New York Attorney General Eric Schneiderman has ordered popular daily fantasy sports websites DraftKings and FanDuel to cease operations, saying they amount to games of chance and thus are illegal gambling.
Whether games require skill or chance is a “legal question [that] often comes up in gambling cases,” said Raymond Sauer, a professor at Clemson University, who specializes in the economics of regulation and of sports. He said poker players, for example, often try to argue their game is one of skill and should be legal.
“These FanDuel and DraftKings games that are set up are very much like poker,” Sauer explained. “There’s elements of both skill and chance involved and so the law is a little bit murky here.”
In a letter to DraftKings, Schneiderman was careful to draw a distinction between daily fantasy sports and a more traditional, long-running version of fantasy leagues, where players often participate in a draft and maintain their teams across an entire season.
In contrast, he said DraftKings is “designed for instant gratification, stressing easy game play and no long-term strategy.” Moreover, he said the site promotes daily fantasy sports like a lottery.
The companies disagree with the attorney general’s assessment. In a statement, FanDuel accused Schneiderman of trying to get press coverage. DraftKings said this is an example of government stifling innovation and that it’s looking into legal challenges.
Nevada has already ordered these sites to shut down and apply for a gambling license. Numerous other states are looking into the issue.
But unlike other forms of sports gambling, fantasy sports have strong support from professional leagues, said Victor Matheson, a sports economist at the College of the Holy Cross.
“If you’re sitting around Monday night and it’s an unattractive game between two teams in small markets, but a bunch of fans nationwide have that quarterback on their fantasy team, guess what, a lot of people are tuning in to games they otherwise wouldn’t,” he explained.
He says that support and the popularity of these sites might eventually push more states to permit sports gambling.
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