Why I Don’t Agree With New York Banning DraftKings and FanDuel

On Tuesday, New York attorney general Eric Schneiderman ordered daily fantasy sports (DFS) operators DraftKings and FanDuel to stop accepting bets by state residents, arguing that the companies’ games are considered illegal gambling, according to state law. I disagree with the decision, which affects me as a New York resident who has been playing in NFL contests on DraftKings this season. The companies plan to appeal the decision.

For some background, DFS companies are legal under federal law; a 2006 federal law exempted fantasy sports from a prohibition that was instituted on online gaming, under the guidance that it is a game of skill as opposed to luck. Schneiderman apparently doesn’t agree that DFS is legal under that law, saying “it is clear that DraftKings and FanDuel are the leaders of a massive, multibillion-dollar scheme intended to evade the law and fleece sports fans across the country.”

In his letter to DraftKings, Scheiderman stressed some of the differences between DFS and traditional, seasonlong fantasy sports that makes DFS illegal while the seasonlong variety is legal, including that the “instant gratification” makes it easy to play DFS, which has “no long-term strategy.” He also argues that DFS is closer to poker — in that a small number of pros profit at the expense of more-casual players — than a lottery. According to Schneiderman’s investigation of the site’s data, the top one percent of winners get the majority of the winnings.

Let me address the points made by Schneiderman. First, I think comparing DFS to poker hurts his argument because I have long argued that poker is a game of skill that, like DFS, should be exempt from that 2006 ban on online gambling. Schneiderman seems to think that because the outcome of the contests relies on outside forces that the DFS players cannot control — namely the athletes — there’s no skill involved in winning at DFS. That couldn’t be further from the truth. Yes, DFS participants have no control over the performance of the players they select, but there is skill involved in choosing which players you want on your team. The people who do it right study stats of previous games and the players’ matchups in the coming games to determine who to select — you’re not randomly selecting players with no basis for your choices.

This also goes into my counterargument to Schneiderman’s point that the top one percent of DraftKings players win the most money. Many of them are DFS professionals who do it full-time. They spend hours, and even days, to select their lineups each week. Conversely, a casual player like me often spends some time on Sunday morning choosing players before the kickoff the 1:00 games. Naturally, you would expect the people who are able to put more time and research into it to win more often — and that would kind of indicate there’s some skill involved in DFS, not that it’s a “multibillion-dollar scheme,” which was the conclusion that Schneiderman jumped to.

Further, those DFS pros are wagering a lot of money, with the possibility of a large payout. So, of course, they’re going to get the majority of the winnings when most DFS players are probably closer to me; I play in one $3 contest a week, and sometimes add a second, similarly priced contest. I don’t expect to win thousands of dollars when I’m wagering so little. I’ve won $10 each of the past two weeks, which is a decent return on my small investment.

Going back to Schneiderman’s letter, he charges that DraftKings promotes its games as “a path to easy riches that anyone can win,” enticing player with claims of becoming a millionaire. That scenario sounds familiar. Where have I previously heard claims of easy riches and becoming a millionaire? Oh yeah, that’s right, I’m thinking of New York Lottery commercials. Of course, that’s it.

So how do DraftKings’ and FanDuel’s claims of winning big differ from the New York Lottery’s? Simple. New York runs its lottery and profits from the people who gamble on it, hoping to win millions in contests in which they have no control over the outcome. Which is pretty much the argument Schneiderman makes for banning DFS — which, I should point out, New York doesn’t make any money off of. And that, in my opinion, is why Schneiderman is going after the DFS companies — he wants his share of the pie from the more than 500,000 New Yorkers who play DFS, according to DraftKings spokeswoman Sabrina Macias.

The fact that Schneiderman only banned DraftKings and FanDuel — by far the two largest and most successful DFS operations — and not the other, smaller sites that run DFS games seems to confirm my suspicion that it’s about money. He is going after the two sites that make the most money off of DFS becasue the state stands to gain the most by going after those two sites.

So the solution is simple. Rather than banning DFS, New York should regulate and tax it. By regulating it, the state can control how DraftKIngs and FanDuel run their games, to make sure it’s not the “scheme” that Schneiderman thinks the sites are running. By taxing it, New York gets its share of the millions of dollars that the sites take in from New York residents. New York is obviously not opposed to gambling; in addition to the lottery, the state regulates the New York Racing Association, which runs several horse racing tracks across the state, and a couple years ago legalized casino gaming other than the Indian casinos that have long operated on Indian reservations in the state.

Thoughts?