Why The Daily Fantasy Sports Industry Wants Nothing To Do With Online Poker

March 7, 2016
Why The Daily Fantasy Sports Industry Wants Nothing To Do With Online Poker

When daily fantasy sports started running into problems in the fall of last year, some proponents of online poker thought the two industries might start working together for legal clarity and regulation.

That hope was misplaced, however; the online poker community eventually figured out this would not be the case. In fact, the DFS industry has done just about everything it can in recent months to distance itself from poker.

Why? The schism comes from the current legal positions in which both reside in the U.S.

Poker and DFS, formerly best friends

The reason for optimism from the world of online poker seemed natural, at first. The two industries seemed like they were tied at the hip:

  • Many online poker players — and pros — made the jump to DFS in recent years.
  • DraftKings consistently marketed to the online poker world, at least until late last year.
  • The two products are extremely similar in how they operate, from lobby mechanics to the skill/gambling dynamic that exists in both. DraftKings CEO Jason Robins once said DFS is a “mashup between poker and fantasy sports.”

Since DFS and online poker were best buddies, it stood to reason they could work together when push came to shove.

DFS vs. poker legality

The idea that online poker and DFS were going to be brothers in arms was never really going to happen, however; that’s because of the legal problems that would create for DFS. The starting point of the two industries is part of why you are seeing DFS push the differences between fantasy sports and poker, instead of the similarities.

Most of that comes from the language in the Unlawful Internet Gambling Enforcement Act, which says states can legalize online poker, if they want to, on an intrastate basis (with the possibility of interstate compacts, like the one between Nevada and Delaware).

Fantasy sports, however, are exempted from the UIGEA, as long as they pass muster as a game of skill under state law. As such, online poker operates in just three states currently (at least legally); FanDuel and DraftKings serve 42 states, right now (although the legality in some of those states is still a matter of debate).

Of course, we’ve seen a growing number of state attorneys general opine that DFS is actually illegal gambling under state law. And that’s the main reason why DFS can’t afford to say it is anything like poker. To do so would be akin to a death sentence for the industry as it currently sits.

That’s why the DFS industry is fighting so hard to classify itself as a game of skill, and not a game of chance — a designation that online poker has fought for — both in courtrooms and state legislatures across the country.

If you were a part of the DFS industry, would you want to throw your lot in with online poker? Probably not. But it hasn’t stopped there.

Poker and DFS, on the outs

The seminal moment for a lot of poker players came FanDuel CFO Matt King appeared on FRONTLINE last month, and threw poker under the bus for all to see.

Matt King FanDuel Frontline

Here’s part of what he said:

The reality is within poker, every time you shuffle the deck, it creates an element of luck that trumps it basically to being much more a chance-dominated game than a skill-dominated game.  If you look at our data, the players that are good, are frankly consistently good. It is truly a game of skill. … Just like football or basketball. The more you practice, the better that you get. Many of the forms of regulated gambling are actively constructed so they are games of chance, and that is a very, very different experience than a game of skill, which is what fantasy clearly is.

We won’t get into that debate now; you can read more about it here and here.

The clear realization that DFS was trying to differentiate itself from poker — two things many see as strikingly similar — was when everyone figured out that online poker was on its own.

Also in DFS court cases

The DFS industry even points out that it believes it is nothing like poker in its legal battles. The most recent example came Friday in Texas, where DraftKings filed a lawsuit to establish its legality in the state.

From the filing:

DFS is also fundamentally different than other games about which the issue of skill versus chance has been previously debated, such as poker. Unlike poker, where players start each hand on a non-level playing field based on the cards they are randomly dealt, in DFS, each contestant starts in the exact same position and has complete and total control over the lineup the contestant chooses, within the consistent constraint of the salary cap. 

And while DFS tries to set itself apart from poker, the industry tries to latch on to anything under the sun that lines up with the “skill game” argument. Anyone waiting for DFS to change its tune regarding poker is likely in for a long wait.

Will everyone treat them differently?

While the bills advancing through state legislatures usually treat DFS apart from other types of gaming, it’s not a unanimous approach. Indiana, for example, has moved a bill to the governor that at least puts DFS under the purview of the state’s gaming commission.

States have varied in how stringent of a regulatory scheme they are trying to set up. But the idea of an omnibus approach to online gaming — which would theoretically encompass both online poker and DFS — has been floated in Pennsylvania, Massachusetts and California.

Given the similarities between the two industries — no matter how much skill you believe is involved in either — treating them in a similar fashion seems to make a lot of sense. If that will end up happening is anyone’s guess. Just don’t expect DFS to jump on board for the ride willingly.

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