Abstract
Introduction
I
Why is that quote worth mentioning? Those words were penned in 1992, well before fantasy sports captured the imagination, headlines, 3 and—most importantly—wallets of our society. 4 Sports and gambling, two titans of industry in their own right, are the lightening trapped in a bottle that is fantasy sports. In 2015, according to the Fantasy Sports Trade Association (FSTA), 56.8 million people played fantasy sports, up from 41.5 million in 2014. 5 If the number of people who played fantasy sports were a country, they would be similar in population to South Africa. A Forbes article in 2013 put the total amount spent on fantasy sports between $40 to $70 billion a year. 6
Daily Fantasy Sports (DFS) is an offshoot of traditional fantasy sports, as well as the child of two fantasy sports heavyweights: FanDuel and DraftKings. While DFS is the natural offspring of traditional fantasy sports, it arguably is swallowing the fantasy sports industry. 7 Over the past few years, DFS has become the most discussed topic of conversation at conferences for gaming operators. 8 Timeframe has been a topic of scholarly discussion and is a key feature distinguishing between traditional and daily fantasy sports—a majority of DFS contests are concluded within 24 hours. 9 For example, while traditional fantasy baseball would span the entire MLB regular season, DFS would be conducted in a single day. While it has become generally accepted that season-long fantasy sports are a contest of skill, 10 whether a contest unfolding in one day is a game of skill or chance is still unclear. One notable gaming scholar has suggested that DFS operators might eventually have to limit the scoring to events taking place over the course of two days. 11 There has been considerable and exemplary scholarly work that has detailed the rise of DFS, how it differs from traditional fantasy sports, and the unique legal risks involved. 12 This article posits that DFS will achieve widespread legalization because the forces driving it forward are too strong and too motivated. Once momentum is gained, it will not be stopped.
The Battleground and the Perception
The states are currently serving as the battleground for DFS, where DFS is employing 78 lobbyists in 34 states and spending between $5 million and $10 million on lobbying in 2016. Gambling falls within the purview of the states' police power, which is reserved to the states impliedly by the U.S. Constitution and explicitly by the Tenth Amendment. 13 According to the Supreme Court, gambling is a vice and the states should have the ability to suppress it. 14 Even immediately following the Pete Rose scandal, 15 Senate Bill 474 (which ultimately became the Professional and Amateur Sports Protection Act of 1992, or PASPA) experienced opposition from the Department of Justice on the grounds that regulating sports gambling among the states was too intrusive into states' rights. 16 The decision of each state to choose how to handle gambling is best exemplified by gambling mecca Nevada being neighbors with Utah, which is only one of two states without legalized gambling. 17 This state-level discretion encourages experimentation as well.
Despite the popularity of DFS, the headlines 18 and public narrative has been pretty negative for FanDuel and DraftKings, 19 but this largely has been self-inflicted. 20 The incredible amount of disdain for DFS has been the subject of considerable public comment, 21 with Washington State Representative Christopher Hurst comparing the chief executive officers (CEOs) of DraftKings and FanDuel to the Mexican drug lord “El Chapo.” 22
Historically, scandal has often rocked the gambling industry, and DFS has already proven that it is no exception. An employee of DraftKings won $350,000 by playing on FanDuel. 23 What was important in this controversy was the scope. This wasn't merely one entity being accused of wrongdoing, but potential collusion. Nothing can be more crippling to a gambling game than the appearance of impropriety. A brief headline on the New York Times' report used the term “insider trading” and although it was removed rather quickly, the term spread rapidly as a brief summation of the incident. 24 The New York Times title that eventually took hold, “Scandal Erupts in Unregulated World of Fantasy Sports,” is arguably even worse. 25 This incident created significant controversy over whether the industry is capable of regulating its sensitive information and how employees are allowed to handle such data. 26 The fallout of this incident included state attorney general investigations, Federal Bureau of Investigation (FBI) and Department of Justice investigations, 27 and a class action lawsuit. 28
There has been a parade of attorney general opinions declaring DFS to be illegal or constituting gambling under state law. Alabama, Hawaii, Idaho, Illinois, Mississippi, New York, Tennessee, Texas, and Vermont all have released attorney general or deputy attorney general opinions to this effect. Headlines have implied that the floodgates have opened, and as the Legal Sports Report symbolically reported, “Georgia AG Latest to Say Daily Fantasy Sports Are Illegal Gambling; DFS Bill Scuttled.” The situation is so fluid that ESPN has a daily tracker that resembles the monitoring of a political election, replete with a colored map indicating where DFS is legal. Updates seemingly roll in as often as DFS contests are played.
But the reality regarding the future of this fantasy game is not as bleak as the headlines suggest. Mark Cuban, billionaire businessman, Shark Tank host, and celebrity NBA owner, opined an editorial in USA Today that “the death of the fantasy sports industry has been greatly exaggerated.” As of this writing, about 20 states already have pending legislation that would permit some type of daily fantasy sports. 29 Furthermore, the DFS industry is not completely devoid of supportive state attorney general opinions, as the Rhode Island attorney general determined that DFS is to likely to be legal under state law. 30 Moreover, a negative attorney general opinion really means nothing in terms of what the legislature can do, as evidenced by Tennessee. 31 What exactly an attorney general opinion represents is also somewhat misunderstood. The Texas state website gives the following description of a Texas attorney general opinion: it cannot create law, but rather is a written interpretation of existing law. 32 Theoretically, this is a simple exercise, but in practice, it is a complicated proposition because DFS has grown so fast that the existing laws predate DFS. 33 Laws react to circumstances; they don't shape them.
It is also important to put into context the potential namifications of a favorable decision by a state attorney general opinion on the state economy. While DFS is a mega industry, a state lottery is also a massive industry living exclusively within the confines of that particular state. There has been a massive shift in policy over the years, with states now participating in gambling as a source of revenue. 34 Governments are now promoting and getting revenue from gambling within their state. Gambling dollars have been critical to states, and they are aggressively pursuing their self-interests. The situation in New York is illustrative. New York's attorney general and DFS had a contentious and public battle over whether DFS could be played in New York. Keep in mind that New York has a very powerful state lottery, as it was the fifth largest state lottery 35 and the state is facing a huge budget deficit. New York has considered and discussed various ways of expanding legal gambling in order to generate more revenue, but these are ideas that would be implemented within the state, to capture more gambling dollars for New York. 36 The New York judiciary has been incredibly protective of the state's lottery, explicitly acknowledging that the state lottery is a “fund raising device of real importance to the state.” 37
The Role of Pressure
Near the very end of the Shawshank Redemption, inmate Ellis “Red” Boyd, who was coincidentally a bit of a gambler himself, describes in amazement how Andy Dufrane was able to tunnel out of Shawshank using an old rock hammer. Red said he thought it would take a person 600 years to tunnel out of Shawshank, but Andy was able to do it less than 20. The reason he was able to accomplish this, Red states simplistically, is because geology is pressure over time. Red might say the same thing about the spread of DFS. There is growing clamor for DFS. There is even belief on the part of some that this pressure has interfered with the justice system, e.g., that there have not been prosecutions involving fantasy sports because the volume of demand creates political pressure for legalization. 38 In the legislative history of Senate Bill 474, which eventually became PASPA, it was acknowledged that it will be very difficult for other states to resist legalizing sports gambling after only one state does. 39 It went on to state that legalization in one state will cause the spread on a piecemeal basis and create momentum that cannot be reversed. 40
But the lure of revenue has always existed. Using gambling to generate money is not a revolutionary concept, although lotteries were literally used to finance the American Revolution. 41 The first state to legalize a new game can take advantage of the disposable income of citizens of neighboring states, which creates a domino effect. 42 Once a new game becomes legalized, the discussion moves from morality to economics. 43 Once it becomes clear that legalization of a game did not cause anarchy, the question then becomes: why aren't we doing it?
In the 1960s, when lotteries started becoming popular, states began amending their constitutions because they feared losing revenue to a neighboring lottery. 44 The revenue-seeking culprit was New Hampshire, which despite concerns from the state's religious clergy, adopted the first legal lottery. 45 Geopolitically speaking, it proved to be the perfect initial domino because of its close proximity to other states. Unsurprisingly, other northeastern states soon followed with similar measures, and then, most of America. 46 It now appears 45 states sponsor state lotteries. Casino-type gambling also saw such a domino effect when New Jersey legalized casinos in 1976. 47 Once Iowa legalized casinos, it took only six months before riverboat casinos opened in Illinois. 48 Straightforward legalization was not enough. States took this competition so seriously that they had to give their own casinos a competitive edge over other states' casinos. Now, 33 states license casino gambling or card rooms. 49 In total, this wave of casino legalization spanned about 15 years.
A crucial difference is that casinos are large, physical structures, while DFS exists in the digital world. While people have to physically travel to casinos, DFS exists in your pocket. Ask the taxi companies about technology creating unprecedented penetration into a market. 50 The advent of ridesharing through mobile applications is threatening to decimate the taxi industry. 51 Ridesharing operators, such as Uber and Lyft, have seen explosive growth 52 despite vehement opposition from taxi companies. Much like DFS, ridesharing has had its share of negative headlines, but its growth is indisputable and its relevance unquestionable.
The boom of the ridesharing industry is outside the scope of this article, but there enough similarities that it is worth briefly discussing. Ridesharing is an industry that has each state as its battleground, 53 relies heavily on technology, is being embraced largely by younger people, 54 was developed from a more established product, is having a public and contentious legal battle in New York, and has a wealth of resources to spend on lobbying. 55 Does that sound familiar? Uber has also deployed lobbyists across the country in order to wage battles at the state and municipal levels. 56 The political and social pressure on communities to embrace this form of transportation is not only palpable, but being ruthlessly wielded by Uber when engaging a targeted city. 57 Like DFS, there is also a certain degree of nervousness involved. No pun intended, but driving this uneasiness is the fact that the ridesharing service was pushed into hundreds of cities before rules could even be implemented to regulate the service. 58 While taxi companies are doing everything in their power to slow the ridesharing business down, legalization seems inevitable in that industry as well. When demand exists, technology will find ways around the legal obstacles. 59
The Dfs Supporters
Central to understanding the prediction of the eventual victory of DFS is understanding who is supporting it. In politics, money equals success. In a development that probably stunned nobody, recent studies have shown that money buys political influence. 60 The sports metaphors risk getting old, but it will suffice to say that the DFS bench has significant depth.
In 2010, the National Collegiate Athletic Association (NCAA) signed a $10.8 billion, 14-year television contract. 61 In 2015, the NCAA tournament had the highest average viewership in 22 years and saw its social media presence jump massively. 62 The 2016 NCAA Football Championship game had a bad year in terms of viewership, pulling in a paltry 25.7 million viewers on ESPN. 63
The NCAA recently came to an agreement with FanDuel and DraftKings to not be included in their contests. 64 A major triumph for those morally opposed to the spread of DFS? Have casinos created a formable coalition to cut off DFS at the knees? 65 Not really. The decision by FanDuel and DraftKings was voluntary, and since college sports only represents three percent of FanDuel's revenue, 66 this was hardly a financial bump in the road. The National Football League (NFL) supporting fantasy sports is probably the most significant recent development, given its sheer popularity and international influence. 67 But it is also significant because it represents a paradigm shift, as the NFL had been notorious for its anti-gambling position. Former Commissioner Paul Tagliabue had previously stated that, “The spread of legalized sports gambling would change forever- and for the worse- what our games stands for and the way they are perceived.” 68 As recently as 2009, an NFL spokesman again reiterated that sports betting would lead to the perception that the game was fixed. 69
But, much like its counterparts, the NFL is running towards gambling. In 2012, the NFL took a significant step of removing the ban against gambling advertisements in stadiums, allowing teams to have at least some degree of relationship with casinos. 70 NFL Commissioner Roger Goodell recently said that there has been evolution on the gambling issue, and that he furthermore does not even view DFS as gambling. 71 This is quite significant, given the fact that historically, the NFL commissioner is capable of being more proactive in the business aspect than the commissioners of other sports. 72 The NFL allows its owners to invest in DFS 73 and, incredibly, 28 out of the 32 NFL teams have some type of relationship with fantasy sports sites. 74 Forbes, somewhat facetiously, titled an article “Daily Fantasy Sports Are Taking over the World.” What would previously have been unthinkable is now quite thinkable: the NFL will consider having a NFL team relocate to Las Vegas. 75 Additionally, the NFL is contemplating putting a franchise in London, 76 where gambling on sports is not only legal, but a cultural fixture. 77
The National Basketball Association (NBA) has pivoted towards legality as well. The NBA website has a Fantasy section detailing how players are performing in fantasy leagues and providing analytical advice regarding fantasy basketball. 78 Similar to the NFL, the rhetoric from the commissioner of the NBA has shifted. Former Commissioner David Stern, a lawyer by trade, started acknowledging the potential benefits of working with gambling operators. 79 The transition from David Stern to Adam Silver, who also practiced law, as commissioner created the perfect opportunity to change direction on fantasy sports. Indeed, Adam Silver is an enthusiastic supporter of DFS who wrote an editorial in the New York Times stating that betting on sports should be legal. 80 Commissioner Silver stated that sports betting is massively popular and that the federal government needs to step in and provide strict regulatory requirements and various safeguards. Perhaps the most recognizable NBA owner, Mark Cuban, is also an avid supporter of DFS and was even the keynote speaker at the annual winter meeting of the Fantasy Sports Trade Association. 81 The NBA is now equity partners in FanDuel and DraftKings, and more recently, became a part owner of a tech company that offers sophisticated analysis for DFS and sports wagering in general. 82
The MLB is certainly an interesting study when it comes to sports gambling, given its traditional values and its widely publicized problems with game fixing. For many years, it has been the long-standing policy of the MLB to oppose sports gambling. 83 As recently as 2005, the MLB was at odds with a fantasy website. 84 But arguably, the MLB might need legalized sports gambling more than any other sport, given its difficulty attracting younger audiences. 85 This might be why, according to the Washington Post, the MLB was the first league to enter the DFS business by purchasing a stake in DraftKings in 2013. 86 DraftKings and the MLB came to a multi-year agreement which makes it MLB's “Official Daily Fantasy Game.” 87 Furthermore, the MLB recently made a deal with a London-based company that monitors suspicious betting activity and provides software for legal bookmakers in Europe and Asia. 88 The MLB has quite the interest in seeing DFS succeed.
The support goes on. The online platforms of ESPN, USA Today, and the New York Times have sites dedicated to fantasy sports. Major media companies like Yahoo!, ESPN, Fox Sports, NBC Sports Group, Google Capital, Time Warner/Turner Sports, Sports Illustrated, and CBS are all reported to have business ties with DFS operators. Fox Sports invested around $150 million for an estimated 11 percent ownership in DraftKings. 89 Then there is the Fantasy Sports Trade Association, which boasts 281 records. 90 Given the visibility of DraftKings and FanDuel, the FSTA is an unheralded 91 but potentially vital, part of keeping the moving pieces organized. This is because a trade association does not actually have any product, but provides a service for their members. In the spirit of competition, the FTSA is conducting their 2016 Summer Conference in “the DFS battleground state” of New York. 92 But perhaps the best marketing tool is the sheer popularity of DFS.
The Value of Dfs
The DFS supporters have the financial means. The current wave of legalization provides opportunity. But, as in criminal law parlance, we still need motive. On the surface, this appears to be a simple discussion. Demographics show that a person who plays fantasy sports appears to have available disposable income 93 and long-term earning power because they are typically well educated. 94 There is interest and available income, the owners and leagues are in the business of making money, so they should act on it. But the commissioner of the NFL is not paid $44 million dollars a year to simply pick low-hanging fruit off the revenue tree. Commissioners are businessmen, who are always anticipating potential business threats and analyzing what the future holds. Rather, the value of DFS is a more nuanced discussion than meets the eye.
Begin from the premise that the professional sports leagues are far from unassailable, although most of the recent threats involving each of the individual leagues are manageable. The NFL is the goliath of the professional sports world, but has the ongoing head trauma controversy. 95 This certainly could impact youth sports and parents allowing their children to play football, a ripple effect that might not be fully quantifiable for years. The NFL has also dealt with domestic assault incidents that have portrayed the league negatively and caused small boycotts. It has been widely publicized that baseball is having difficulty with the speed of play 96 and connecting with younger audiences, 97 while the National Hockey League's (NHL's) problem might be that it seemingly can't get much significant coverage. 98 The NBA has battled image problems due to player behavior, 99 ranging from incidents like Gilbert Arenas bringing a gun into the locker room, to the infamous Malice at the Palace melee where NBA players entered the stands to fight fans. Each league is dealing with different types of issues.
The first aspect of value DFS brings is from live broadcasting. Obviously, live broadcasting of sports is important. 100 ESPN and TNT paid a record amount to show NBA games, starting with the 2016–2017 season, 101 and ESPN went as far as to purportedly sacrifice on-air talent in order to acquire these rights. 102 Beginning in 2014, the MLB will receive $12.4 billion annually from its television broadcasting contracts. 103 Meanwhile, the signature events continue to drive record numbers. The 2015 NBA Finals between the Golden State Warriors and Cleveland Cavaliers was the most watched playoff series since Michael Jordan played for the Bulls in 1998. 104 Super Bowl 50 saw a decline in the number of people watching it, yet the 111.9 million viewers was still the third largest in television history. 105 Even with streaming from tablets becoming extremely popular, it would be difficult, if not completely ridiculous, to take the position that sports on a television set is becoming less relevant in our culture.
A DFS manager is going to tune in to a game even when the score becomes less important, which makes advertising more valuable. As USA Today so appropriately put it, the professional sports leagues are hoping that DFS will have “a steroid effect on television revenue, because nobody watches live sports quite as intensely as fans with money at stake.” 106 It is not hard to see the connection between DFS and live broadcasting, especially because the broadcast of live sports remains a form of entertainment that people still like to watch in real time. But there is another reason that DFS is important to the leagues: attendance at live sports could be in jeopardy. For many years, fans attending live sporting events served as a connection between the fans and the team. Professional sports leagues know what happened to casinos when e-casinos experienced their explosive growth. 107 Physical presence is not necessary to experience sports anymore; in fact, it is arguably an unnecessary barrier. From the leagues' perspective, the leagues can either sit on the sideline or do what they can to help usher in DFS.
It is never a good sign when the discussion appears to shift straight to how to solve the problem, as sometimes seems to be the case with declining attendance. 108 One of the straightforward reasons for this is the at-home experience of watching sports has dramatically improved with HD television and surround sound. 109 Rising ticket prices 110 and security being a growing concern 111 doesn't help either.
The NFL experienced a dip in regular season attendance in 2015. 112 Just as a dip in Walmart's stock causes some consternation about the national economy, this dip in NFL attendance should cause heads to turn.
What about the NBA and MLB? Certainly baseball is no stranger to declining attendance. The New York Yankees, the most valuable franchise in the MLB, experienced the lowest attendance in 15 years in 2015. 113 The NBA has seen much better attendance the last two seasons, but the league was experiencing problems immediately preceding that.
The saying goes that there are lies, damn lies, and statistics. Attendance is a statistical measure and there are some questionable variables involved in reporting sports attendance. 114
It might just be the cyclical nature of attendance at live events. 115 But leagues are searching for ways to drive fans to attend games because, at the very least, they have to acknowledge that technology poses a legitimate threat to live sports. The NCAA is seeing a growth in the number of schools offering beer for sale in their stadiums, 116 and the College World Series is going to experiment with selling beer inside the baseball stadium. Baseball is trying to speed the game up by adding a clock for between innings and for pitching changes. 117 Perhaps the most telling change is that stadiums are now listing fantasy statistics of different games. 118 This is not Bill Veeck sending a midget up to bat as a marketing gimmick, 119 but substantive and meaningful changes with the in-game experience.
The leagues need and want DFS to continue to flourish because it creates a strong connection between the fan and the league. Attending live sports was used to be how a game was experienced. But inventions can redefine an experience. 120 Now, the thrill of cheering on your own DFS team may replace stepping a foot into a stadium. DFS will help the leagues compensate by redefining the experience of sports through embracing a new reason that people are watching sports. Just as ridesharing redefined hailing a cab, DFS might change the way fans perceive and experience sports.
Conclusion
There are reasons to avoid confident rhetoric about the expansion of legal gambling, as it is shaped by irrationality, unpredictable technology, and spreads in a haphazard manner. 121 But there is a reason that Mark Cuban ended his editorial by wishing a sarcastic “good luck” to those trying to suppress DFS—this isn't an expansion of legal gambling because the product already exists everywhere. It exists on your phone, the phones of people you know, billboards, television, podcasts, and koozies. ESPN, the New York Times, Yahoo!, have entire sections dedicated to DFS. The expansion already occurred; now developments will move toward the inevitable legalization.
Sports is a business, and the business of sports is shifting due to technology and societal factors. While the leagues will do anything to protect the sanctity of the game, the owners and commissioners realize that the landscape is shifting and that they need to be proactive. The resources of those supporting DFS is enough to keep applying a full court press of lobbying and advertisements across the United States. But pressure for a particular state is going to turn into digital suffocation when the perception changes from potential revenue to simply lost revenue. Social media, a 24-hour news cycle, and hundreds of millions of dollars going to a neighboring state have a way of creating a highly pressurized political environment in a hurry. Ironically, the same cultural craving for competition that draws fans to DFS will likely makes its legalization a slam dunk.