Consumers Should Call ‘Foul’ on Maryland Daily Fantasy Sports Restrictions

By: Jesse Hathaway

As National Football League (NFL) players report to their teams’ training camp, fans’ minds are beginning to turn to the growing national pastime of fantasy football. Unfortunately for sports fans, lawmakers and regulators in some states are working to crack down on online fantasy sports competitions, making it more difficult for consumers to show off their knowledge and skill of all things football.

For example, in October, new regulations proposed by Maryland State Comptroller Peter Franchot may take effect that restrict how consumers can compete in daily fantasy sports (DFS) competitions facilitated by websites such as FanDuel and DraftKings.

Daily fantasy sports are a type of fantasy sports game, in which participants draft a new team every week, instead of being stuck with the same roster over the entire season. Competition “seasons” in DFS usually last a single weekend. On Monday morning, it’s a new season and time to draft a new team. DFS and other kinds of fantasy sports only differ in the duration of the fantasy season.

Players are assigned a fictitious auction value, simulating the salary management concerns of a general manager on draft day; participants use their knowledge of NFL statistics and player news to compete to build the best team possible within the constraints of the game rules.

Winners are typically awarded with cash or prizes.

The proposed restrictions are functionally identical to gambling restrictions put into place by Maryland state lawmakers, effectively treating DFS as though it is the same as gambling in one of the state’s six government-approved casinos.

For example, state law prevents all consumers under 21 from entering physical casinos. Franchot’s anti-fun regulations, if enacted, would “ban daily fantasy sports game participation by Marylanders under 18.”

State law requires casinos to “limit the dollar amount that video lottery terminals will accept,” and Franchot’s regulations require DFS websites to “limit participants to a maximum of $1,000.”

By treating DFS as gambling, Maryland lawmakers are ignoring existing precedent on how to deal with this increasingly popular form of entertainment.

The Unlawful Internet Gambling Enforcement Act (UIGEA) was signed into law by President George W. Bush in 2006. UIGEA prohibits “gambling businesses from knowingly accepting payments in connection with the participation of another person in a bet or wager that involves the use of the Internet,” except for any fantasy sports competitions that reflect “the relative knowledge and skill of the participants and are determined predominantly by accumulated statistical results of the performance of individuals in multiple real-world sporting or other events.”

In other words, UIGEA, a bill cracking down on online gambling, exempted DFS from its scope. If DFS is a form of gambling, federal lawmakers would have written the law to treat fantasy sports as a form of gambling.

The difference between fantasy sports and gambling has also been recognized by many academics and public policy researchers.

In a 2007 paper published in the North Carolina Journal of Law & Technology, M. Christine Holleman writes that online fantasy sports competitions, such as those Maryland regulators are proposing to bring to heel, are not gambling and should not be treated as gambling.

“In general, the rule for determining whether an activity is gambling rests on the answers to two questions: ‘is the result of an activity separable from the element of chance, so that skill can be determinative, at least in some cases. Or is the result always sufficiently affected by the operation of chance that chance could always account for the result?’” wrote Holleman.

Because success in DFS is based on how well a participant selects players and how well one synthesizes news about the actions of players and teams, DFS is definitely a “game of skill” and not a “game of chance.”

Instead of hitting consumers on the blind side, lawmakers should resist the urge to unnecessarily regulate fun activities and products. Leaving consumers alone and allowing them to spend their money in enjoyable ways is a touchdown for everyone.

Jesse Hathaway ([email protected]) is a research fellow at The Heartland Institute.