Has fantasy sports crossed the line to become another form of online gambling?

John Kindt, an emeritus professor of business and legal policy at the University of Illinois, is a leading national gambling critic who has testified before Congress about the societal, business and economic impacts of decriminalizing gambling. The author of a forthcoming book on sports gambling, Kindt spoke with News Bureau Business and Law Editor Phil Ciciora about the legality of online fantasy sports.

The fantasy sports companies FanDuel and DraftKings recently had to defend themselves against accusations of insider trading, prompting calls for Congress to draw a clear line between fantasy sports and online gambling. Is fantasy sports merely a game or a semi-legal form of online sports gambling?

A majority of legal experts would say fantasy sports has probably crossed the line into online sports gambling, which is illegal in the U.S.

To be fair, there is an exception for fantasy sports in the Unlawful Internet Gambling Enforcement Act of 2006, and the fantasy sports companies argue that they are able to skirt the law through that loophole. But that’s because, at the time, fantasy sports was thought of as just a game, not a moneymaking juggernaut. The stakes were low, and you were playing for season-long bragging rights – not daily dollars.

Most online games these days aren’t about bragging rights. They’re about winning money – in some cases, up to a million dollars. And when substantial sums of money are involved, that’s when it starts edging closer to illegal gambling. When there’s an exchange of money based on artificial risk – whether you call it an “entry fee” or a “prize” – it’s gambling, plain and simple.

Furthermore, even the provisions in the loophole are now generally ignored, which places fantasy sport companies and other companies associated with them at extreme legal risk.

When my colleagues and I testified before Congress in 2006 about this issue, there was concern about the loophole, which we argued should be eliminated during the bill’s markup. But the loophole was retained, and now the problems it has created are enormous. During congressional hearings in March 2015, my colleagues and I again urged lawmakers to close the loophole.

Clearly, Congress needs to take another look at the law and pass even more stringent anti-gambling statutes because the industry’s self-regulation is a sham. And if there’s insider trading going on, maybe it’s something for the office of the attorney general to look at.

Since the seasons of the four major sports league span the calendar, someone could conceivably play daily fantasy sports games year-round. Why not legalize and regulate online fantasy sports?

When fantasy sports becomes someone’s year-round occupation or primary source of income, that makes it more like bookmaking. And if they’re playing year-round for a couple dollars here and there – well, that’s still gambling. We already have legal sports gambling in Las Vegas and a few other jurisdictions. We don’t need to create more ways to bet on professional sports.

The recommendation of the U.S. National Gambling Impact Study Commission, which included members of the gambling industry, was to keep gambling on the Internet illegal. The reason why: If you have Internet gambling, it will bankrupt families and destabilize the economy. That recommendation looks even more prescient, now that everyone has a smartphone in their pocket, a computer on their desk and a tablet on their nightstand.

Everyone loses with Internet gambling. In their segment “The Bet That Blew Up Wall Street,” “60 Minutes” exposed how the elimination of anti-gambling laws via the Commodity Futures Modernization Act of 2000 helped catalyze the market crash that precipitated the Great Recession.

You can’t regulate online gambling. You can only prohibit it.

Not only is fantasy sports popular among sports fans, but many powerful interests – from the sports leagues themselves and their players unions to companies such as Comcast, Fox and Google – are backing the leagues. Should the public be concerned that this phenomenon has gotten out of control?

The public ought to be concerned. Sports gambling is a multibillion-dollar industry – up to $95 billion per year, according to some estimates, the majority of it illegally wagered. All of that money is disposable income that could otherwise have been spent on goods that contribute to our economy: education and health care, as well as consumer goods like cars and appliances.

I think the entire industry is ripe for increased public scrutiny through another congressional hearing. I also have serious doubts that fantasy sports companies would be able to justify the legality of their operations during such a hearing. Throwing more sunshine on the industry is definitely necessary.

Likewise, the NCAA and the professional sports leagues should be very concerned about the integrity of their sports and the connection between fantasy sports and sports gambling, which has its own sordid history from the 1919 Black Sox scandal to Pete Rose. The sports leagues need to recognize that it’s a matter of not only protecting the integrity of the sport itself, but also protecting the fans, because sports gambling is particularly attractive to young people. In fact, for the younger generation, the one that has always had access to the Internet and considers it part of everyday life, the medical community delimits fantasy sports as the ultimate gateway drug to gambling addiction.

George Washington On the Record

Moral objection to gambling has a long history not only in central Illinois but throughout the United States, reaching back to George Washington, who shared his own objections in a letter to his nephew Bushrod Washington on January 15, 1783.

“Avoid gaming. This is a vice which is productive of every possible evil; equally injurious to the morals and health of its votaries. It is the child of avarice, the brother of iniquity, and the father of mischief. It has been the ruin of many worthy families, the loss of many a man’s honor, and the cause of Suicide. To all those who enter the lists, it is equally fascinating. The successful gamester pushes his good fortune, til it is overtaken by a reverse. The losing gamester, in hopes of retrieving past misfortunes, goes on from bad to worse, til grown desperate he pushes at everything and loses his all. In a word, few gain by this abominable practice (the profit if any being diffused) while thousands are injured.”

Geneseo churches victorious over video gambling

Geneseo, IL – Video gambling machines won’t be found in Geneseo bars or gas stations. At the Tuesday, Sept. 22 committee of the whole meeting, aldermen voted against forwarding a proposal to allow video gaming to the October city council meeting.  As a result of the vote’s failure, Geneseo’s current ban on video gambling will remain in force.

Concerned citizens and leaders from local churches voiced their opinions at the meeting:

  • “The Geneseo Ministerial Association is united in support of a city-wide ban on video gaming,” said Graham, adding he felt allow video gaming would go against the city’s “family friendly” atmosphere.
  • The Rev. Dr. Chris Ritter of First United Methodist Church said he felt video gambling would “suck money out of our economy.” He added, “Gambling preys upon people with weakness” and urged the council not to “invest in human weakness.” Ritter said even though surrounding communities have permitted video gambling, he supported Geneseo’s ban. “If the rest of Illinois is zigging, I’m OK with zagging.”
  • “What kind of community do we want to be? Do we want to be common, or do we want our community to be special? One of the most family-friendly places in Illinois?” asked the Rev. Stephen Palm of Geneseo Evangelical Free Church. “Video gambling machines make a statement to our young, and that statement is that gambling is OK.”
  • Citizen Scott Johnson told the council he saw video gambling as part of unhealthy gambling expansion in the state, adding gambling in Illinois has gone from “historical” boats that were required to cruise, to dock-side gambling to “boat in a moat” casinos to local video gambling. “It keeps expanding, expanding and expanding, and it’s supposed to be an economic boom for Illinois, but the state’s not in better shape now than it was before,” Johnson noted.
  • Resident Jim Mason agreed. “The state’s worse off than it was,” he said, adding “Gambling hurts the people who can least afford it. There are a whole lot of people in town who can’t afford to spend $20 or $40 for ‘entertainment.’”

Read the full Geneseo Republic article.

Two Mundelein bars fined in underage video gambling violations

Mundelein, IL – The Illinois Gaming Board voted Sept. 21 to fine two Mundelein businesses $25,000 each and charged them with seven counts that they allegedly allowed underage patrons to play video gambling machines and then did not self report the prohibited activity. One official says this is the first time the state is punishing businesses for that reason.

Read the full article by the Chilcago Tribune.

American College of Pediatricians – Marijuana Use: Detrimental to Youth

Although increasing legalization of marijuana has contributed to the growing belief that marijuana is harmless, research documents the risks of its use by youth are grave. Marijuana is addicting, has adverse effects upon the adolescent brain, is a risk for both cardio-respiratory disease and testicular cancer, and is associated with both psychiatric illness and negative social outcomes. Evidence indicates limited legalization of marijuana has already raised rates of unintended marijuana exposure among young children, and may increase adolescent use. Therefore, the American College of Pediatricians supports legislation that continues to restrict the availability of marijuana except in the context of well controlled scientific studies which demonstrate medicinal benefit together with evidence-based guidelines for optimal routes of delivery and dosing for specific medical conditions.

To read the full article go to: http://www.acpeds.org/marijuana-use-detrimental-to-youth