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Daily Fantasy Sports Gets Attention of Federal Government With Hearing

Last Wednesday, the House Subcommittee on Commerce, Manufacturing and Trade held a hearing titled “Daily Fantasy Sports: Issues and Perspectives” to gain a better understanding of the legalities of DFS and figure out if regulation is needed. Leading DFS operators DraftKings and FanDuel are still battling the government to allow their fantasy games nationwide, with more and more states choosing to make them illegal based on the classification as “betting” opposed to “contests of skill” like they prefer.

The two-hour hearing had a much bigger scope though, as lawmakers used it to examine the larger topic of sports gambling and whether or not consumer protection should be required. New Jersey Representative Frank Pallone requested the hearing because he wants his state to legalize sports betting.  Pallone hoped the panel would discover the desperate need for regulation through legislation rather than keeping it underground. Decriminalization is a hot topic for those backing the legalization of betting and viewed as essential in order to take the next steps of making the dreams of many into a reality.

Unfortunately, neither DraftKings nor FanDuel had reps present at the hearing to state their case in the wake of a meeting with the Nevada Gaming Policy Committee back in March. DFS games are banned in the state of Nevada due to the fact that it is currently classified as sports pool wagering, and both companies refuse to obtain a gaming license to operate there. The meeting discussed similar topics such as consumer protection, revenue generation and commerce for states through taxation and regulation plus legal clarification for companies that want to offer games across the country.

The Catch-22 for DFS companies like DraftKings and FanDuel is that if they were to apply for a gaming license in Nevada, they would essentially be admitting their games are in fact betting rather than skill-based. So instead, they choose not operate in the state while the debate rages on elsewhere with Alabama, Arizona, Hawaii, Idaho, Iowa, Louisiana, Mississippi, Montana, New York, Texas, and Washington also following suit and banning them under gambling laws. The Chicago-based Fantasy Sports Trade Association represented DraftKings and FanDuel at the federal hearing in Washington, D.C., and was created to help about 300 companies in the space fight legal issues.

Research firm Eilers & Krejcik Gaming reported that $3.4 billion in entry fees were generated by DFS companies in 2015 with approximately 56.8 million participating in the United States and Canada. With that kind of massive volume on both fronts and the American Gaming Association also estimating that $149 billion was bet on sports last year – with only $4.2 billion of that action taking place in Nevada sportsbooks – there is obviously an increasing need for professional sports leagues to work together with the government to find a solution to this issue. But the DFS question must seemingly be answered and resolved first in order to further open the door and aid Pallone and others in their quest to legalize sports betting.

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