Legal Developments

Congressman Highlights Hypocrisy of U.S. Gaming Laws at DFS Hearing

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Last week the House Subcommittee on Commerce, Manufacturing, and Trade hosted a hearing on daily fantasy sports titled, “Daily Fantasy Sports: Issues and Perspectives.”

New Jersey Representative Frank Pallone was the instigator of the hearing, and the democrat representative from the Garden State used the hearing to put forth the case for legalized sports betting in the United States, and at the same time expose the hypocrisy in federal gambling laws.

What the hearing was really about

It may have been officially billed as a DFS hearing, but it was clear from the beginning that this was more about the current federal law, the 1992 Professional and Amateur Sports Protection Act (PASPA), that prohibits sports betting outside of Nevada and to a lesser extent, Oregon, Delaware, and Montana.

Pallone highlighted the hypocrisy of federal gambling laws, which essentially allowed unregulated daily fantasy sports sites to operate in most states, yet prohibit regulated sports betting outside of a few select locales.

At the hearing Pallone stated:

“I must also mention the hypocrisy of those arguing that daily fantasy sports is readily distinguishable from traditional sports betting. While quietly applying for and receiving gambling licenses in the United Kingdom, DFS operators continue to argue to interested states in the U.S. that  unlike sports betting  DFS is not gambling.”

Pallone called this an “arbitrary distinction,” and a moot one at that, since sports betting is also a game of skill. Pallone also noted how sports leagues have been blocking New Jersey from legalizing sports betting while at the same time supporting DFS and how Pallone’s home state has been locked in a multiyear court battle with the NCAA and professional sports leagues over New Jersey’s efforts to legalize sports betting.

Pallone went on to ask Peter Schoenke, who was in attendance representing the Fantasy Sports Trade Association (neither DraftKings or FanDuel representatives were present), “So what is DraftKings’s rationale for getting a gambling license in the U.K. if they say that daily fantasy sports is not gambling? And what about FanDuel’s? How do they justify this when they ask for the gambling license in the U.K.?”

His answer, that laws were different in the UK didn’t persuade Pallone, who rebuked this answer by saying, “It sounds like the difference is that in one country they have a lot of smart lawyers or lobbyists that are defining things in one way and in the other they’re not.”

Can DFS lead to a PASPA repeal?

In written testimony, Geoff Freeman, the president and CEO of the American Gaming Association (AGA) stated:

“[The] growing popularity [of DFS] has raised important questions about the appropriate regulatory environment, the adequacy of federal and state gaming laws and the best way to protect consumers and the integrity of games.

“It also provides an opportunity to review the effectiveness of America’s 25-year-old federal sports betting ban in light of growing public acceptance of gaming in general, the soaring interest in sports betting in particular and the development of new technologies that can aid law enforcement in overseeing betting activities.”

Freeman went on to explain the AGA’s position on DFS, saying As far as DFS is concerned, the AGA would like to see states continue to take the industry out of the “gray” category and make the laws 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,” Freeman stated in his testimony.

From there, Freeman’s testimony quickly pivots towards sports betting:

“The debate about DFS touches on the broader issue of sports betting in America.

“[…]

“In 1992, Congress passed the Professional and Amateur Sports Protection Act (PASPA), effectively outlawing sports betting in most of the U.S.

“[…]

“But the 25-year old ban has failed to achieve its objectives. Instead of curbing sports betting, it has just driven it underground with trillions of dollars estimated to be wagered illegally over the life of the law.”

Freeman’s testimony concludes with a call to action, “It is past time to determine if a more effective approach to sports betting in America exists,” Freeman stated.

What Freeman and others are calling for is a repeal or gutting of PASPA, which would lead to legalized sports betting proliferating across the country, taking the industry out of the shadows and into the light.

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