Posted by: Mike Cornelius | November 12, 2015

From Fantasy To Nightmare For Pro Leagues

The top story on ESPN.com Thursday afternoon offered advice to fantasy football players on who they should add or drop from their rosters prior to the start of this week’s play in the NFL. The website CBSSports.com featured stories on both fantasy football and basketball on its front page. At the top of both home pages there is a prominent link that will take one directly to that portion of each website devoted exclusively to all things fantasy; including of course the games run by ESPN and CBS Sports. The former’s fantasy page includes a link to the DraftKings site, while the latter’s offers one-click access to the website for FanDuel, the other major player in the daily fantasy sports game business.

Over at the sports section of the New York Times website there was also a story offering advice for the weekend, as well as a graphic display ranking the season-long fantasy performance of NFL players. But the prominent report on the subject of fantasy sports was the one detailing the response of DraftKings and FanDuel to Tuesday’s order by New York State attorney general Eric Schneiderman that the websites must stop accepting bets from New York residents because the games amount to illegal gambling under state law.

That response from both companies was a pledge to continue to allow New Yorkers to play during the five days that Schneiderman gave them to comply with his order, and a commitment to fight the order in court. It contrasted sharply with the actions of both DraftKings and FanDuel less than a month ago, when the Nevada Gaming Commission ordered them to cease accepting action from that state’s residents until the companies applied for and won gaming licenses. In that instance both companies quietly complied by shutting off access to Nevada players.

The difference is the order of magnitude between the two states. Eilers Research LLC, a firm that focuses its work on the gaming industry, estimates that together the two companies have more than one million active players in New York, more than in any other state and nearly thirteen percent of the daily fantasy market. DraftKings and FanDuel simply can’t afford to meekly comply with the state attorney general’s order, although several smaller players in the business have reportedly suspended operations in the Empire State.

The pervasive nature of fantasy sports, as demonstrated by a quick glance at ESPN.com, CBSSports.com, or almost any other sports-related website, not to mention the huge amount of money at stake, lead to the obvious conclusion that what fans are likely to witness is a protracted legal battle. It’s impossible to know how that will ultimately play out, though as noted here a few weeks ago it’s hard to imagine the likes of DraftKings and FanDuel just going away.

Still the New York attorney general, perhaps second only to the same position in more populous California, has exerted significant influence over law enforcement officials and regulators in other states in previous consumer protection fights, and may do so here as well. In addition, Schneiderman’s order got the attention of at least one of the major financial transaction processing companies, the invisible link between every company doing business online and a consumer keying in his or her credit card number on a home computer. Vantiv Entertainment Solutions is reported to have told all daily fantasy sports sites, including DraftKings and FanDuel, that it will stop processing payments from New York customers.

But while the end result of the legal wrangling may be unknown, it’s abundantly clear that a significant segment of the population looks upon these games as one more form of gambling. People holding that view may well be in favor of gambling, or at least believe it’s no worse than various other activities that are widely allowed, albeit sometimes subject to state or federal regulation. Others may consider gambling to be a deadly and dangerous addiction. But love it or loath it, gambling is gambling. And that is a subject that has long been anathema in all of our major sports leagues.

Rules against gambling are drilled into players from the moment they sign a professional contract. They are posted in clubhouses and dressing rooms at stadiums and arenas from east coast to west. No one in the history of major league baseball has more hits than Pete Rose. His 4,256 are nearly 1,200 more than any active player. But Rose has been banned from the Great Game for more than twenty-five years for betting on baseball while both a player and manager.

Yet there is Major League Baseball, an investor and partner in DraftKings since 2013. Earlier this year the two announced a multi-year deal that made DraftKings the “Official Daily Fantasy Game” of the game. Twenty-five of the thirty MLB teams have their own marketing deals with the Boston-based fantasy sports company. And baseball is hardly alone. NASCAR as well as multiple franchises in the NFL, NBA and NHL have marketing deals with DraftKings. FanDuel’s marketing partners include half the franchises in the NFL and nearly half of those in the NBA. The latter league itself entered into a “strategic partnership agreement” with FanDuel this time last year. Leading NFL owners Bob Kraft and Jerry Jones have both invested in the companies.

Now the attorney general of the state that is home to the offices of all these leagues has declared what for many has long been clear. For the leagues and teams and owners who failed to look past the seductive allure of a fat return on their investment, there is no easy way out of a mess of their own creation. Just this week MLB Commissioner Rob Manfred offered his opinion that daily fantasy sports were games of skill. But he didn’t explain why major league players are prohibited from participating in those games. What are the odds Manfred and his counterparts in the NFL, NBA and NHL are all now thinking that instead of investing in a sure thing, maybe they made a bad bet?

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