On Nov 10 2015 NYS Attorney General Eric Schneiderman announced that his had issued a cease and desist order to Fan Duel and Draft Kings, the two largest operator of Daily Fantasy Sports. He gave them five days to voluntarily close, which they did not do. The November 10 order got much notice in the NY papers, with an editorial in the NY Times essentially supporting it, though talking about “strict regulation.” The Daily News had a 2-page news article and an editorial saying that the AG is correct, plus an op-ed. The news article had a sidebar by the writer of this post.. The Post had a front page article, though their editorial took issue with the AG’s action.
The Times article on Nov 11 provoked a flood of comments, most angry at the decision. Dissenters generally used one or more of four basic arguments (1) skill is involved; so, it’s not gambling (2) the NYS lottery holds a much higher proportion of users’ losses than do DFS operators, yet the AG does not try to enjoin it (3) no one is being hurt by participation (4) the AG wants to get money for the state by imposing regulation.
My comments on these comments:
“Skill” certainly determines success, but relatively few participants have that skill, It lets them exploit the vast majority. As the AG memo below says, this is still gambling. Take a few minutes to watch TV satirist John Oliver on this. A recent lawsuit in Alabama gives a another useful perspective on gambling.
The NYS Lottery is an abomination, but it is technically legal with enough seniority in that status that even I can’t fault the AG for not now going after every aspect of it. The floridly illegal aspects, like hybrid table games with physical dice, I do wish he would challenge.
Full-blown cases of gambling addiction already spawned by DFS are not numerous, are still largely hearsay to my ears. It is still early. Yet the exploitation of “fish” (less expert participants) by “sharks” with their computer routines is no less predatory than the behavior of a casino or a state lottery. It’s just that in DFS there are two types of predator, not one. Besides the operator there are the sharks. The ad blitz of the last few months is meant to recruit millions of fish by deceptive advertising.
To the fourth argument I would reply that the AG has not proposed to regulate DFS. He has said they are illegal and should stop operating in NYS. Devising regulations to legalize is not his job. His motivation is to protect New York’s people from being exploited by illegal gambling and to enforce existing regulations. It is up to the legislature to regulate.
Daily Fantasy Sports herniated through a loophole in the 2006 Unlawful Internet Gambling Enforcement Act and should be surgically reduced. It is a strong bridge to two activities that are at this time illegal in New York State and in most jurisdictions in this country: internet gambling not on sports, such as i-poker or internet casino “games” and betting on sports. The bridge could reach further, to the gambling entrepreneurs’ promised land of legalized internet betting on sports. DFS should not be “regulated.” It should stay illegal.
Below is a forwarded message from the AG to the public and press, a strong summary.
If you read this post, please send a comment to the AG to counter the pickets and telephone chains of complaint his office has been dealing with from DFS partisans.
Click here for a link to the AG’s office
Below is a press release from the AG dated November 17. On Nov 19 Mr. Schneiderman had an op-ed in the Daily News that complements the press release. Either is a great source for writing a letter to the editor of a paper near to you.
News from Attorney General Eric T. Schneiderman
FOR IMMEDIATE RELEASE
November 17, 2015
New York City Press Office / 212-416-8060
Albany Press Office / 518-776-2427
A.G. SCHNEIDERMAN SEEKS PRELIMINARY INJUNCTION AGAINST FANDUEL AND DRAFTKINGS
NEW YORK—Attorney General Eric Schneiderman filed an enforcement action this morning in New York State Supreme Court in the County of New York, seeking a preliminary injunction against DraftKings and FanDuel. The Attorney General’s suit details alleged violations of law by DraftKings and FanDuel.
The Attorney General’s memorandum of law and complaint against DraftKings can be found here and here. A copy of the memorandum of law and complaint against FanDuel can be found here and here.
The following are excerpts of the memorandum of law filed by the Office of the Attorney General:
- The New York State Constitution has prohibited bookmaking and other forms of sports gambling since 1894. Under New York law, a wager constitutes gambling when it depends on either a (1) “future contingent event not under [the bettor’s] control or influence” or (2) “contest of chance.” So-called Daily Fantasy Sports (“DFS”) wagers fit squarely in both these definitions, though by meeting just one of the two definitions DFS would be considered gambling. DFS is nothing more than a rebranding of sports betting. It is plainly illegal.
- Yet FanDuel and DraftKings insist that DFS is not gambling because it involves skill. But this argument fails for two clear reasons. First, this view overlooks the explicit prohibition against wagering on future contingent events, a statutory test that requires no judgment of the relative importance of skill and chance—they are irrelevant to the question. Second, the key factor establishing a game of skill is not the presence of skill, but the absence of a material element of chance. Here, chance plays just as much of a role (if not more) than it does in games like poker and blackjack. A few good players in a poker tournament may rise to the top based on their skill; but the game is still gambling. So is DFS.
- FanDuel and DraftKings’ current denials about DFS constituting gambling are belied by how the sites depicted themselves in the past and how they portray themselves behind closed doors. FanDuel’s DFS contests were designed by a veteran of the legal online betting industry in the United Kingdom, Nigel Eccles. The company admitted to an early investor that its target market is male sports fans who “cannot gamble online legally.”
- DraftKings depicts itself to investors in a similar fashion. For example, in one investor presentation, DraftKings pitched itself to a prospective investor by noting the “Global opportunity for online betting,” pointing to the massive revenue of the “global online poker market,” and making direct comparisons throughout the presentation to poker and sports wagering.
- The CEO of DraftKings previously spoke openly about DraftKings as a gambling company. He called DFS a “mash[-]up between poker and fantasy sports,” suggested that DraftKings operates in the “gambling space,” and described its revenue model as “identical to a casino.”
- The rejection of the gambling label by the DFS sites is particularly hard to square with the overt strategy of recruiting gamblers. For FanDuel, this has meant hiring a former top executive from Full Tilt, the online poker company, and affiliating with gambling industry stalwarts like “Vegas Insider” and BetVega, a sports betting and handicapping website. For DraftKings, this has meant aligning itself closely and negotiating sponsorships with other gambling ventures, like the World Series of Poker and the Belmont Stakes.
- DraftKings has also embedded gambling keywords into the programming code for its website. Some of these keywords include “‘fantasy golf betting,’’ “weekly fantasy basketball betting,” ‘‘weekly fantasy hockey betting,” “weekly fantasy football betting,” “weekly fantasy college football betting,” “weekly fantasy college basketball betting,” “Fantasy College Football Betting,” “daily fantasy basketball betting,” and “Fantasy College Basketball Betting.” This increases the likelihood that search engines, like Google, will send users looking for gambling straight to the DraftKings site.
- FanDuel’s advertisements commonly showcase testimonials from ostensibly ordinary DFS players (g.,“Zack from Fairfield, California”), and play up the ease of playing and of winning huge cash prizes…The reality is that like poker, blackjack, and horseracing, a small percentage of professional gamblers use research, software, and large bankrolls to extract a disproportionate share of DFS jackpots. With poker and DFS, professional players, known as “sharks,” profit at the expense of casual players, known as “minnows.” The numbers show that the vast majority of players are net losers, losing far more money playing on the sites than they win. DraftKings data show that 89.3% of DFS players had an overall negative return on investment across 2013 and 2014.
- While irresponsibly denying their status as gambling companies, the DFS Sites pose precisely the same risks to New York residents that New York’s anti-gambling laws were intended to avoid. Experts in gambling addiction and other compulsive behaviors have identified DFS as a serious and growing threat to people at risk for, or already struggling with, gambling-related illnesses.
- Jeffrey L. Derevensky, Director of the International Centre for Youth Gambling Problems and High-Risk Behavior at McGill University, notes that, among other things, false or misleading representations of the skill involved in DFS “can lead players to a preoccupation with DFS, chasing of losses, and developing symptoms and behaviors associated with a gambling disorder.”
The illustration reproduces a painting by Tiepolo with a timeless theme. The opinions expressed in this post, aside from the quote by the AG’s office, are entirely those of the editor, Stephen Q. Shafer and do not necessarily reflect those of any or all other members of Coalition Against Gambling in New York. Permission to reproduce in full or in part is hereby granted on condition that the permalink above is cited.