Congress Holds Informational Hearing On Daily Fantasy SportsDFS Could Help Provide Momentum For Sports Betting Legislation |
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On Wednesday, the House Subcommittee on Commerce, Manufacturing, and Trade held a hearing on daily fantasy sports, despite no legislation on the table that would regulate the games. The hearing was informational in nature.
U.S. Rep. Frank Pallone (D-NJ) pushed for the hearing last year, as his state continues to fight in court with the major sports leagues and the NCAA over a 1992 federal law that prevents New Jersey from having sports books in Atlantic City casinos. Atlantic City is currently in free fall thanks to a shrinking gambling market.
At the beginning of the hearing, Pallone called it “hypocrisy” that some companies and groups claim DFS isn’t gambling. Near the end of the hearing, he criticized DraftKings and FanDuel, by far the largest players in the DFS space, for applying for gambling licenses in the U.K. but saying in America that their product isn’t like traditional sports betting.
Pallone called for “fairness and transparency” in the DFS industry, citing data that shows roughly 90 percent of money paid out by DFS sites goes to the top one percent of players.
That point was elucidated by testimony from Kurt Eggert, professor of law at Chapman University. For the very best players, DFS “isn’t a game of skill or chance, it’s a game of algorithms,” he said. Eggert compared the current way DFS operates to a casual tennis player being pitted up against Roger Federer and not even knowing it. “What do you do to protect the recreational player?” Eggert asked of the industry.
According to testimony from Peter Schoenke, chairman of the Fantasy Sports Trade Association and president of RotoWire.com, roughly 50 million Americans played some form of fantasy sports in 2015. The market is worth $26 billion between the U.S. and Canada.
Despite the popularity of fantasy sports, and the growing popularity of DFS specifically ($2 billion in market size by 2020, according to Eilers Research), the games shouldn’t be looked at on their own, but rather in the context of nationwide sports betting, Dr. Ryan Rodenberg, a professor at Florida State University with a focus in sports law analytics, testified before members of Congress. It’s “difficult to evaluate DFS without looking at sports betting,” he said.
Rodenberg’s comments aligned with what Pallone was articulating.
While there was important information shared at the hearing, it did include some tired questions that pertain to the online gaming space in general. U.S. Rep. Michael Burgess (R-TX) asked if it was possible to prevent underage players from accessing the DFS sites. Regulated online casino gaming in Nevada, New Jersey and Delaware has been running since 2013 without issue.
MGM Resorts International, one of the largest casino developers in the world, had a presence at the hearing. John McManus, the firm’s executive VP and general counsel, testified that MGM had “great interest” in DFS, but decided against venturing into the space at this time because of a lack of “legal clarity” and the fact that MGM wasn’t sure “how to make money” from it.
Though MGM isn’t involved with the business, McManus said that he thinks “house-banked” games should always be regulated. Congresswoman Susan Brooks (R-IN), who hails from a state that passed DFS legislation in March that will give the government $50,000 per DFS license, said that Congress doesn’t want to “stifle innovation” through regulation.
The American Gaming Association, the casino industry’s top lobbying group on Capitol Hill, said in written testimony that its position on this topic is “simple.”
“DFS currently operates in a legal gray zone,” wrote AGA CEO Geoff Freeman. “We think it should be black and white. The gaming industry wants to see clear rules of the road that lay out where DFS is going to be legal, how it is going to be regulated and how consumers are going to be protected.”
With the Nevada sports betting market expected to grow to $5 billion (the handle) in 2016, and an illegal market in America worth as much as 80 times that, the AGA is pushing for reform to the Professional and Amateur Sports Protection Act of 1992. Freeman was quoted earlier this year as saying that “the next president is going to have that issue of legalizing sports betting on their desk, and I’m confident they’ll make the right decision.”
Wednesday’s hearing didn’t provide any indication that the current state-by-state regulation of DFS will change, but it could provide more momentum to the powerful calls to bring sports betting out of the shadows in America.
The NFL, the richest of the major sports leagues, indicated just days ago that its anti-gambling position is evolving. The comments from commissioner Roger Goodell come as the Oakland Raiders seriously consider a move to Las Vegas.
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