Fantasy Sports' Long Run of Good Luck
When the debate of Republican presidential candidates on Wednesday turned to the question of whether fantasy football should be regulated in the same way as gambling, former Florida Governor Jeb Bush, an avid player, boasted of his own 7-0 record, then gave an evasive answer. Governor Chris Christie of New Jersey, however, blasted the moderators for wasting Americans' time with such frivolous matters.
The question was timely, and far from trivial. It has arisen most recently because federal and local law enforcement authorities are investigating fantasy sports websites such as FanDuel and DraftKings for alleged insider trading by employees, and the Nevada Gaming Commission announced that it viewed the online games as a form of gambling, meaning the companies would need licenses to operate within the state. States including Illinois are considering regulation, and Congress is getting in on the action with plans to hold hearings.
But the set-to at the debate was an illustration of how difficult it will be to define the legal parameters of the game, which its passionate players see as requiring skill, not chance, and for whom the money involved often is a secondary concern.
Fantasy sports arguably began in the 1920s with All Star Baseball, a board game that allowed players to pick and manage a team of athletes whose performance in the course of the game was determined by the past performance of real players and the random turn of a spinner.
But All Star Baseball, along with a more refined version called Strat-o-Matic, considered only players’ past record, and couldn't factor in their future performance.
Two groups of sports fans in the 1960s devised a way to wed the idea of a fantasy team with the the actual, future performance of players (as opposed to the random turn of a spinner). The first, connected to Bill Gamson, a Harvard psychology researcher, devised a game that allowed participants to “draft” real players into dream teams using a fictional budget of $100,000.
As the season unfolded, the real-time performance of the players collectively determined whether fantasy teams won or lost in match-ups simultaneously taking place in a separate, fantasy league. At the end of the season, the winning team owner would collect the pot: the $10 entry fees that each person had paid to participate.
The game, which combined sports with statistical prowess, soon became a huge hit at Harvard. to avoid any association with gambling, Gamson named his game the “Baseball Seminar.” The winnings -- a relatively modest sum -- were a minor consideration.
Similar motives drove a separate group to devise the first fantasy football league: the Greater Oakland Professional Pigskin Prognosticators League, or GOPPPL. Led by the late Wilfred “Bill” Winkenbach (who had a stake in the Oakland Raiders), the creators of GOPPPL shared an obsessive love of sports and statistics.
In succeeding years, fantasy sports caught on throughout the country. While money did change hands, it seems to have been almost an afterthought.
By the late 1970s, a new generation of rabid sports fans refined these early games. One of the original players of the Baseball Seminar, for example, launched the “Rotisserie League” (named for a now defunct French restaurant where the game was hammered out). It used newly defined statistical categories to determine team rankings and performance.
By the late 1980s, about 500,000 people played “Rotisserie League,” or “Roto” baseball; fantasy football had a comparable following, with statistical publications marketed to obsessives.
These games tended to connect existing networks of friends or co-workers, and although prize money exchanged hands, it wasn’t generally considered a form of gambling by either the federal or state governments. That’s because the courts have drawn a distinction between what are called games of chance and games of skill.
To some extent, this is an artificial distinction: poker requires skill, but remains a game of chance. But that distinction, and the staggering amount of time and preparation that fantasy sports buffs devote to drafting and managing their teams, has rightly protected fantasy sports in the eyes of the law.
This was true even after the advent of the Internet, which helped fantasy sports attracted millions of new fans throughout the decades. In 1995, the Wall Street Journal reported that “media titans” and big business “all want to capitalize on the seemingly natural business pairing: statistically obsessed fans and their new favorite medium, the Internet.”
But this didn’t lead crusaders against gambling to regulate fantasy gaming. For example, in 1998, Senator John Kyl, a Republican from Arizona, attempted to secure passage of the Internet Gambling Prohibition Act.
But Kyl pointedly called for “one exception” to the prohibition -- fantasy sports leagues -- and conceded that “perhaps some of my colleagues have participated” in these games. It was one thing to attack Internet gambling, but to kill off a hobby of sports-obsessed citizens? This was downright un-American.
Kyl’s bill failed to pass, but a modified version did in 2006. That bill, the “Unlawful Internet Gambling Enforcement Act,” imposed prohibitions on almost every species of Internet gambling. But it, too, exempted fantasy sports from regulation. In effect, the federal government legalized the practice.
Since then, the fantasy sports business has boomed online, and the companies that host these games are worth billions. They have become valuable adjuncts to professional sports, fostering interest in different sports, and consuming vast quantities of leisure time -- and not a little bit of money, even if the numbers pale next to the funds spent on conventional gambling.
Nonetheless, Nevada, which is dependent on gambling revenue, evidently sees this as a threat and wants it eliminated. No doubt its allies in Congress will push to do the same. But while the new websites could definitely use greater oversight, would-be anti-gambling crusaders should avoid getting carried away.
In fact, any attempt to ban the practice will almost certainly provoke a profound backlash. It would be, in short, a seriously bad bet.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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