Daily Fantasy Sports And Sports Betting: Why One Is Called A Game Of Skill And The Other Isn’t

September 8, 2016
Daily Fantasy Sports And Sports Betting: Why One Is Called A Game Of Skill And The Other Isn’t

Not too long ago I had an interesting and lengthy Twitter conversation with ESPN Chalk gambling writer David Purdum. The conversation centered around the differences between skill-based gambling and games of skill. From Purdum’s point of view, sports betting advocates should adopt a similar approach to daily fantasy sports and tout sports betting’s designation as skillful.

During the discussion, Purdum contended that DFS isn’t categorized as gambling because it was deemed a game of skill; he personally believes DFS has a bit of gamble to it.

Purdum expanded on his tweets, saying, “If we’re going to define what is and what is not gambling solely on if the game requires more skill than chance and the DOJ and NFL have said that sports betting is a skill game then, by our legal definitions, sports betting is not a form of gambling.”

My argument was that sports betting may be skillful, but it’s also gambling. Its designation can’t be changed so easily, because the two (gambling and skill) are not mutually exclusive. Sports betting is not a game of skill, rather it’s a form of skill-based gambling.

This last bit is something Purdum agrees with, “being defined a game of skill is not what makes sports betting illegal,” Purdum told me. “PASPA is really the only reason it is illegal.”

Twitter being what it is, this very nuanced conversation had to be abandoned; we agreed to continue it in-person at a later date.

For those who won’t be around when David and I continue our discussion, here are my thoughts on the matter.

The three potential outcomes for DFS

Sports betting can be beat through skill.

Poker can also be beat through skill.

But sports betting and poker are also gambling, which trumps the skill part of the equation when it comes to specific laws.

Additionally, poker and sports betting are old enough that they are already written into most gambling statutes.

Conversely, DFS is new. State legislatures were tasked with determining where DFS contests fit into the complicated and often contradictory web of laws.

Does it fall within the purview of gambling statutes (as is the case in a variety of states, including Louisiana, Washington, and Nevada) or outside of them? A variety of attorneys general have weighed in on this question under laws as currently written.

So, when legislatures put DFS under the microscope, they were essentially given three different boxes to place DFS into when crafting new laws:

  1. Gambling;
  2. skill-based gambling; or
  3. a game of skill;

The legislatures that have acted on DFS (nine at last count) settled on the “game of skill” box.

Here’s why.

How DFS avoided the gambling designation (in some places)

The reason why DFS has been branded as a game of skill by lawmakers (and not gambling or skill-based gambling) in most jurisdictions is a combination of three different factors:

  1. DFS lacks historical context.
  2. DFS’ connection to season-long fantasy sports and the UIGEA exemption.
  3. The can of worms calling DFS “gambling” would have opened.

Let’s take a look at each of these in turn.

Nascency

Poker and sports betting are already designated as gambling, with poker occasionally falling into a skill-based gambling subcategory depending on how state laws were crafted. Both pursuits also have 100-plus years of being thought of as gambling to overcome.

As noted above, DFS was working with a relatively clean slate.

To reclassify sports betting, lawmakers would first have to come up with a reason why it’s not gambling or skill-based gambling. Then they would have to change any of the current laws that said otherwise, and only then could they decide which category it rightly belongs to.

With DFS they simply were answering the questions, “What is it?” and “Where do we put it?”

Protection

Because of the fantasy sports exemption in UIGEA, state lawmakers were able to eliminate any federal complications. Of course, that was provided they kept DFS within the parameters laid out in UIGEA, which meant not calling it “gambling.”

Much like the 2011 DOJ opinion that limited the scope of the Wire Act to sports betting, the UIGEA fantasy exemption offered states the green light to tackle DFS.

As New Jersey has discovered, sports betting doesn’t have this same protection.

Necessity

The second DFS is legalized and labeled gambling in the United States, it immediately becomes vulnerable to a PASPA challenge — except in Nevada, where sports betting legal. If offered across state lines as “gambling,” it could run afoul of the Wire Act.

(Whether anyone with standing would actually bring a PASPA challenge, however, is in question. The pro sports leagues are all-in on DFS, while the NCAA has a detente with the industry.)

On the other hand, sports betting is expressly mentioned in the Wire Act and PASPA, so it doesn’t matter what you call it: Any attempt to legalize it would result in challenges.

The application of these laws to DFS (which wasn’t around at the time the laws were written) needed to be defined. By designating DFS as a game of skill, states were theoretically able to avoid running afoul of PASPA or the Wire Act by piggybacking on the UIGEA exemption.

However, someone could still bring a challenge on these grounds at some point in time.

[i15-table tableid=20717][i15-table tableid=19346]

Bottom line for DFS vs. sports betting

To classify sports betting as a game of skill, you have to determine why it should no longer be considered gambling. To do this, existing laws need to be changed.

Going back to the idea of legislatures having three boxes in which to place DFS: In order to move sports betting into the “game of skill” box, they would need to take sports betting out of the “gambling” box first.

When it came to DFS, lawmakers started with ball in hand. DFS wasn’t in a box yet. Lawmakers in states where the line between games of skill and gambling is more ambiguous believe they were allowed to determine which of the three boxes DFS should be placed into, so no change was necessary.

DFS isn’t legal because it’s skillful, it’s legal (in some states) because the process of designating it as a skill-based game was simple.

Privacy Policy
[class^="wpforms-"]
[class^="wpforms-"]