larger backers by the day. With investors, including major news networks and large sports leagues, it will be difficult to pass any law against them now.

Nonetheless, this will not stop those who are against legalized gambling from trying. So chances are, these companies are not going anywhere anytime soon. Until then, if you are a sports fan, don’t miss out on your chances to enter some tournaments and possibly win big while the option still exists.