Uncle Sam is in a tizzy.
Big Brother is worried about whether daily fantasy sports sites on the Internet are gambling or games of skill.
Nevada — the leader in gambling and houses of ill repute although Congress gives them a run for the money on the latter — has already decreed DraftKings and Fantasy Duel as being gambling fronts and ordered the sites to cease operating within the Silver State. Not saying that Nevada has a conflict of interest but it’s amazing how the state that depends the most on gambling revenue is the first to fend off a threat to its tax and job bases.
The Department of Justice and FBI inquiries are based on a law adopted in 2006 by Congress. That law bans banks and other financial institutions from transferring money to online gambling sites. Games of skill — which wasn’t exactly well defined within the law — were exempted.
No one got excited until recently when DraftKings and Fantasy Duel, which control 95 percent of the North American fantasy sports site markets, indicted they expect to pay out a combined $3 billion in prizes this year.
Let’s put this in perspective for a moment. The American Gaming Association in January — using a 1999 national study as a basis – estimated $3.8 billion was bet illegally on the 2015 Super Bowl. That compares to $100 million legally bet on the Super Bowl in Nevada. The American Gaming Association happens to lobby on behalf of Nevada casinos.
The 2006 law was enacted, by the way, in part to avoid banks being used to launder money.
So are fantasy sports leagues games of chance or is their skill involved?
If you have ever seen anyone seriously into fantasy sports leagues crunching player stats and keeping tabs on games and individual athletes you might start to wonder about their sanity. The same can be said of those heavily into playing the ponies or day trading for that matter.
Let’s talk about trading stocks for a second. Is that a “game” of skill or is it gambling?
A lot of legitimate financial advisors would consider such a question daffy, but then consider how the “game” is sometimes played.
A number of traders try to predict how a stock will perform based on weather, war, proposed legislation, and elections. How much different is that than predicting how a left-handed batter will do against a certain pitcher or how one team will perform in a certain division and making fantasy trades accordingly?
In both cases there is no labor in the truest sense involved. The trader and sports fantasy player are trying to maximize their investments. They have no real control over the stocks or fantasy players they put their money on. And if you try to argue buying stocks is investing in proven value then explain how a web start-up that has bled billions and never produced a penny in profit can be valued more than a firm like ConAgra or Ford? Sounds a tad like gambling, doesn’t it?
Besides gambling and stocks have to have winners and losers in order to work.
The real question that should be asked is what does government have against gambling per se?
Are they worried about games of chance corrupting or bankrupting people? If they are, how do they explain away state lotteries? Oh, I forgot. They’re operated by the government so they are OK. But then again the California Lottery if it were a casino game rolled out at a Reno casino it would be illegal under Nevada gambling laws because the odds are stacked way too high against the player.
But we’re not worried about fairness here. Think Al Capone.
Laundering “illegal” money from drugs and such is done to make it legal. But there is also the question of the government getting its cut.
It is fairly easy to tell the investors in DraftKings et al are legitimate. The list of investors read like a Who’s Who in American Commerce: Google Capital, Comcast. Time-Warner, Major League Baseball, the National Hockey League and 21st Century Fox.
The problem apparently is with the people playing the daily fantasy sports leagues. Some of them may be playing with money they got from illegal drug sales. Perhaps they’re using money that was secured by avoiding the payment of taxes such as at garage sales, low-key flea markets, or being paid under the table. Using money gained from such sources and then ending up taking it out in winnings is technically a form of money laundering.
Keep in mind if the Department of Justice determines fantasy sports leagues are gambling and not a game of skill that means non-Internet fantasy sports leagues constitute gambling as well.
It’ll just be a matter of time before the federal agents kick down your door.
This column is the opinion of Dennis Wyatt, and does not necessarily represent the opinion of The Journal or Morris Newspaper Corp. of CA. He can be contacted at email@example.com or 209.249.3519.