After Being Banned In NY, Are Sites Like DraftKings And FanDuel Really Gambling?

I’m pretty sure that all of you have seen a few commercials advertising daily fantasy sports sites like DraftKings and FanDuel. Let’s be honest, you have seen thousands of those commercials advertising those sites trying to get you to invest in their sites and even extending the carrot by offering to match your initial deposit (which has some fine print to it).

The problem from the beginning of these sites has been whether DFS sites are really gambling, whether it is a game of skill or a game of luck.

On Tuesday, New York Attorney General, Eric Schneiderman, announced that daily fantasy sports sites are illegal gambling. He also announced that he sent a cease-and-desist letter to DraftKings and FanDuel to inform them to cease business in New York. Schneiderman said that the DFS sites are not games of skill but more games of luck, which in turn makes these sites gambling. Obviously the other parties disagree on Tuesday’s announcement.

“Fantasy sports is a game of skill and legal under New York State law,” FanDuel said in a statement. “This is a politician telling hundreds of thousands of New Yorkers they are not allowed to play a game they love and share with friends, family, coworkers and players across the country. The game has been played — legally — in New York for years and years, but after the Attorney General realized he could now get himself some press coverage, he decided a game that has been around for a long, long time is suddenly now not legal. We have operated openly and lawfully in New York for several years. The only thing that changed today is the Attorney General’s mind.”

“We are very disappointed that New York Attorney General Eric Schneiderman took such hasty action today, particularly since he did not take any time to understand our business or why daily fantasy sports are clearly a game of skill,” DraftKings said in a statement. “We strongly disagree with the reasoning in his opinion and will examine and vigorously pursue all legal options available to ensure our over half a million customers in New York State can continue to play the fantasy sports games they love.”

While it seems that the future looks bleak for DraftKings and FanDuel, take this into account. Three of the four major sports leagues in North America (NBA, MLB and NHL) have equity in the companies. New England Patriots owner Bob Kraft and Dallas Cowboys owner Jerry Jones also own equity in DraftKings while Fox has equity in DraftKings and Time Warner, NBC Sports Ventures and Comcast has equity in FanDuel. With this type of firepower, on top of ESPN who accepts the sites’ advertising, and you have an entity that will not go away easily.

With all the back and forth about DFS sites, the fact of the matter is that DraftKings and FanDuel are gambling. These daily or weekly fantasy sports require no skill. Much like the season-long fantasy football leagues everyone is in, it’s all about luck. There is no skill in picking players every week for fantasy football, whether it’s weekly or one-week only. The rationale behind why DFS is not gambling is simple…it takes skill to select players based on your budget and their projections for that week. However, what skill does it take to pray that Matt Forte meets or exceed projections? You are hoping to get the best performances from players which take…yes LUCK.

At some point, other states will begin to get into the act and begin recognizing DFS as gambling. Nevada regulators ordered last month that daily fantasy sports sites were to shut down in that state saying that without a gambling license, the sites can’t operate there. While they are stating that as a reason, Nevada and the gambling industry actually sees DFS as a threat where they see people starting to do daily fantasy, which could result in a decreasing number of gambling in Nevada. While that rationale is no where near possible (Las Vegas is really going to lose gamblers to DFS sites?) other states will begin to view DFS as sports gambling which is a big no-no in this country.

In the end, I do not see daily fantasy sports going anywhere. With the backing they have in the sports leagues, networks and even the owners they have under their control, I really see no reason as to why they would not continue to run in every other state with the exception of Nevada and New York. Both DraftKings and FanDuel has said that they will fight the NY ruling to the fullest extent, but already in New York, another DFS site has stopped operations. DraftOps, which is not on the level of the big two, has already stopped NY operations and that’s after they signed a three-year deal with the New York Islanders and Barclays Center.

The end game of this will be that the two big sites will most likely lose their upcoming appeal in New York but it will continue to be business as usual. There is too much money already in the coffers of DraftKings and FanDuel and with everyone making money on the sites, from fans to equity partners to the sites themselves, it’s incomprehensible that they would go away. It won’t be long before DFS sites have their own lobbyists on Capitol Hill to help get them some members of Congress on their team. I hate to say it but daily fantasy sports sites are going nowhere anytime soon so get ready to see more commercials reminding you that DraftKings is one-week fantasy football and that some dude won $395 playing FanDuel.

There is just too much money on the table to just stop it.