NFL's Fantasy of Betting That Isn't Gambling
Those DraftKings commercials aren't going away anytime soon.
The daily fantasy site has struck a marketing partnership with the National Football League Players' Association, so those annoying ads will start featuring more athletes. (New England Patriots tight end Rob Gronkowski already has an endorsement deal with the company.) Bloomberg News's Scott Soshnick and Eben Novy-Williams report that DraftKings will become the players' union's second daily fantasy partner. Last year it signed with TopLine Game Lab's DailyMVP, a Cantor Ventures-funded site that launched in 2013 and boasted Tom Brady as its premier spokesman. (Whoops.)
Most sports leagues condemn sports betting, which puts them in an ethical gray area when they become partners with daily fantasy sites that have murky legal status under laws enacted before these sites existed. The NFL in particular has stood firm in its opposition to legalized gambling -- publicly, anyway. Back in April, Commissioner Roger Goodell was unequivocal in a room full of sportswriters:
And yet, nearly every NFL team has a partnership with a daily fantasy site. DraftKings has deals with 12 teams, while FanDuel counts 16 teams among its partners, for a total of 28 of the 32 teams in the league. How can the NFL square its public stance against gambling with its partnerships with gambling sites? Easy: League executives "don't look at fantasy sports as gambling," Goodell said in 2012 in recently unsealed testimony against legalizing sports betting in New Jersey.
The NFL can make such a bold claim because of the vague law governing online gambling, which was written before the advent of daily fantasy sites. The Unlawful Internet Gambling Enforcement Act of 2006 defined traditional fantasy sports, in which participants follow athletic performances over a full season, to be a game of skill, not chance. That made it legal, unlike traditional sports gambling activities like betting on point spreads.
But it's debatable whether it takes more skill to predict the number of rushing yards Marshawn Lynch will collect in a season than it does to predict the margin by which the Lions might lose to the Seahawks. The line grows even thinner when you're talking about daily fantasy, in which fans bet on how individual players will perform, changing their lineups on a day-to-day basis. New Jersey Representative Frank Pallone has asked the House Energy and Commerce Committee to review the legality of daily fantasy sites, which will hopefully provide more clarity on what seems like an arbitrary distinction between legal and illegal forms of sports betting.
But despite its public posturing, the NFL has quietly argued that even point-spread wagering and other traditional kinds of sports betting should be considered games of skill, a proposition that would pave the way for wholesale legalization. In July, ESPN reported that it had found public records of NFL statements "in support of traditional sports gambling as being skill-based" in legal proceedings as far back as 2003. (ESPN also found similar statements by the Justice Department from 2013.) The league was trying to stop Delaware from bringing back a football-based lottery. In a memo, written three years before the 2006 Internet gambling law provided a legal space for skill-based fantasy betting, the NFL's outside counsel argued, in essence, that a sports "lottery" isn't really a lottery, because sports betting inherently relies on skill while lotteries under the Delaware Constitution are games of "pure chance." The argument carried the day.
The NFL will deploy the definition of legal gambling that best suits its needs, so it should come as no surprise that it doesn't think fantasy should be considered gambling. The American Gaming Association estimates that fans will bet $95 billion on both professional and college football this season, almost all of it illegally. Just $2 billion of that will be wagered in legal sports books in Nevada. Meanwhile, gaming research firm GamblingCompliance projects that the U.S. sports betting market would balloon to $12.4 billion with full legalization. The NFL is clearly comfortable with gambling as long as it's getting its cut of this exploding market.
With the NFL players' deal, the players are getting in on the action, too. In that respect, the NFL can at least say it's not the NCAA, which prohibits its athletes from benefiting from a daily fantasy partnership from which it profits. Professional players can strike deals with DraftKings and be compensated for promoting the site, and can even play fantasy themselves as long as their payouts are small enough. Under the NFL's Compliance Plan, fantasy isn't considered gambling and thus all league employees may participate, but their payouts can't exceed $250. As NBC Sports' Mike Florio notes, that creates a "clumsy balancing act" for both players pushing a product promising lucrative payouts they can't accept, and for the league that continues to articulate its own distinction between legal and illegal gambling.
As the line between the two continues to blur, let's hope more NFL players in DraftKings commercials can at least make those ads tolerable on game day.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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