House Rep Challenges Legality of Daily Fantasy Sports (DFS) Sites

For the first time since Daily Fantasy Sports (DFS) exploded across the United States a few years back, the legality of DFS (compared to traditional sports betting) has come under fire. House Representative Frank Pallone [D-NJ], a ranking member of the House Energy and Commerce Committee, has called for a hearing to discuss the relationship between legal DFS and illegal sports betting.

Legality of DFS Sites ChallengedLast Monday, after the nation witnessed a barrage of DFS advertisements for the two top-rated DFS operators, FanDuel and DraftKings, within the commercial space of every major sporting event on television, Rep. Pallone beseeched his fellow congressmen. That afternoon, he petitioned the panel that oversees professional sports and gambling related matters to schedule a hearing on the issue.

Rep. Pallone wants the panel to closely inspect the diversities between gambling on the outcome of a sporting contest, and wagering on daily fantasy sports. He also wants to put the relationship between professional leagues/sports teams and DFS operators like FanDuel and DraftKings under the microscope.

That relationship is a tight one, indeed. The National Basketball Association (NBA) has money tied up in the of FanDuel, while Major League Baseball (MLB) owns a small stake in DraftKings. Individually, both DFS sites sponsor a handful of teams throughout various American sporting leagues.

According to an article in the Washington Post last week, “DraftKings and FanDuel have received hundreds of millions of dollars in venture capital, money the daily fantasy sites used to purchase advertisements.” The proliferation of those ads played a primary role in prompting Rep. Pallone to request a hearing.

“Anyone who watched a game this weekend was inundated by commercials for fantasy sports Web sites, and it’s only the first week of the NFL season,” read a statement by Rep. Pallone.

“These sites are enormously popular, arguably central to the fans’ experience, and professional leagues are seeing the enormous profits as a result,” the Congressman explained his concern. “Despite how mainstream these sites have become, though, the legal landscape governing these activities remains murky and should be reviewed.”

Back in April, Rob Manfred, Commissioner of the MLB, expressed what he believes to be the only defining difference between DFS and traditional sports betting. “The difference is, one is legal and one is not,” said Manfred.

How DFS Sites Operate within the Law

With DFS sites like FanDuel and DraftKings, customers are able to place a wager by building their own “fantasy” team, selecting players from various teams. To make it fair, bettors must stay under a specific “salary cap”, with each eligible player having a price on their head. An NFL line-up, for example, will include a quarterback (QB), two running backs (RB), three wide receivers (WR), a tight end (TE), a defense (DEF) and either a kicker (on FanDuel) or a “flex” player (on DraftKings; meaning an extra RB, WR or TE).

For sports fans, DFS is extremely enticing, with entry fees as low as $0.25 and prize pools that rise into the millions. But despite DFS sites being created to follow the legal context of the UIGEA of 2006 and PASPA 1992, Rep. Pallone thinks there’s a precedence that must be defined more clearly.

“Fans are currently allowed to risk money on the performance of an individual player,” said the Congressman. “How is that different than wagering money on the outcome of a game?”

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