News Column

Fantasy Football Gambling Industry Facing Increased Legal Scrutiny

September 1, 2014

By Jacob Feldman, The Miami Herald

fantasy football, gambling, increased scrutiny

It is all fun and games for daily fantasy sports companies in Florida -- for now.

Rapid growth has taken the industry from nonexistence a few years ago to mainstream discussion entering this football season, providing millions in profits along the way. This year promises to be the best yet for companies offering daily and other short-term fantasy contests with stakes ranging from $1 to thousands of dollars.

Industry leader FanDuel claims on its website that its industry is worth $4 billion.

Numbers like that have recently attracted the involvement of established venture capitalists, as well as media companies and sports leagues, lending credibility to the industry.

But rapid growth could also draw more attention from authorities in states such as Florida where the laws regarding gambling on fantasy sports are murky at best. Those laws rarely have been challenged or enforced, but states might be pushed to action if the industry continues to grow.

In sum, growth and attention could either turn daily fantasy gambling into big business or no business at all in many states.

Florida was one of the first states to address gambling on fantasy sports in 1991, when then-attorney general Robert Butterworth wrote in a non-binding opinion that the state prohibits fantasy leagues that require an entry fee and result in cash payments from the entry fees to the best team based on actual players' performances.

Butterworth referenced a Florida statute that prohibits betting on "the result of any trial or contest of skill."

But the state, like others, has not tried to actively enforce the law when it comes to fantasy sports.

Large daily fantasy websites such as FanDuel.com and DraftKings.com have offered head-to-head and large group pay-to-enter fantasy sports contests to Florida residents, though those sites prohibit participation in monetary competitions in five other states for legal reasons.

Marc Edelman, an associate professor of law at Baruch College, Zicklin School of Business, City University of New York, said the list of states those two websites ban, "very well may be under-inclusive, and in my opinion are not necessarily the five states with the greatest risk."

Edelman went on to say that Florida is among the unlisted states that he believes present "bona fide legal risks."

Attorney Marc J. Zwillinger is the founder of ZwillGen PLLC, which is a law firm that represents FanDuel and other fantasy sports contest providers.

"Fantasy sports contests -- whether season-long or daily -- generally operate in accordance with the carve-out for fantasy sports under federal law," Zwillinger wrote in a statement. "As for state law, most of my clients, including FanDuel, exclude residents of states where it is unlawful to participate in or organize skill games for prizes."

CBSSports.com declined to comment on its legal strategy. Requests for comment were not returned by DraftKings or Ballr.com.

Miami-area sports lawyer Darren Heitner said it was "puzzling" that Florida's statute has been ignored and suggested the industry might have been too small to reach the attorney general or state law enforcement's radar.

David Klein, a managing partner at New York-based law firm Klein Moynihan Turco, said it is typical for the government to crack down on an illegal enterprise once it has gained a large following.

"Only when and if there is a lot of noise about it, the regulators take action," he said.

With a video feature running on ESPN and The Associated Press writing a three-part series this month, "It may be becoming an issue that the attorney general would look at," Heitner said.

If Florida does take action, Heitner said it is unlikely the government would go after individual gamblers first.

The Office of the Attorney General declined to comment, citing legal restrictions, and the Florida Department of Law Enforcement did not respond to a request for comment. Still, the legal experts said prohibition was not guaranteed -- the games might go on.

Daily fantasy's profits have been noticed by major media outlets such as Sports Illustrated and USA Today, which have both recently launched similar ventures. Established businesses like those could give state lawmakers comfort about the industry while protecting it from attacks.

"It is much more difficult, at least in court of public opinion, to go after this sector as a whole if you do begin to get some of the larger institutions like a Yahoo! Sports, ESPN or CBSSports.com and especially the leagues involved," Heitner said.

After all, it was reportedly powerful lobbyists associated with sports and media companies who helped spawn the industry on a national level by getting a fantasy sports exemption in a 2006 U.S. law that prohibited other forms of gambling online.

Kansas' Racing and Gaming Commission recently explained on its website that gambling on fantasy football is -- and has been -- illegal in that state. Still, major websites, including FanDuel, continue to operate in the state, and the commission's lawyer said she was not aware of any cases being pursued against somebody betting on fantasy sports.

Brett Hildabrand, a Kansas state representative, posted on Twitter that he would like to make fantasy wagers explicitly legal.

Klein said he could see states formally legalizing the fantasy sports gambling business. Maryland did exactly that in 2012. For now though, Klein said the industry is keeping his firm busy, and he understands why it has exploded.

"As I told clients and prospective clients, it was the one area of legal gambling that you could charge for under the law without a license," he said. "... There is nothing else like it."

___

(c)2014 The Miami Herald

Visit The Miami Herald at www.miamiherald.com

Distributed by MCT Information Services

Original headline: Popular fantasy football gambling industry facing more legal scrutiny



Source: Miami Herald (FL)


Story Tools






HispanicBusiness.com Facebook Linkedin Twitter RSS Feed Email Alerts & Newsletters