Just a Game of Chance

The rapid growth in recent years of the fantasy sports industry has been accompanied by increased scrutiny: The FBI has begun to examine closely the activities of daily fantasy sports sites, and the New York Times last week published a report about fantasy sports betting. Calls for increased regulation of the industry have grown louder and more pervasive as well. Last week, Massachusetts State Senate President Stanley Rosenberg urged the state government to strengthen its approach to the industry. “We regulate and tax horse racing,” Rosenberg said. “To me it's a similar thing.”

The position taken by Rosenberg, as well as by House Speaker Robert DeLeo, reflects a growing push to treat fantasy sports as gambling in Massachusetts. In 1992, Congress outlawed sports betting nationwide—a ban that still applies in all but five states. But after heavy lobbying from the National Football League and Major League Baseball, Congress made an exception in 2006 for fantasy sports, defining it as a game of skill, not chance. Users of the most popular websites, including ESPN and Yahoo! Sports, have thus avoided government control.

But the continued growth of the fantasy sports industry is proving this exception outdated. An estimated $26 billion, with an average of $465 per player, are spent annually on fantasy sports in the United States and Canada. With the emergence of FanDuel, Draft Kings, and other similar sites offering daily and weekly windows for betting—as opposed to the conventional format in which users compete for the duration of a given sport’s season—fantasy sports is evolving away from its original purpose as a hobby and towards a business. Moreover, these new forms of fantasy betting did not yet exist when the 2006 law was passed; in short, whether Congress would still consider many of the current games to be based on skill is unknown.

This is especially clear as scandal envelops the industry. Both DraftKings and FanDuel—the two most prominent daily fantasy sites—recently have had to ban its employees from playing fantasy sports for money when one DraftKings employee reportedly won $350,000 playing on rival site FanDuel. Multiple class action lawsuits have since been filed against the company, alleging insider trading.

A 2015 Sports Business Daily study found similarly unsettling results. Over the first half of the MLB season, the study found, 91 percent of daily fantasy profits were won by just 1.3 percent of users, accentuating the divide between those whom the study called “sharks” and the vast majority of players.

It is unclear exactly how the Commonwealth should regulate fantasy sports. Attorney General Maura Healey, who is reviewing the industry’s legality, explained, “This is a new industry. It’s something that we’re reviewing, and we’ll learn more about it.” But it cannot be doubted that these fantasy sports outlets are large-scale commercial gambling outlets, analogous to banned industries like casinos and horseracing; and they should be treated as such by the state government, and subjected to regulation and taxation.