Congress launched an effort Wednesday to explore daily fantasy sports, hoping to better understand the popular and lucrative online contests and, in a broader sense, the legality of sports betting in this country.
The House subcommittee on Commerce, Manufacturing and Trade held a two-hour informational hearing on the multi-billion-dollar daily fantasy sports business, which has become a staple in the lives of millions of sports fans. The daily contests allow participants to select players, set lineups and win cash prizes based on the statistical performances of athletes in most major sports. Some estimates suggest that 16 million players paid more than $4 billion last year to compete in daily fantasy sports. The companies have classified themselves as entertainment, not gambling, enterprises.
“I obviously believe there’s a lot of hypocrisy surrounding the support of daily fantasy sports compared to traditional sports betting,” said Rep. Frank Pallone (D-N.J.), who requested the hearing last year and is pushing for legal sports gambling in his home state. “The daily fantasy sports industry has been arguing that daily fantasy sports is somehow completely separate from sports betting, despite the fact that similarities can’t be denied.”
No immediate action or proposals resulted from Wednesday’s hearing, and subcommittee members noted that gambling generally is regulated at the state, not federal, level, though there was some discussion about how daily fantasy sports comply with the Professional and Amateur Sports Protection Act of 1992 (PASPA).
The daily fantasy sports industry has been debated in several state legislatures, and several state attorney generals have issued advisory opinions against the games, in some cases prompting companies to cease operations there. At the same time, other states are crafting legislation to regulate and assign oversight.
While the subcommittee members heard from a panel of experts Wednesday, perhaps most notable were the players who weren’t at the table: DraftKings and FanDuel, the two companies that control 95 percent of the U.S. market. Also absent: the sports leagues, teams and media entities that are major investors and partners with both companies. Several subcommittee members expressed disappointment that the companies and others declined invitations to appear on the panel.
“We appreciate the thoughtful conversation today,” a DraftKings spokesman said in a statement Wednesday afternoon. “DraftKings is a company founded by sports fans for sports fans, and we look forward to the continued evolution of common sense legislation aimed at protecting fantasy sports consumers.”
“What came through clearly was fantasy sports should be available to all Americans and fantasy games should be regulated with common-sense measures to ensure games are fair and players are protected,” a FanDuel representative said in a statement Wednesday afternoon.
Both companies allowed Peter Schoenke, the chairman of the Fantasy Sports Trade Association, to speak on their behalf. While Schoenke wasn’t able to answer some of the members’ specific inquiries about the companies, he was subject to the most aggressive questioning. At one point, Pallone pointedly asked Schoenke how the companies could apply for gambling licenses in the United Kingdom but claim they’re not gambling entities in the United States.
“The laws of the United States are very different than the laws of the United Kingdom,” he told the subcommittee. “In the United Kingdom, any game that has any skill is also under gambling. In America, in most states, if a game has more skill than luck, it’s not considered gambling.”
“But I mean, they’re doing the same thing, right, in both places?” Pallone responded.
Schoenke agreed the online contests are the same.
“That’s all I’m asking,” the congressman said. “It sounds like the difference is, in one country they have a lot of smart lawyers or lobbyists that are defining things in one way and in the other they’re not.”
After the hearing, Pallone called the companies’ delineation “laughable.” In trying to legalize sports betting in New Jersey, the congressman has proposed amending PASPA, which bars sports betting in all but four states: Nevada, Delaware, Montana and Oregon. He noted that while sports leagues and teams have fought against legal sports gambling in New Jersey, many of those same entities are profiting off daily fantasy sports.
Geoff Freeman, president of the American Gaming Association, provided written testimony before the hearing and met with several committee members in person. He said earlier in the week he is hopeful Wednesday’s hearing opens the door for broader discussions and acceptance of sports betting in America.
“We’ve been clear from Day 1: Daily fantasy has been a gift to the sports gambling discussion,” he said.
While every gallery seat in the Rayburn meeting room was filled Wednesday, attendance by subcommittee members was relatively sparse. It wasn’t immediately clear whether more hearings might follow or what additional steps the subcommittee might take.
“It is hard sometimes to get members to focus on this when they’re dealing with larger issues like the economy, a water crisis, terrorism or whatever,” Pallone said after the hearing. “Because it’s gaming, they tend to view this as frivolous. But it really isn’t because there’s so many jobs involved. The fact that so much of this operates throughout organized crime means that it should be addressed. I just hope that we can get more momentum.”