Lawmaker Calls for a Hard Look at Legality of Fantasy Sports

If you’ve recently noticed the incessant advertisements for fantasy sports websites with cash prizes and wondered, “Why isn’t this gambling?” you aren’t alone. New Jersey Rep. Frank Pallone is wondering, too, and he’s called for congressional hearings on the matter.

Online gambling is illegal. Gambling on sporting events is illegal (except in some places). So why isn’t “gambling” online about athletes in sporting events illegal?

Well, it’s complicated. In what’s known as the fantasy sports carve-out, “betting” money on individual performances and how they might interplay with each other to win a prize is not illegal. And because we’re talking about a game of skill, not pure chance, and the prize money isn’t directly related to the entry fee (we’re not talking about odds here), fantasy sports with cash prizes are not considered gambling, or sports betting. At least, that’s the prevailing legal argument at the moment.

But fantasy sports are really big money now. Big money, as in: Draft Kings logos plastered all over the Fox Sports anchor desk (Fox is an investor). Big money, as in: Fan Duel’s $275 million round of investor funding it announced this summer. (NBC is an investor. So are several pro sports leagues.)

How about we stop pretending that gambling is illegal in America. (I’ve always hated the faux puritanical relationship America has with gambling.) It’s illegal unless the state does it and calls it a lottery, for example. When I lived in Missouri, gambling was illegal, unless you were on water in a riverboat, where it was legal.

So if we all agree sports gambling and online gambling are legal, fine. But this is one of those times that we really need to make up the rules before we play the game, not after a bunch of people get really hurt.

The major sports leagues are firmly against sports betting. They recently ganged up on the state of New Jersey to stop a plan to allow in-person sports betting at state casinos. But they have embraced fantasy sports.

Consider this: 16 NBA teams and 27 MLB teams get sponsorship money from fantasy operators; 21 NFL teams have some kind of fantasy sponsorship. Some teams have directly invested in fantasy. Lots of players have relationships with operators. The NFL thinks it’s great that its players participate in fantasy leagues; on the other hand, baseball and hockey leagues forbid their athletes from playing. The NBA is still trying to figure it out.

Meanwhile, the leagues also benefit from heightened interest in their also-ran games, of course — you know that’s the only reason you might care about that Rockies-Braves baseball clash.

“Professional sports’ deep involvement with daily fantasy sports leaves many questioning whether fantasy sports are distinguishable from sports betting and other forms of gambling,” Pallone writes.

“The interplay between (existing) federal laws has made the legal landscape murky and public policy unclear,” Pallone warns, “making them ripe for congressional review.”

No accusations of wrongdoing here. I haven’t heard from a single consumer saying that they feel cheated by any of these companies or that anyone feels victimized, though if you don’t think this will lead to more addictive behavior by some folks, you are being willfully blind.

But what we have here is a gold rush full of entangling alliances fueled by money and potentially addictive behavior, and we are doing it while painfully twisting the English language.

People spend money on these sites because they can win more money, and that’s gambling. Let’s call it that. Let’s make sure who owns what is transparent. Let’s ensure our games have integrity. Let’s have rigorous, open discussion about what’s going on. Let’s not back our way into sports betting pretending that we’re not.

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