More About DFS

There is a great site called that extensively covers the current issues surrounding Daily Fantasy Sports. They recently did a poll asking adults about whether DFS should be legal and regulated. The more significant results were:

  • 54 percent of respondents say DFS should be legal; 38% said it should be illegal.
  • 50% said they believe DFS is a form of gambling; 30% said it is a game of skill; the rest responded “don’t know.”
  • 38% said they agreed with actions taken by the New York attorney general against DraftKings and FanDuel; 31% disagreed.
  • 40% said said betting on sports on the internet should be illegal, 47% said it should be legal.
  • 51% said state governments should regulate DFS sites; 35% said they should not.

I always take polls with a grain of salt. For one thing, the thinking behind some opinions isn’t always clear.  Why exactly should anything be legal or illegal? For another, it is common for people to have rock solid opinions on things they know absolutely nothing about. Most policy things are like icebergs – the majority of the bulk is underneath where you can’t see.

It’s not a surprise that I would favor internet betting. Generally, I think adults should have the right to bet on pretty much whatever they want, but I have no problem with some protective rules, and I especially have no issue with wagering sites paying FAIR taxes.

The current hoopla about DFS is probably not about the right to bet or the morality of gaming as much as it is about the state protecting the players and getting its share. The anti-gambling folks can pontificate all they want about the miseries associated with gambling addiction. I’m of the opinion that no matter what the vice, 10% of the population will find a way to become addicted or abuse it. While it is a nice thought, you can’t always save people from themselves. As the famous Pogo quote goes, we have met the enemy and it is us.

The case in New York seems to revolve around the definition of “control or influence” in the definition of gambling in the NY Penal Code. Here is the actual statutory reference.

Gambling.” A person engages in gambling when he stakes or risks something of value upon the outcome of a contest of chance or a future contingent event not under his control or influence, upon an agreement or understanding that he will receive something of value in the event of a certain outcome.

This is a tricky situation for the DFS folks. On the one hand, you could argue (just like horseracing) that since the players make decisions about player selection based on statistical inputs and research, it is under their control or influence. They could argue pure gambling is something like most slot machines or most table games where the odds are fixed and you can do nothing to push the odds in your favor. Even in something like video poker, playing the optimal strategy is a long run loser.

On the other hand, they have no control or influence over the performance of the athlete they are betting on. Much like horseracing, there is still an essence of gambling when you make the bet. Attorney General Schneiderman’s initial argument underscores this:

Yet FanDuel and DraftKings insist that DFS is not gambling because it involves skill. But this argument fails for two clear reasons. First, this view overlooks the explicit prohibition against wagering on future contingent events, a statutory test that requires no judgment of the relative importance of skill and chance—they are irrelevant to the question. Second, the key factor establishing a game of skill is not the presence of skill, but the absence of a material element of chance. Here, chance plays just as much of a role (if not more) than it does in games like poker and blackjack. A few good players in a poker tournament may rise to the top based on their skill; but the game is still gambling. So is DFS.

Of course the problem with Schneiderman’s argument for DFS being gambling is that it appears to make every single thing where there is a bet involved gambling. If I bet you that I can run across the busy freeway and not get hit, regardless of my skill in the freeway dash, I can’t predict the behavior of all the drivers I’ll be dodging. or if the road suddlenly crumbles beneath my feet. There is, as Schneiderman says, no absence of a material element of chance. In other words, you make a bet, no mater how much time you spend researching and coming to a decision, you are gambling.

The more relevant question for Schneiderman is, what, if anything, is a game of skill with an absence of a material element of chance and betting as part of the game?

Draft Kings and Fan Duel are not going anywhere in the long term despite their travails in the short term. The have massive corporate backing (you don’t hire David Boies cheap) and frankly if the NFL or MLB sat down for weeks brainstorming they couldn’t come up with a better marketing idea than DFS.

I’m sure some pretty smart people are in charge at the DFS services, but in the end the best strategy they have is not to fight with NY about skill versus gambling, but to simply sit down with a reasonably powerful legislator and negotiate a regulatory structure that works for both sides.

I don’t know what that is, but I know what it isn’t. Horseracing’s set up,