3Qs: Is the end near for daily fantasy sports?

It’s hard to miss the bombardment of advertisements touting daily fantasy sports websites such as FanDuel and Boston-based DraftKings. One entity that has noticed the companies’ meteoric rise in popularity is the federal government, specifically the Department of Justice and the FBI.

Both agencies have reportedly begun preliminary investigations into the websites, where users pay to compile fantasy teams of NFL players that they then enter into tournaments. If the players perform well enough on that day, the users can win money.

Roger AbramsAnd while the organizations’ owners claim it’s a game of skill, federal authorities want to determine if the websites violate gambling laws. We asked Roger Abrams, the Richardson Professor of Law and a leading authority on sports law, to offer his insight.

Are daily fantasy sports websites such as DraftKings and FanDuel illegal? Why or why not?

The fantasy sports sites would be illegal under federal law if they were primarily games of chance and not of skill. Most observers conclude that daily fantasy games are primarily games of chance because the performance of athletes on a selected team varies tremendously from week to week.

Is there any law that spells out the difference between a game of skill and a game of chance?

The dictionary defines chance as “something that happens unpredictably without discernible intention or observable cause.” Games of chance are not determined by knowledge or practice, but rather by factors outside of the control of a participant, such as luck and fortune rather than judgment and skill. Success at many games depends on some combination of both chance and skill and their characterization depends on which factor is predominant. The online fantasy games present the veneer of a contest of skill. Pick your team correctly and you win. Each team has a salary cap, however, and the “cost” of acquiring each professional athlete is based on his prior performance. How will members of a team do this week? That is a matter of chance.

Last week, authorities in Nevada said daily fantasy sports websites should be considered gambling sites and therefore must apply for licenses in that state. Is that a designation that could benefit the government in its investigation?

The online sites will withdraw from the Nevada market rather than admit they are gambling sites. There are class-action lawsuits pending in a number of jurisdictions based on claims of fraud. The attorneys general of Massachusetts—Maura Healey, L’98—and New York are investigating, as is the FBI. This would normally portend that the online industry will soon collapse, but Congress cannot ignore the fact that more than 40 million people participate in these games. I would predict government regulation to assure fair practices with regular oversight.