U.S. states taking action against wagering websites like FanDuel and DraftKings
CBCNews.ca – January 31, 2016
The daily fantasy sports industry is fighting for its survival in the U.S. — fending off accusations that it’s an unlawful form of gambling.
But in Canada, it seems to be business as usual for those who like to wager on these fantasy lineups of pro athletes as government and law enforcement agencies have shown little interest in cracking down.
Casual sports fans likely know about daily fantasy sports through the aggressive marketing of websites such as FanDuel and DraftKings.
The two U.S.-based sites dominate the industry and relentlessly promote their product through TV commercials, rink board ads and, for a brief time, sponsored segments on at least one all-sports network.
DFS allows fans to act as managers by selecting their own roster of professional players in a range of sports — from NFL football and NHL hockey to mixed martial arts and pro soccer — who will be competing on the same day.
Those fantasy rosters are then paired up in head-to-head competition against other “managers,” with the players’ real in-game stats from that day determining the daily fantasy winners.
The next day, managers can start again with a new roster and a fresh slate of other managers to compete against.
What makes DFS controversial is the entry fees those sites collect and the monetary prizes they pay out to winners, which can range from pocket change into the tens of thousands of dollars.
DraftKings boasts it paid out more than $1 billion in cash and prizes last year alone.
Its rival, FanDuel, claims to have more than a million active players worldwide, and is backed by more than $360 million US in investor funding.
The company can’t say how many of those users are Canadians, but a representative said that “Canadians are, unsurprisingly, much more likely to play daily fantasy hockey.”
There is no question these sites are popular, but now a growing chorus of legal and gambling industry voices are arguing that DFS is essentially sports betting — with the wager being placed on individual player performances rather than the outcome of a game.
“We believe it’s a gaming product because of how the Criminal Code defines a gambling product in Canada,” said Paul Burns of the Canadian Gaming Association.
Indeed, section 197 of the Criminal Code defines a “game” as one of “chance or mixed chance and skill.”
And legal scholars have argued that because that definition doesn’t reference games of pure skill, it implies that they aren’t subject to the code’s gambling provisions.
It’s also why daily fantasy sports sites have long insisted that their product is a pure game of skill.
But those working in Canada’s $16-billion-a-year gaming industry disagree, saying player performance is only predictable up to a point.
“While there may be some skill in building your roster, there’s still a large element of chance,” says Burns. “Someone could break a leg, the power could go out, someone’s girlfriend could dump them 10 minutes before tipoff.”
In the U.S., the skill versus mixed-skill and chance distinction is at the heart of a series of legal battles that the DFS industry is waging for its survival.
Last October, Nevada became the first state to restrict DFS, ordering sites to stop until they secure state gambling licences.
Soon after, New York’s attorney general, Eric Schneiderman, began looking into allegation that industry employees were using inside information to win daily contests.
The investigation also alleged that industry ads tempting players with six figure pay-outs were misleading, and that just one per cent of players take home most of the prizes.
“Daily fantasy sports is neither victimless nor harmless, and it is clear that DraftKings and FanDuel are the leaders of a massive, multibillion-dollar scheme intended to evade the law and fleece sports fans across the country,” Schneiderman wrote in a statement in November.
Attorneys general in Illinois, Texas and, most recently, Hawaii have also said that daily fantasy sports are illegal under their state laws. Other states, notably Washington, Florida and Massachusetts, have considered steps to regulate or ban DFS.
In Canada, meanwhile, prosecutions haven’t been pursued despite the similar legal context.
“Authorities are more focused on anti-terrorism, and drugs, and biker gangs and the like, and they should be,” says Michael Lipton, a lawyer and gaming law expert with Dickinson Wright law firm in Toronto.
“We’ve always had a fairly liberal attitude regarding matters of this nature.”
Historically, authorities here have only shown interest in going after companies with servers inside Canada — which FanDuel and DraftKings do not.
He says that provincial attorneys general, as well as provincial lottery corporations and local law enforcement agencies, need to prioritize their workload, and DFS hasn’t warranted further action, yet.
“Does one have the resources? Is the public being harmed? Is there an issue that the public needs protected from?” Lipton asked.
Last year, the CGA commissioned a legal opinion from a former general counsel for the Alcohol and Gaming Commission of Ontario. The CGA says that report argued DFS constituted illegal gaming, and should be regulated in Canada.
Burns said the report was shared with law enforcement agencies, but he doesn’t know if it will influence authorities to take action.
“We’ve put it out there. Whether or not anyone chooses to do anything, it’s not up to us.”
While the opinion aimed to capture the attention of the industry and lawmakers, even Burns is keeping his expectations for change in check. “Frankly, no one’s about to bet their career on this stuff.”
As originally published on CBCNews.ca