Why Does N.J. Congressman Want a Hearing on Daily Fantasy Legality?

U.S. Rep Frank Pallone: “How is that different than wagering money on the outcome of a game?”

Dilworth Park station daily fantasy draftkings

Ads for daily fantasy site DraftKings at Dilworth Park in April. Photo | Dan McQuade

If you watched the Eagles Monday night, you know that there is a way you can become a millionaire. It’s as simple as playing along with football and other sports.

Last week, DraftKings and FanDuel — two companies that offer daily fantasy sports, where players pick a daily or weekly lineup of athletes and compete against each other — spent $31 million to run 9,900 ads. Every NFL game was blanketed with daily fantasy ads.

This caught the attention of U.S. Rep. Frank Pallone. Earlier this week, the New Jersey congressman wondered aloud (in a press statement) why daily fantasy sports wasn’t gambling.

“Anyone who watched a game this weekend was inundated by commercials for fantasy sports websites, and it’s only the first week of the NFL season,” Pallone said in the release. “These sites are enormously popular, arguably central to the fans’ experience, and professional leagues are seeing the enormous profits as a result. Despite how mainstream these sites have become, the legal landscape governing these activities remains murky and should be reviewed.”

Frank Pallone, official portrait.

Frank Pallone, official portrait.

Daily fantasy emerged, essentially, after online poker sites were shut down. The 2006 Unlawful Internet Gambling Enforcement Act cut off online poker at the knees by banning companies from taking payments for Internet gambling. But it carved out an exemption for fantasy sports, which were then primarily played between friends — many times for money, and almost always over a full season.

Daily fantasy is similar, but entrants only play for a much shorter period of time (say, a day, or a weekend). It has exploded over the last few years. DraftKings is now the official partner of Major League Baseball, and its ads have been plastered at the new Dilworth Park subway stop for long stretches this year. The NBA has an equity stake in FanDuel. The two companies are not yet profitable, but they say that’s due to their huge ad budgets. (For a more detailed look at the rise of daily fantasy, I wrote a long article for The Guardian about it in May.)

DraftKings CEO Jason Robins recently told the Washington Post that daily fantasy was completely legal and he had no concerns about it. “Anyone who has taken the time to understand the law as it relates to DraftKings’ offerings, and anyone who has seen the data … on the skillfulness of the game, it’s really, honestly not a debate,” Robins told the paper. “It’s clearly legal. And we have a team of great lawyers who watch everything we do.”

Lawyer Marc Edelman isn’t so sure. Writing at Forbes, Edelman says DraftKings’ CEO is ignoring the risks.

“Robins’s statement about the legality of his company’s offerings at best makes him come off as a naive brand cheerleader and at worst, misinformed,” he writes. “In truth, there are some very real legal risks in the U.S. associated with operating certain formats of daily fantasy sports contests, especially one-tournament contests like golf and NASCAR, and especially under the laws of states such as Arkansas and Tennessee.”

Edelman argues that larger companies didn’t get into daily fantasy because the vagueness of the law kept them away from attempting it. Daily fantasy companies are not regulated like gambling ones, which means they aren’t required by law to do things like run public service announcements about problem gambling. The industry insists there is no vagueness and the law is clear: Under the 2006 law, daily fantasy is legal.

“Fantasy sports bring fans closer to the games they love and have been a major driver of fan interest and engagement for decades,” Peter Schoenke, chairman of the Fantasy Sports Trade Association, said in a statement to Philadelphia magazine. “These are skill-based games that match sports fans against each other in a contest of sports knowledge and strategy that is fundamentally different from wagering on the performance of an individual player or the outcome of a particular game.”

Daily fantasy sports is very obviously a game that involves skill. But there is still a disconnect: It still sounds like gambling to a lot of people. “Fans are currently allowed to risk money on the performance of an individual player,” Pallone said. “How is that different than wagering money on the outcome of a game?”

It seems Pallone does not really want daily fantasy sports made illegal. Rather, he’s a proponent of the legalization of sports gambling in New Jersey, and is using daily fantasy as a way to wedge that issue to the forefront.

“Several states can already operate sports betting, but New Jersey has been shut out despite the will of our citizens,” Pallone said in a joint statement with Rep. Frank LoBiondo last month. “The fact is, the citizens of New Jersey passed a constitutional amendment by referendum and the state legislature acted to give it effect. The federal government should not stand in the way.”

Pallone has submitted his request for a hearing on daily fantasy to the House Energy and Commerce Committee (below), which he sits on.

Follow @dhm on Twitter.