The ruckus over these daily fantasy sports contests started two months ago when an employee inadvertently released data before the week’s NFL games and then went on to win $350,000 on a rival website. With allegations of insider trading, the FBI opened an investigation. Lawsuits were filed across the country and the Attorney’s General of New York and Nevada issued cease and desist orders.
In New York, a judge ordered both companies to cease operations within the state, only to be overruled later the same day. FanDuel no longer allows New York residents to participate. DraftKings is still operating and will continue to do so until at least January 4 when a panel of judges will rule on whether or not the injunction to stop all business operations in the state is appropriate.
Meanwhile, Pennsylvania and California are looking into legislation to regulate the business. In Pennsylvania, the House Gaming Oversight Committee has already held one hearing. Legislation is also being drafted. In California, the Committee on Governmental Organization will hold a hearing this month. Legislation is also being drafted here.
The issue revolves around whether or not these daily fantasy contests are games of skill or games of chance. DraftKings and FanDuel claim they are games of skill, arguing that a participant needs to be knowledgeable about sports and individual athletes. The states contend these contests are a form of gambling where luck is a major factor. For example they would argue that if the star quarterback fractures a bone and is knocked out of the game, then his value to a contest participant decreases.
Given the amount of money and interest in daily fantasy sports, all eyes will continue to watch this issue as more states weigh in.