State AG’s Continue To Rule DFS Contests Are Gambling
Hawaii Attorney General Doug Chin and Mississippi Attorney General Jim Hood are among the latest to designate daily fantasy sports as illegal gambling, joining five other states’ attorneys general Nevada, New York, Illinois, Texas, and Vermont that have made the same determination.
These developments are problematic in and of itself (it should be noted that the attorneys general in Massachusetts and Rhode Island have come to the opposite conclusion), but perhaps more problematic is the subjective way DraftKings and FanDuel are dealing with these decrees.
Should I stay or should I go?
When Nevada declared daily fantasy sports illegal gambling last October, FanDuel and DraftKings quickly ceased operations in the state.
On the other hand, when New York Attorney General Eric Schneiderman said the same, the companies fought back, and are now embroiled in a multi-layered court battle with the state that extends to payment processor Vantiv.
DFS operators have remained in Illinois (not surprising as the AG only issued an opinion that it was illegal during a hearing) resulting in a court case. The companies have also remained in Texas, Vermont, and Mississippi, but have pulled out of Hawaii.
Based on the precedent, if push comes to shove, I suspect DraftKings and FanDuel to fight any actions taken in Texas and Illinois, and begrudgingly leave Mississippi and Vermont, as their strategy seems more dependent on the number of DFS players rather than the specific gaming laws they may or may not be violating.
In my opinion, this a risky strategy that creates a dangerous precedent. The attorneys general have been citing one another in their opinions, and if a largely populated state like New York has an identically worded law on gambling vs. skill as a state the companies have decided to pull out of, it will be difficult for one of the DFS companies to square that circle.
A necessary strategy?
Unfortunately, given the industry is being attacked on several fronts, DraftKings and FanDuel need to spend their lobbying and legal money extremely wisely, and fighting lengthy and costly court battles in insignificant (to a DFS site) states would be a terrible use of funds.
As an aside, I agree with Chris Grove’s recent statement that it may be time for DraftKings and FanDuel to consolidate, which would help them avoid duplicate (and very expensive) legal costs.
The problem is, by pulling out of some states and staying in others, DraftKings and FanDuel are adding fuel to the fire, and emboldening attorneys general and lawmakers to act.
Strategy is making an existing problem worse
In addition to giving ammunition and precedent to other attorneys general, this strategy might create a second problem for the DFS industry, as their decision to fight in New York and beyond is very combative and antagonistic, and is likely to sway public opinion away from DFS.
For instance, the industry recently launched political attack ads against California Assemblyman Marc Levine, the lone assembly member who voted against a recent DFS legalization bill. Why the industry felt the need to turn to attack ads when the bill passed 62-1 is beyond me, as it will likely only serve to further polarize the issue.
And DFS already has a public relations issue, thanks in large part to the DFS industry’s stubborn insistence over the phrase “game of skill,” and their revulsion when it comes to the word gambling.
First, by and large, the general public believes DFS is gambling (here, and here).
Further, talking heads ranging from Scott Van Pelt, to Bill Burr, to John Oliver have chastised the industry for their adherence to their “game of skill” talking point [videos embedded below]. It’s not that they are against DFS, or think it should be prohibited, rather they are speaking out against what they deem to be the industry insulting the intelligence of their customers and the general public by correcting them whenever the word gambling is used in the same sentence as DFS.
The problem is, DFS falls within the majority opinion of the definition of gambling, which has a “I know it if it I see it” component to it.
Upshot
At this point in timed it seems like the DFS industry is running out of options, and while they need to bed calculating as to where they a draw a line in the sand, doing so in some locales and not others could very well lead to more and more states’ attorneys general forcing them to make this decision.
Furthermore, these seemingly inconsistent decisions, based largely on value and not on principle, could sway public opinion and further polarize the industry in the eyes of the general public and lawmakers.
Steve Ruddock is the content director for BettingUSA and the Editor-in-Chief of Gaming Law Review.
Steve has covered the legal and legislative developments in the US gambling sector for more than a decade for online and print publications.
