Academic journal article The Journal of High Technology Law

Can Daily Fantasy Sports Overcome the Odds?

Academic journal article The Journal of High Technology Law

Can Daily Fantasy Sports Overcome the Odds?

Article excerpt

I. Introduction

In November of 2015, New York Attorney General Eric Schneiderman ordered the daily fantasy sports ("DFS") giants, Fan-Duel and DraftKings, to stop accepting bets from New York residents. (1) This announcement was a significant detriment to the multi-billion dollar industry of DFS, with New York users making up 12.8% of the industry's market. (2) Today, the legal status of DFS sports continues remain uncertain. (3) This uncertainty is a result, ironically, of an anti-gambling statue passed by Congress in 2006 titled the Unlawful Internet Gambling Prohibition Act ("UIGEA"). (4) Written into the UIGEA are two clauses of particular importance, both of which have complicated the issue. (5) The first clause provides an exemption for all fantasy sports from federal regulation, while the second gives states the ability to ban or regulate such games within their borders. (6) As DFS companies continue to expand, state lawmakers across country will be forced to decide whether such contests are predominately based on chance, rather than skill; an important distinction because, if states determine they are chance-based games they are likely to be deemed illegal gambling. (7) Massachusetts, home to one of the biggest daily fantasy operators, FanDuel, has spearheaded the problem by enacting regulations as an alternative to a complete ban. (8)

First, this Note will outline the gaming culture in America and its expansion over the years. (9) Second, this Note will illustrate how that aforementioned culture has evolved into the phenomenon that is fantasy sports. (10) Third, this Note will discuss how regulators have responded to fantasy sports in the Internet age and how federal laws have been applied to DFS specifically. (11) This Note will then discuss how and why Massachusetts has regulated DFS in the wake of the federal exemption for fantasy sports. (12) The analysis section will examine how DFS games are played and whether the elements of skill are primarily more material than the elements of chance. (13) Finally, this Note will conclude that although DFS contests involve some inherent element of chance they are predominantly skill-based, therefore, states should take steps, like Massachusetts has done, to regulate DFS rather than ban it.

II. History

A. Lotteries in America

Gambling was first introduced to the United States in the early 19th century in the form of public lotteries. (14) States greatly benefited from the use of the lotteries as a means to raise revenue for civic projects, such as canals, roadways, bridges, and even educational institutions. (15) Lotteries during this time up until concerns over the morality and social impact of gambling spread throughout the local communities." (16) Public opinion rapidly declined once it was revealed that the lottery administrators were growing increasingly wealthy through dishonest means. (17) In 1860, when efforts to regulate the lotteries failed scrutiny reached its peak and all but three states banned lotteries altogether. (18) The ban remained intact for take over a century before states began to reintroduce lotteries; New Hampshire being the first. (19) Today, however, lotteries are present and thriving in over forty states. (20)

B. The Rise of Sports Gambling

Once the public began betting on sporting events, the landscape of gambling transformed considerably. (21) The earliest sports gambling can be traced back to horse racing in the 19th century. (22) Sports gambling evolved as sports, such as baseball, became increasingly popular and provided a new and exciting opportunity for gamblers to explore. (23) In 1919, the sports gambling phenomenon received national exposure during the World Series of Professional Baseball between the Chicago White Sox and the Cincinnati Reds, known today as the "Black Sox Scandal." (24) Even today, many consider the White Sox team as the greatest assembled baseball team in American History. …

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