What’s your fantasy? Let’s play daily!

Joshua F. Barnette, KLJ Staff Editor[1]

In recent years, the world of fantasy sports has enthralled many. An estimated 56.8 million people in the United States and Canada play some form of online fantasy sports.[2] On average, adult players spend $465 per year on fantasy sports, of which $257 is spent on daily fantasy sports (“DFS”).[3] Industry experts predict that DFS will generate over $2.5 billion in entry fees in 2015, and grow annually to over $14.4 billion by 2020.[4] States have begun to regulate the DFS industry, but legislatures are still missing a major opportunity. To receive the financial benefit of this national obsession, state governments should allow DFS to continue, while simultaneously taxing operators of DFS websites.    

Currently, two entities—FanDuel and DraftKings—dominate the world of DFS.[5] In DFS, like in traditional fantasy sports, players build fictitious teams around professional and collegiate athletes and pit their teams against other players, evaluated only on the collaborative, real-life statistics of the athletes selected for their fictitious teams. The “industry has emerged out of a legal loophole for something that looks a whole lot like sports gambling . . . .”[6]

In 2006, while enacting legislation prohibiting online gambling, Congress carved out an exemption for fantasy sports.[7] One characteristic of the fantasy sports exemption is that payouts are predetermined, known by the players ahead of time, and neither the number of players nor the fees paid by the players determine the payout amounts.[8]

However, this federal legislation has not kept states from passing their own legislation regarding DFS. Some states have prohibited fantasy sports—or online wagering related to fantasy sports—when enacting or introducing legislation that bans other online gambling.[9] Other states are seizing the opportunity to regulate the industry. Recently, the Nevada Gaming Control Board issued a Notice to Licensees advising of the Board’s determination that DFS constitutes gambling and, therefore, those entities offering DFS for play within Nevada must possess the appropriate license.[10]

Federal and state governments should follow Nevada’s lead and enact regulatory measures in order to capitalize on the ever-growing revenue generated by the world of DFS. With political figures weighing in on DFS,[11] and the CEO of FanDuel calling for industry-wide regulation,[12] the time is ripe for Congress and state legislators to regulate the operators of DFS websites and collect tax revenue from an industry built around daily entrance fees.

[1] J.D. expected May 2017.

[2] See Fantasy Sports Trade Ass’n, Industry Demographics Actionable Insights & Insightful Data, http://www.fsta.org/research/industry-demographics/ (last visited Oct. 31, 2015).

[3] Id.

[4] Darren Heitner, The Hyper Growth of Daily Fantasy Sports is Going to Change Our Culture and Our Laws, Forbes (Sept. 16, 2015, 4:01 PM), http://www.forbes.com/sites/darrenheitner/2015/09/16/the-hyper-growth-of-daily-fantasy-sports-is-going-to-change-our-culture-and-our-laws/.

[5] See Joshua Brustein & Ira Boudway, You Aren’t Good Enough to Win Money Playing Daily Fantasy Football, Bloomberg Businessweek (Sept. 10, 2015, 8:00 AM), http://www.bloomberg.com/news/articles/2015-09-10/you-aren-t-good-enough-to-win-money-playing-daily-fantasy-football.

[6] Neil Irwin, Daily Fantasy Sports and the Hidden Costs of America’s Weird Gambling Laws, N.Y. Times (Sept. 24, 2015), http://www.nytimes.com/2015/09/27/upshot/daily-fantasy-sports-and-the-hidden-cost-of-americas-weird-gambling-laws.html?_r=0.

[7] See Unlawful Internet Gambling Enforcement Act, 31 U.S.C.A. § 5362 (Westlaw through Pub. L. No. 114-61 (excluding 114-52, 114-54, 114-59, and 114-60)).

[8] See id.

[9] See, e.g., Mont. Code Ann. 23-5-802 (LEXIS through 2015 legislation)(allowing fantasy sports, but not allowing telephonic or online wagering related to fantasy sports).

[10] Nevada Gaming Control Board, Notice # 2015-99, Notice on Legality of Offering Daily Fantasy Sports in Nevada (Oct. 15, 2015), http://gaming.nv.gov/modules/showdocument.aspx?documentid=10481.

[11] See, e.g., Neil Irwin, At Republican Debate, Fantasy Sports Got More Attention Than Wall Street, N.Y. Times (Oct. 29, 2015), http://www.nytimes.com/2015/10/30/upshot/fantasy-sports-got-more-attention-than-wall-street-at-the-gop-debate.html?_r=0.

[12] See Sharon Terlep, CEO of FanDuel Calls for Government Regulation, Wall St. J. (Oct. 29, 2015, 10:03 AM), http://www.wsj.com/articles/fanduel-ceo-calls-for-government-regulation-1446127412.