As news breaks of a federal investigation into the fantasy sports industry, commentators warn that betting in fantasy leagues is not harmless fun.
The Wall Street Journal reported Oct. 14 that the Federal Bureau of Investigation is “investigating [the] daily fantasy sports business model” to see if it violates federal law. A front-page story in the Oct. 15 New York Times stated the fantasy website DraftKings appears to be the focus of the probe, with rival site FanDuel also potentially facing scrutiny and the entire industry confronting accusations of “predatory tactics” and improper handling of insider information.
In daily leagues, “filling slots on your fantasy team becomes more like a slot machine, feeding the obsessive compulsion to turn small amounts into large winnings in a day, and to bet more tomorrow to try to win back yesterday’s losses,” said Mike Whitehead, an attorney in Kansas City, Mo. “Daily users are more susceptible to addiction and serious losses — a risk the industry itself has done its best to ignore.”
Fantasy sports began with season-long contests typically involving friends and coworkers. But now online fantasy leagues allow customers to pay entry fees then draft virtual sports teams that compete against each other in daylong contests for prize money based on the players’ performances in real athletic events. FanDuel and DraftKings are the two largest fantasy companies, controlling some 95 percent of the North American daily fantasy sports market. They are valued at $1.3 billion and $1.2 billion respectively, according to The Journal.
Despite bans on sports gambling by many professional sports leagues, investors in FanDuel and DraftKings include Major League Baseball, the National Basketball Association, New England Patriots owner Robert Kraft and Dallas Cowboys owner Jerry Jones, The Times reported.
The 2006 Unlawful Internet Gambling Enforcement Act prohibits much online gambling, Whitehead said, but includes an exception for fantasy sports games if “(1) the value of the prizes is not determined by the number of participants or the amount of fees paid; (2) all winning outcomes reflect the relative knowledge and skill of the participants; and (3) the fantasy game’s result is not based on the final scores of any real-world games.”
Most “traditional versions” of fantasy sports, Whitehead told said in written comments, “seem to comply with federal law.”
The U.S. Department of Justice is trying to determine whether daily fantasy contests — which seem to involve more chance than season-long competitions — are a form of illegal gambling, according to The Journal.
Daily fantasy sports drew increased criticism after a DraftKings employee prematurely released sensitive data about the site’s biggest contest and then won $350,000 on FanDuel, The Journal reported. DraftKings said the data release was unintentional, and both companies said the employee did not benefit from insider knowledge.
Both companies acknowledge their employees “have played and won significant money on each other’s sites,” The Times reported, though both now have banned their employees from competing in daily fantasy sports.
“It is entirely predictable that the government would follow up on the misleading reports about our industry,” a DraftKings spokeswoman said in a statement to The Journal. “We have no knowledge of the specifics of any federal investigation but strongly disagree with any notion that our company has engaged in any illegal activities.”
Fantasy sports websites face additional legal challenges on the state level. Whitehead explained that some states prohibit fantasy sports if they involve money, rewards and chance, with “chance” defined differently in various states.
“Most state laws say play-for-cash contests are only illegal if they involve more chance than skill (the ‘predominant purpose test’),” Whitehead said. “A few states prohibit betting games if they depend on chance even in the smallest degree (the ‘any chance test’).”
Whitehead noted, “In ‘any chance’ states, like Arizona, Arkansas, Louisiana, Iowa and Tennessee, most play-for-cash leagues appear to violate the state gambling statutes (unless, of course, they fall under ‘social gaming’ or ‘in-house gaming’ exceptions). Montana, Louisiana, Washington, Iowa and Arizona prohibit daily fantasy games where participants risk their own cash.
“The legality of fantasy football has been questioned in a couple of other states,” Whitehead said. “In Florida, a state attorney general opinion from back in 1991 called into doubt the legality of fantasy football contests. Similarly, in Kansas, a state website formerly included language that called into doubt the legality of fantasy sports. Yet no legal prosecutions have occurred.
“Theoretically, if any members of an Internet league reside in an ‘any chance state,’ other participants of the league residing in other states may still be in violation of law, which could become a federal violation due to inter-state commerce,” he said.
The Times reported DraftKings executive Jon Aguiar posted “on a public thread informing players how to deposit funds and play in contests in states and countries where the games are prohibited.” A class-action lawsuit in Louisiana, where operation of daily fantasy sports sites is prohibited, alleges the plaintiff was allowed to deposit money with both DraftKings and FanDuel.
The attorney general of New York has begun to gather information about both companies, and the Massachusetts attorney general is discussing potential consumer-protection regulations with the sites, The Journal and The Times reported. Various U.S. senators and congressmen have called for investigations of fantasy sports.
Fantasy sports & spiritual health
John Babler, professor of counseling at Southwestern Baptist Theological Seminary, said that the problem with fantasy sports betting extends beyond its legality. For some, it “dominates [their] lives and to some degree holds [them] captive,” he said.
“For some this can be almost instantaneous,” Babler said in written comments, “from the first time they bet on fantasy sports.” For most, “it is more of a process that occurs over time. There is an exhilaration that comes from piecing together a winning team and if there is financial gain as well, that is even better. It is not hard for this fun activity to begin dominating one’s life.”
Betting poses a problem even when it is not an addiction, Babler said.
“God’s intent is that people work and as a result of that work, God would provide,” he said. “The problem and allure of betting is not related to the amount of money won or lost, but that it is a distraction from God’s purpose and intent for us in regard to work and reward. It is very tempting and exciting to think that instead of working for money, we can get it from either luck or our sports acumen. Betting serves as a distraction from our relationships with God as well as running contrary to His design for us.”
David Prince, pastor in Lexington, Ky., wrote in an online commentary for the Ethics & Religious Liberty Commission that “fantasy football leagues are affecting families by relentlessly catechizing an entire generation watching these NFL games on the acceptability and excitement of sports gambling.”
Though “traditional fantasy football” that does not involve wagers is “harmless,” Prince wrote, “gambling entrepreneurs have turned a geekish fun hobby into a relentless, daily, predatory lure of fast cash and easy money.”
Prince added, “This should deeply trouble those of us who love Jesus and delight in sports as a good gift from God.” Gambling, he wrote, “is a societal evil that preys on those most in need.”
— by David Roach | BP