The selection of which sportsbook to supply is likely one of the clearest factors of divergence between DraftKings and FanDuel.
DraftKings gives 4 sportsbook — golf, MMA, NASCAR, and soccer — that FanDuel doesn’t.
The ramifications of that break up, as soon as restricted to the battle for market share, might now affect the form of the daily fantasy sportsbook trade that emerges following the present wave of authorized, legislative, and regulatory scrutiny.
Why doesn’t FanDuel supply golf or NASCAR?
FanDuel CEO Nigel Eccles has provided numerous causes for not matching DraftKings sport-for-sport, together with considerations about how fantasy golf and NASCAR intersect with related legislation.
“The authorized standing could be very detrimental,” Eccles mentioned of fantasy NASCAR final yr on RotoGrinders. “NASCAR doesn’t present a whole lot of stats that you might assemble a fantasy sport round, and so any sport rapidly resembles sportsbook betting. Until that adjustments I can’t see us providing fantasy NASCAR.”
Eccles provided his firm’s evaluation of fantasy golf in the identical thread: “We gained’t be introducing fantasy golf. I feel it’s commercially engaging (its most likely our subsequent most requested sport) however I’m uncomfortable with the legality of it.”
“Each time I’ve to decide like this,” Eccles continued, “I feel whether or not the argument would arise in court docket. To me an affordable particular person would think about a golf event to be a single occasion, not a number of occasions. Due to this fact it will not fall underneath the UIGEA protected harbor. That doesn’t mechanically make it unlawful (it might nonetheless be a sport of talent underneath state legislation) but it surely does make it extra dangerous.”
Eccles’ choices got here at a steep worth, as DraftKings — aided by a surge of curiosity in golf — closed FanDuel’s once-substantial lead throughout the spring and summer time of 2015 earlier than seizing the highest spot in September.
Why DraftKings does
There was little direct public dialogue by DraftKings executives of the authorized scaffolding supporting particular sportsbook.
That DraftKings has such scaffolding is all however sure. American cost processing companions require a certified authorized opinion from all DFS operators. Different key stakeholders doubtless require comparable assurances.
However the nature of the scaffolding is a vital query.
At a gathering of the Fantasy Sports activities Commerce Affiliation that came about in Could 2015, DraftKings CEO Jason Robins acknowledged that fantasy NASCAR might not comport with a literal studying of the necessities outlined by UIGEA, in keeping with sources with direct information of the assembly.
A part of the justification asserted by Robins throughout the assembly for providing fantasy NASCAR, per the identical sources, was that the product doesn’t violate any state legislation, successfully eradicating the necessity for the UIGEA protected harbor.
DraftKings started providing fantasy NASCAR in Could 2015. In late June 2015, DraftKings edited its “Why It’s Authorized” web page to take away all mentions of the UIGEA:
DraftKings is much from the one DFS web site providing fantasy NASCAR and golf.
Authorized specialists talking on background confirmed to LSR that full compliance with state playing legislation would arguably render UIGEA compliance moot, and that, whereas they might not verify DraftKings’ particular justification for providing fantasy NASCAR, such a authorized principle shouldn’t be unusual within the DFS trade.
What UIGEA requires
UIGEA doesn’t make any type of playing authorized or unlawful. It solely speaks to the legality of cost processing round sure types of online playing. Extra on that essential distinction right here and right here (see web page 7).
The UIGEA carve-out steadily referenced by DFS operators resides underneath (1)(ix) of the Definitions. That part identifies the traits a given exercise should show with a view to qualify for “protected harbor” from UIGEA penalties.
The required attribute generally recognized as problematic for single-race NASCAR contests and single-event golf contests is present in (1)(ix)(II) (emphasis added):
All successful outcomes mirror the relative information and talent of the contributors and are decided predominantly by accrued statistical outcomes of the efficiency of people (athletes within the case of sportsbook occasions) in a number of real-world sporting or different occasions.
It’s essential to emphasize {that a} fantasy sportsbook sport that doesn’t meet the necessities of the UIGEA might nonetheless be a authorized sport.
The UIGEA is completely silent on the difficulty of defining playing — authorized or in any other case — leaving that process to the states and different federal legal guidelines.
How the sportsbook break up might form DFS 2.0
Trade break up might threaten unity mandatory for self-regulation
The query of which sportsbook are and aren’t honest sport for fantasy will likely be doubtless be clarified by the method of regulation.
The problem is already contentious. The OC Register recounted a confrontation between Eccles and Robins on the summer time FSTA convention over the legality of particular sportsbook provided by DraftKings.
Debate over that clarification might show intense and may threaten operator unity:
- Websites providing a broader vary of sportsbook will doubtless push to keep up that aggressive benefit.
- Others might advocate for a extra conservative strategy, or just bristle on the notion of enshrining an edge for his or her rivals.
Such a wedge might undermine the trade’s skill to credibly name for — and execute — self-regulation or light-touch regulation.
Raises chance of a UIGEA re-evaluation
As lawmakers and regulators begin to get into the nuts-and-bolts of daily fantasy sportsbook, it’s attainable that the break up over the difficulty of UIGEA compliance — and the underlying ambiguity driving that break up — might turn into extra seen.
That visibility might plausibly function a precursor to speak of revising the UIGEA to resolve any ambiguity.
Complicates the authorized dialogue
The general public dialog concerning the legality of daily fantasy sportsbook is commonly (incorrectly) boiled right down to compliance with UIGEA.
For instance, MLB Commissioner Rob Manfred not too long ago referred to “the statutory exemption … that Congress created” as help for his league’s conclusion that DraftKings wasn’t concerned in playing.
Shifting the main target of the dialog from federal legislation to state legislation might set off a reassessment of the taking part in discipline for DFS.
There’s additionally the open query of how a scarcity of compliance with the UIGEA would resonate in states like Kansas and Maryland, the place state legislation explicitly defending DFS is modeled on language from the UIGEA.
FSTA inaction spotlights limits of self-policing system
The FSTA Paid Entry Contest Operator Constitution requires that every one signatories “search authorized recommendation to make sure all video games provided by them are compliant with the fantasy sportsbook definition within the Illegal Web Gaming [sic] Enforcement Act 2006.”
In October 2014, FSTA head Paul Charchian indicated that the group actively enforces that requirement: “We’ve had cases the place we’ve got needed to inform members their mannequin doesn’t match what we’re snug with, so, whereas we don’t police the trade as such, we definitely attempt to make sure we keep inside the language of the UIGEA.”
Each DraftKings and FanDuel sit on the board of the FSTA.
In Could, Robins reportedly urged to different FSTA members that DraftKings deliberate to suggest to amend the FSTA constitution to take away the UIGEA requirement, in keeping with individuals with direct information of the assembly the place the suggestion was made.
Robins’ suggestion adopted an acknowledgement by a number of within the assembly that, as provided, fantasy NASCAR was not a UIGEA-compliant product, in keeping with the identical sources.
5 months later, the UIGEA requirement stays within the public model of the constitution, and a number of other FSTA members proceed to supply sportsbook that lack a transparent, articulated justification underneath the UIGEA.