The daily fantasy sports (DFS) industry is under siege from all quarters. Wednesday the Wall Street Journal, quoting anonymous sources, reported that the U.S. Department of Justice (DOJ) and FBI are investigating DFS operators. Yesterday Nevada gaming regulators declared the activity to be gambling in their state and ordering the operators to stop offering services there without a sports betting license.

The Nevada decision came after regulators there asked the Nevada Attorney General’s office to provide a legal analysis of fantasy sports betting – which the providers claim is a game of skill, and Nevada decided was gambling regardless of the level of skill involved. Before the DOJ can form, and issue a legal opinion, they need more facts. Thus the preliminary investigation that began in Boston.

That legal opinion is crucial to the continued existence of the pastime at a national level as the major companies involved; DraftKings, FanDuel, and newcomer StarsDraft claim their offerings are 100% legal and refer to language in the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA) that gives them a specific “carve-out” and defines them as legal games of skill. However, the industry has evolved since that time. When the law was written fantasy sports were mostly season long events,  today contests can be entered into and concluded daily.

A DraftKings spokesman didn’t seem surprised by the inquiry and released a statement published in the WSJ that said, “It is entirely predictable that the government would follow up on the misleading reports about our industry,” the spokesperson said. “We have no knowledge of the specifics of any federal investigation but strongly disagree with any notion that our company has engaged in any illegal activities.”

Whether or not today’s DFS enjoy the same protection under the UIGEA as their predecessors, several states have begun their own inquiries. The former U.S. Representatives from Iowa, Jim Leach drafted the law and stated this week that even if they are protected under that act, it does not give them immunity from prosecution if they are breaking other laws.

New York Attorney General Eric Schneiderman has launched an investigation and his comments so far are not unbiased, calling DFS “illegal” and the act of entering contests “gambling”. The AG of Florida, Pam Bondi has asked the U.S. Attorney’s office there to investigate whether DFS operators are violating the Illegal Gambling Business Act (IGBA) [.PDF] and a federal grand jury has reportedly been impaneled there to decide if charges should be filed. The Federal Trade Commission has also been asked to investigate DFS.

The spotlight began to focus with over $100 million spent on advertising by the top 2 companies last month. And then a scandal broke when an employee inadvertently published internal data, the kind which was reportedly used by employees of each site to bet at the other. The loose fingered employee won $350,000 the same weekend. Several class-action lawsuits have been filed this week by players who think they were disadvantaged.

Leave a Reply

Your email address will not be published.