Is Daily Fantasy Sports Illegal Under Federal Law and most State Laws?

In this Op-ed Prof. John Kindt writes: Virtually a nonentity in 2012, by 2015 Daily Fantasy Sports (DFS) was the largest advertiser in the United States.

But by the end of 2015, DFS was the subject of investigations by the U.S. Attorney Offices in New York, Boston, and Tampa. Other criminal justice authorities including two dozen state attorney generals were reviewing various DFS operations.

N.Y. Attorney General Eric Schneiderman declared DFS illegal in October 2015. He was soon joined by the attorney generals of 11 other states including Illinois, Texas, Alabama, Georgia, Hawaii, Mississippi, Nevada, South Dakota, Tennessee, Idaho, and Vermont.

Historically, DFS has also been banned in Arizona, Louisiana, Montana, Washington, and Iowa. DFS lobbyists recently failed to overturn Iowa’s DFS ban.

However, most states are facing a continued onslaught led by over 75 reported DFS lobbyists, who are targeting the state legislatures with proposed bills authorizing DFS—regardless of Federal prohibitions. DFS is illegal under three Federal laws: (1) the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA), (2) the Professional and Amateur Sports Protection Act of 1992, and (3) the famous Wire Act of 1961, which was passed by U.S. Attorney General Robert F. Kennedy to fight organized crime’s gambling operations.

As the most relevant Federal legislation prohibiting DFS, the Congressional intent behind UIGEA was highlighted in October 2015 by the primary sponsor of UIGEA, former U.S. Representative James Leach (R-IA). Representative Leach emailed The Associated Press to emphasize that DFS operators’ claims that DFS was legal under UIGEA were “sheer chutzpah.”

Colleagues and I testified in favor of UIGEA during the 2006 Congressional hearings, and we can confirm that Fantasy sports was to be only season-long and does not include DFS.

The Boston Globe and other media have reported that the major DFS companies have not turned a profit in months and may soon be insolvent. A pro-DFS news site has even admitted that the large DFS company FantasyHub “is refusing to pay players or provide players with any concrete information regarding their money.”

In March 2016, Virginia and then Indiana supposedly legislated regulations for DFS, but the Washington Post exposed the nationwide tactics of DFS lobbyists who “proposed a two-page bill … called a ‘fluff sandwich’ with a line in the middle declaring that fantasy sports games are ‘not illegal gambling’.” The so-called DFS regulations in Virginia and Indiana only provide the appearance of regulation—without any practical effect. DFS lobbyists also claim that existing regulations may permit DFS in Kansas, Maryland, Massachusetts, and Rhode Island.

Given the current Federal prohibitions against DFS, it is common knowledge that DFS lobbyists realize that they cannot get Congress to legalize DFS. Accordingly, DFS lobbyists are manipulating individual states into passing laws appearing to regulate DFS. Such state laws would then compel state attorney generals to defend their state regulations. The end result would pressure Congress to enact future Federal legislation enabling “nationwide DFS.”

DFS places real-time gambling at every school desk, work desk, family TV, video game, and cell phone. People of all ages will be able to “click their phones, lose their homes.” Virtually all academic experts concur that DFS is designed to create ubiquitous real-time gambling without any effective consumer protection.

Specifically designed to seduce a youth market, the DFS marketing philosophy also reportedly synchronizes well with pornography marketing techniques. The title of a February news report by Bloomberg emphasizes this marketing: “Porn Giant Vivid Wants to Rescue Daily Fantasy Sports.”

The U.S. National Gambling Impact Study Commission Report concluded that DFS-type gambling was “impossible to regulate” and had to be prohibited. The U.S. Gambling Commission was sponsored by former U.S. Senator Paul Simon (D-IL) and U.S. Representative Henry Hyde (R-IL) with the bipartisan support of virtually the entire U.S. Congress.

Since the U.S. Gambling Commission, these conclusions have been confirmed by experts at Congressional hearings and in academic publications, including the multi-volume United States International Gaming® Report, produced at the University of Illinois and in concert with other research universities.

In 2015 Congressional hearings began investigating the proliferation and abuses involving DFS. All states would be well-advised to reject the claims and endeavors of DFS lobbyists to leverage state governments into confrontations with the U.S. Department of Justice and the majority of state attorney generals.

*Prof. John Kindt testified at the 2006 Congressional hearings enacting UIGEA, as well as the 2015 Congressional hearings where he re-affirmed that DFS was illegal. Prof. Kindt’s office is listed on the first page of “Sources of Information” in the U.S. National Gambling Impact Study Commission Report.

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