OT/Meta Massachusetts attorney general investigating the legality of Draft Kings

Submitted by julesh on September 17th, 2015 at 3:52 PM
I'm on mobile so I'm not going to try to embed: https://twitter.com/fox25news/status/644547056665788416 While I would hate for mgoblog to lose a sponsor, I would be so happy if I could stop seeing/hearing ads everywhere for both DK and Fan Duel.

Comments

Mr Miggle

September 17th, 2015 at 4:42 PM ^

The argumnts advanced for why gambling on fantasy sports should be legal were based on traditional season long pools. They are much weaker with regards to the weeky pools they advertise endlessly. Some ads highlight how easy it is and downplay that any skill is needed to win big. This kind of nvestigation was inevitable. Hopefully it leads to a reexamination of the ill founded ban on poker.

 

Yeoman

September 18th, 2015 at 12:18 AM ^

The claim, when the DFS guys were making their legality pitch, was that daily/weekly pools were much less chance-ridden than season-long pools because an injury can only wipe out your one daily play, not an entire three months or a year.

Focusing on that one risk instead of the much larger question of sample size was BS, of course, but if the audience really wants to buy an argument they will, whether it's valid or not.

bluesalt

September 17th, 2015 at 5:45 PM ^

I get your point, sort of, but gambling is very regulated in states where it's legal, and in many states it isn't. I've got to imagine that daily/weekly fantasy sports does billions a year. If it's against the law and doing that much volume, they'd be neglectful to not look into it.

It's not the AG's job to write the laws. It's his job to enforce them. And one being blatantly broken at that scale.. Really I'm shocked no one else has investigated.

Asgardian

September 17th, 2015 at 3:59 PM ^

http://www.legalsportsreport.com/3517/daily-fantasy-sports-illegal-in-m…

September 2, 2015

"The Michigan Gaming Control Board believes that daily fantasy sports are not legal in the state, according to areport from GamblingCompliance (paywall), following the introduction of a fantasy bill introduced last week."

MGCB executive director Rick Kalm said he believes playing daily fantasy sports for real money is “illegal under current Michigan law,” according to GC.

The GC report and the comments from Kalm come on the heels of a fantasy sports bill being introduced last week by Sen. Curtis Hertel. Hertel’s bill seeks to exclude fantasy sports from gaming law in the state, making it legal as a “game of skill.”

Elsewhere:

One of the reasons Draft Kings & Fan Duel own this market is because Nevada regulators have advised casinos in Las Vegas to go slow on Daily Fantasy Sports until they have completed their own review of the product:

http://www.legalsportsreport.com/2689/nevada-checking-legality-of-dfs/

The Nevada Gaming Control Board is currently undergoing its own “legal analysis” of daily fantasy sports.

 

 

Seth

September 17th, 2015 at 4:47 PM ^

Is that what Vegas is saying? They were told to slow-play because of legality concerns? Because, like, Vegas didn't have daily fantasy games out there too?

I am not as familiar with FanDuel, but Draft Kings was built by buying up the uber fantasy nerds. You'll remember Larry of Draftstreet, who was also Larry the guy who plays with stat sheets. Draft Kings acquired him and his database, and now has him putting projection lines on Baseball-Analysis.com etc. Football doesn't lend itself well to statistical projections or else we'd have a weekly article on it by now.

The focus on statistics is to make the dollar amounts as fair as possible. To me that sounds like a game: create fair rules where people can test their wits and knowledge. What they don't do is set some guys purposefully low to entice people to play, as Vegas is constantly doing with lines for Michigan.

Asgardian

September 17th, 2015 at 6:02 PM ^

Ultimately this is going to be regulated as legal/illegal on a state by state basis.

Many states have not taken a position yet.  There is a strong argument that it is a game of skill and therefore legal, but it's yet-to-be-clarified in many places.

However following the lessons learned from the Online Poker ban, the brick-and-mortar casinos are awaiting clarity before investing in the space.

Wouldn't be the first time an industry allowed online startups to disrupt it or steal it's new growth business.

http://www.legalsportsreport.com/2617/boyd-gaming-ceo-says-dfs-is-gambl…

 

Bloomberg had a big (unflattering? I guess it depends on your perspective) expose on Daily Fantasy Sports last week following the advertising barage:

http://www.bloomberg.com/news/articles/2015-09-10/you-aren-t-good-enoug…

 

The Mad Hatter

September 17th, 2015 at 4:02 PM ^

The Feds have ruled that fantasy football is a game of "skill" as opposed to a game of "chance", thus exempting it from the federal level prohibitions on internet gambling.

Individual states may pass laws making it illegal, but they haven't yet.

The Mad Hatter

September 17th, 2015 at 4:09 PM ^

And IMO poker is more of a skill game than one of chance, but the feds disagree.

Thing is, Draft Kings has very influential and wealthy financial backers, which is why you're seeking all of the ads lately.  They're not going to outlaw that business on the federal level.  Its legality has already been bought and paid for with Super PAC donations. 

madmaxweb

September 17th, 2015 at 4:06 PM ^

Why is this country so against online gambling like DraftKings and FanDuel? If they regulate it, it can be a decent stream of revenue for the government.

madmaxweb

September 17th, 2015 at 4:22 PM ^

I totally agree, we don't need anymore regulations but for something this small, IMO it's small I guess, I'd rather have it regulated than not have it all because some idiots in the government decides it shouldn't be allowed with what seems to be no good reason backing them up.

wahooverine

September 17th, 2015 at 4:53 PM ^

There is almost nothing in your material life that is not "regulated" in some way by the federal government. Most of it is invisible to you, other than in prices of things, and most of it is usually a good idea and effective. Only regulation of controverial things like tobacco, alchohol, firearms, finance, environment/oil etc are subject to the "bureacracy" criticism, especially because they are politically divisive, but they constitute of a fraction of the things that are regulated. Almost no industry can exist, at least in a mature state, without regulation in a modern economy and legal system.

EGD

September 18th, 2015 at 12:41 PM ^

Regulation is inherently bad?  Okay.  Let's imagine a world with no regulations whatsoever.

You grow some delicious apples in your backyard.  Your neighbor agrees they look delicious, so your neighbor comes over to your yard and starts picking apples off your tree.  You go outside to ask him what he's doing, and he punches you in the face.  The neighbor is bigger and stronger than you are, so there is nothing you can do to stop him from punching you in the face and taking your apples.

A week later, another neighbor knocks on your door and says there is a person in the neighborhood who's been beating everybody up and stealing food out of their gardens.  The neighborhood is hoping to establish some rules that say "(i) no punching people in the face" and "(ii) no stealing," and will I come to a meeting to vote on it.  

But you are against regulation, so you would have to say "no, I don't mind being punched in the face and having my apples stolen."  Congratulations: your imaginary world sucks.

As I think this hypothetical demonstrates, there is undoubtedly some baseline level of regulation that any society needs to function at even the most basic level.  The real question is, how far beyond that do we go?  Too much regulation, or poorly-designed regulation, is also bad--we wouldn't want rules saying "you can only grow apple varieties that the bully neighbor doesn't like," for instance--but so is inadequate regulation.   

TomJ

September 17th, 2015 at 11:33 PM ^

And I would add that regulation goes part and parcel with capitalism. No one wants unfettered capitalism, because the only motivation of capitalists is to make money, and making money often comes at the expense of the public good. For example, chemical companies could make a lot more money if they could simply dump their refuse in streams; power companies could make a lot more money if they could just burn whatever they want anywhere they want. And they WOULD do these things without regulations.

Regulations are how the government protects the rest of us from people in power. Regulations are good. 

bluesalt

September 17th, 2015 at 6:02 PM ^

Wouldn't you rather have regulation?

I mean, things rarely move from totally legal to no-holds-barred. If you want it, just concede regulation. It doesn't have to be highly regulated -- just make sure that a) these companies have enough cash to pay out people who draw down their accounts (which I think PokerStars didn't do), and make sure that no one is allowed to cheat (for example, the company lets some competitors pick their rosters after games have started). I don't know if they provide tax forms to winners who make enough, but they should do that too.

That's not too much, just an occasional audit/reporting. If the government wants to dip their hand in the pot in the form of licenses (to help pay for the regulating or just make money), they could do that too, but it's not requisite.

Yeoman

September 17th, 2015 at 9:27 PM ^

From the draftkings FAQ:
 

 

You do have to pay taxes on your Cumulative Net Profit from fantasy sports. DraftKings is required to issue 1099 tax form(s) to any player who has a cumulative net profit in excess of $600 for the calendar year. This is calculated by the approximate value as ((prizes won - entry fees)+bonuses).

 

They'd be idiots to not do this. They're in a struggle to stay legal and the very last thing they need is the IRS breathing down their neck.

Hadn't thought about it before, but now I find myself wondering--can you carry gambling losses forward to offset a big win in a future year, the way you do with capital gains?

Picktown GoBlue

September 17th, 2015 at 10:37 PM ^

Intuit's site:

Limitations on loss deductions

The amount of gambling losses you can deduct can never exceed the winnings you report as income. For example, if you have $5,000 in winnings but $8,000 in losses, your deduction is limited to $5,000. You could not write off the remaining $3,000, or carry it forward to future years.

Yeoman

September 18th, 2015 at 12:12 AM ^

It's a game of skill that some people are using as their primary source of income. Like a professional chess player, for example, who reports his income as if he's running a business and is certainly allowed to carry his losses forward if he has a terrible year and can't meet expenses.

Or that's what they claim, anyway, when they're making the case for legality. Will the IRS buy it?

Erik_in_Dayton

September 17th, 2015 at 4:25 PM ^

I have mixed feelings about outlawing gambling, but the best reason not to allow it IMO is that it generally leads to money going from people who can't afford to lose it to people who don't need it.  It's all well and good to say, "Well, those idiots shouldn't have gambled their money," but those people don't then disappear from the earth once they're broke.  They're still around, and society as a whole suffers one way or the other from their poverty.

Erik_in_Dayton

September 17th, 2015 at 4:44 PM ^

...(and please keep in mind I'm trying to describe a position that I'm not totally sold on) they at least get something tangible out of buying said stuff.  Most people walk out of a casino or a fantasy football season with nothing. 

There's also the addiction factor for some people.  People don't receive anything tangible when they pay to watch a movie, but they probably aren't paying for that movie b/c they have an addiction that overwhelms their conscious will. 

Seth

September 17th, 2015 at 4:52 PM ^

There is absolutely a poverty issue with gambling in general. I think that argument is weakest in this case. DK takes money from sports fans, especially online sports fans. The average MGoBlog reader is probably in the top 20% of Americans, because we have a lot of grad educations and high-paying professions, and highly motivated, intellectual people. Spend one day trying to track the Draft Kings people down or working through their system and you'll meet a bunch of 20-somethings who know way too much about the San Francisco Giants for an East Coaster, and never sleep.

Erik_in_Dayton

September 17th, 2015 at 5:26 PM ^

I don't think there is a compelling argument against letting someone go into a casino when that person knows that they're buying a couple of hours of entertainment and that they'll likely leave with less money than they had when they came in.  That's like going to see a musical or, as you say, a basketball game. But the pro-casino side, so to speak, has to acknowledge that a decent amount of a casino's customers don't fit into that category. 

ElBictors

September 17th, 2015 at 5:33 PM ^

Well that and all those gigantic casinos on the strip weren't built because everyone wins.

I know a couple examples of people who moved to Vegas and started gambling too much because it was there for them.

I like Seth's explanation regarding demographics for DK and FD and MGB. Locally we had an out of state gaming co pan try to get voters to approve a casino that would have been in a very impoverished area and the Last thing those folks need is that sort of money drain when they're already barely getting by.