Sign up for a CDC Gaming Reports Premium Subscription trial!

Commentaries

Future of daily fantasy sports tied to New Jersey court case

By Howard Stutz, CDC Gaming Reports

We are back to square one, it seems, concerning daily fantasy sports.

Sort of.

Last week’s news that daily fantasy behemoths DraftKings and FanDuel had called off their much-discussed merger, after the Federal Trade Commission raised anti-trust concerns, turned the companies back into competitors.

There is still an overhang casting shade on daily fantasy sports. Can the activity be classified as a form of sports wagering?

The daily fantasy sports industry’s largest trade organization says participation does not constitute gambling. Several states this year – including Colorado, Missouri, Indiana and Mississippi – passed laws that set up regulations for daily fantasy sports.

Nevada, the nation’s gambling capital, has been on the sidelines since 2015, when the state’s Gaming Control Board ruled daily fantasy sports was a form of betting. The ruling proved disruptive and forced DraftKings and FanDuel to abandon the Silver State.

Meanwhile, USFantasy has a monopoly on Nevada’s fantasy sports business. The Las Vegas-based company, which is licensed by state gaming regulators and operated by sports betting pioneer Vic Salerno, offers fantasy sports contests through a pari-mutuel wagering system similar to horse racing. The activity is available at most Las Vegas sports books.

“I’m still enthusiastic about it. I think it’s going to catch on,” Salerno told the Las Vegas Review-Journal in March.

The U.S. Supreme Court could finally end the debate surrounding daily fantasy sports later this year. The nation’s highest court will hear arguments concerning a New Jersey lawsuit in which lower courts have denied the state’s efforts to allow legal sports betting at its racetracks and casinos.

A favorable ruling could demolish the 25-year-old Professional and Amateur Sports Protection Act (PASPA), which bans single-game sports wagering outside of Nevada.

Legal experts believe the justices could bring sports betting out of the shadows and let states set up their own regulated sports betting systems. Connecticut’s governor, for example, signed into law an overall gaming package that includes a sports betting provision.

”Once decisions about whether to legalize gambling are returned to the states, there would be no reason for the federal government to interfere if other states entered into interstate and even international agreements,” gaming law expert I. Nelson Rose wrote in a recent commentary.

In Nevada, mobile sports wagering applications helped propel Nevada’s legal sports books to a record $4.5 billion in wagers during 2016. Full-blown daily fantasy sports wagering could be an additional piston in the state’s already high-powered engine.

DraftKings and FanDuel would have to earn Nevada gaming licenses, but the companies would, then, no longer be considered outsiders.

Attorneys General from California and the District of Columbia joined the FTC in lawsuits blocking the merger, saying a combined business would control 90 percent of the fantasy sports market.

DraftKings and FanDuel are not receding into the background. The companies are moving forward as competitors once again, to take market share from each other and smaller rivals.

“There is still enormous, untapped market opportunity for FanDuel, and we will continue to execute our strategy to grow our business and further expand the fantasy sports industry,” FanDuel CEO Nigel Eccles said a statement.

DraftKings CEO Jason Robins said the company is focusing on overseas growth.

“We have a growing customer base of nearly 8 million (and) our revenue is growing over 30 percent year-over-year,” Robins said in a statement.

How much the market continues to grow is the hands of the nine Supreme Court justices.

Follow @howardstutz on Twitter