Fantasy Sports Visits Washington; But It Will Not Stay

In May, the House Energy and Commerce Subcommittee on Commerce, Manufacturing and Trade will hold hearings on fantasy sports.  The topic hit the national consciousness last September when FanDuel and DraftKings spent hundreds of millions of dollars advertising their product on Monday Night Football.  It ranks as one of the most debated subjects thus far in 2016.  So it is not surprising that Congress would like to investigate. Holding hearings is the Congressional equivalent to an athletic competition and in the District of Columbia it is a very popular sport indeed.

The daily fantasy sports industry is under fire from regulators across the country and now faces another crucial test before Congress. Lawmakers on Capitol Hill will hold their first hearing in May to look into the growing but controversial industry.  A spokesperson for the House Energy and Commerce Subcommittee on Commerce, Manufacturing and Trade said the hearing would focus on the legal status of the daily fantasy games. David McCabe, The Hill, 4-18-16

The House committee will not be the first committee to investigate the world of fantasy sports.  According to the Associated Press, 30 states legislatures have in some way discussed the issue.  The debate focuses on the nature of the activity, questioning whether it is gambling or a game of skill.  The major companies offering leagues for fantasy play maintain it is a game of skill.  Critics, including the Nevada gaming commission and the New York attorney general, say it is gambling and subject to the states’ gambling laws, regulations and taxes.

In the legislatures, the tally is pretty equally divided between the two poles, illegal and legal.  For every state that is willing to declare the activity legal, there is another state that finds it violates state gambling policy.   The pro-fantasy states are willing to permit, regulate and tax it; the others threaten to prosecute the purveyors and sometimes the participants.   The attorney general of Connecticut cut to the chase when he said, “There presently exists a high degree of uncertainty about whether daily fantasy sports contests constitute games of skill or games of chance.”   He did not pick a side, but he did opine that legalizing fantasy sports would conflict with Connecticut’s Indian gaming compact.  It is a very complex issue.

Every state has a different gambling policy and each state wishes to retain its control over all of the gambling activity in the state, which clearly includes the right to limit, regulate and tax any activity that by state law is characterized as gambling.  And that brings me back to Washington and the hearings.  Regardless of what the fine members of the House of Representatives learn in the process of “hearing” evidence on both sides of the issues, this is not an issue fit for national policy or regulation.  I have always thought internet poker – or any other form of online gambling – fell into the same category.  But online poker never grabbed the national attention the way fantasy sports has and even online gambling is clearly a “state’s rights” issue; it does not appear important enough to drive policy at a state or national level.

Although it is rarely part of the discussion on the subject, fantasy sports is an internet activity and I think there is a good chance that fantasy sports will do the heavy lifting for all online gambling.  The fantasy sports debate has generated a great deal of emotion and interest as each state staked a position on the issue.  It has become too emotional for anyone to concede to the feds the right to determine its legality.  It was clearly established as a state’s rights issue by the impassioned discussions in two thirds of the states.

Gambling has always been a state’s rights issue, with a couple of exceptions, most notably the Interstate Wire Act of 1961.  Nevada was the first state to fight for the right to control gambling within its borders.  Senator Estes Kefauver and Attorney General Bobby Kennedy both tried to rest that control from Nevada. Nevada fought back and won.  The federal government’s efforts failed, but not because of Nevada’s political power.  It failed because of the political power of the concept of state’s rights.   I think fantasy sports will once again arouse the emotions needed to limit the power of the federal government.



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