Alabama fantasy sports bill fails in Senate ahead of vote
The daily fantasy sports (DFS) industry apparently will not be getting the green-light to operate in Alabama any time soon. Despite unanimously passing the Senate Tourism and Marketing Committee earlier this month, SB325 —which would establish the Fantasy Contests Act and provide for the registration of certain fantasy sports operators conducting fantasy sports contests within the state — was decisively shut down on the floor during Tuesday’s session before even given a chance to take a vote on the matter. History of Fantasy Sports in Alabama In April 2016, former state Attorney General Luther Strange sent cease-and-desist letters to two Daily Fantasy Sports companies — DraftKings and FanDuel — after determining that paid daily fantasy sports contests constitute illegal gambling. In DFS, participants pay to create a roster of players, then pit their roster against those of other participants. Whomever’s roster performs the best that day within a certain pool wins prize money through the site. According to Alabama code section 13A-20-12, a person participates in gambling if he or she “stakes or risks something of value upon the outcome of a contest of chance or a future contingent event not under his control or influence, upon an agreement or understanding that he or someone else will receive something of value in the event of a certain outcome.” Gambling in Alabama is illegal, with a few exceptions including buying securities and commodities, insurance, and some grandfathered activities. DFS sites often contend they are games of skill, not of chance, and thus aren’t covered under most states’ gambling laws, nevertheless the companies complied with Strange’s request. Sanford contends 400,000 Alabamans played fantasy sports before it was banned from the Yellowhammer State. Previous legislative attempts to legalize fantasy sports For three years now state lawmakers have endeavored to legalize fantasy sports. Last year the House passed its version of a bill doing just that, but the Senate adjourned for the session without ever taking it up. Since the bill’s sponsor, Huntsville-Republican state Sen. Paul Sanford, is retiring it is unknown whether or not the legislation will be introduced again in the future.
Fantasy Sports bill unanimously passes Senate Committee, advances
The Senate Tourism and Marketing Committee unanimously approved legislation on Wednesday that would legalize fantasy sports contests. Under existing law, there are no regulations relating to fantasy sports. Sponsored by Huntsville-Republican state Sen. Paul Sanford, SB325 would establish the Fantasy Contests Act and provide for the registration of certain fantasy sports operators conducting fantasy sports contests within the state. Specifically, the bill: Sets the registration and annual renewal fee for operators $5,000 for new operators $85,000 for existing operators with more than 5,000 customers Sets the minimum playing age at 19 Excludes contests based on collegiate and amateur events Installs consumer protections comparable to those in other states History of Fantasy Sports in Alabama In April 2016, former state Attorney General Luther Strange sent cease-and-desist letters to two Daily Fantasy Sports companies — DraftKings and FanDuel — after determining that paid daily fantasy sports contests constitute illegal gambling. In daily fantasy sports (DFS), participants pay to create a roster of players, then pit their roster against those of other participants. Whomever’s roster performs the best that day within a certain pool wins prize money through the site. According to Alabama code section 13A-20-12, a person participates in gambling if he or she “stakes or risks something of value upon the outcome of a contest of chance or a future contingent event not under his control or influence, upon an agreement or understanding that he or someone else will receive something of value in the event of a certain outcome.” Gambling in Alabama is illegal, with a few exceptions including buying securities and commodities, insurance, and some grandfathered activities. DFS sites often contend they are games of skill, not of chance, and thus aren’t covered under most states’ gambling laws, nevertheless the companies complied with Strange’s request. Sanford contends 400,000 Alabamans played fantasy sports before it was banned from the Yellowhammer State. Previous legislative attempts to legalize fantasy sports For three years now state lawmakers have endeavored to legalize fantasy sports. Last year the House passed its version of a bill doing just that, but the Senate adjourned for the session without ever taking it up. The bill now advances to the full Senate.
Gambling industry hopes casino mogul in White House pays off
Donald Trump will be the first U.S. president to have ever owned a casino, and the gambling industry is wondering how he will handle three major issues: internet gambling, sports betting and daily fantasy sports. The industry has sent its wish list to the president-elect. The American Gaming Association told The Associated Press it has asked Trump for fewer regulations, approval of sports betting, a crackdown on illegal gambling, tax reform and immigration policies that don’t dry up the flow of overseas gamblers – and workers – to U.S. casinos. “President Trump, his administration and Congress will unquestionably implement policies that will directly impact our industry for years to come,” Whitaker Askew, the association’s vice president, told the AP. Kirk Blalock, a lobbyist who worked for the George W. Bush administration, said Trump “comes to the table with a good, solid understanding of how the industry works and what the challenges are.” Just three states – New Jersey, Nevada and Delaware – allow internet gambling, and well-financed opponents, backed by billionaire casino magnate and Trump backer Sheldon Adelson, want to ban it nationwide. Trump and his daughter, Ivanka, formed a company in New Jersey to explore the possibility of offering internet gambling in New Jersey before the state legalized it in 2013, but never applied for a license to do it. In a brief interview in September, Trump told the AP he had not settled on a position regarding online gambling. “I have a lot of friends on both sides of this issue,” he said. His transition team did not respond to several recent requests for comment. The gaming association does not take a position on internet gambling. Sports betting is currently legal in four states: Nevada, Oregon, Delaware and Montana. And dozens of states are grappling with whether daily fantasy sports, in which players put up money to compete with each other to assemble teams of athletes who accrue points based on their real-world performances, constitutes a game of skill that does not need to be regulated, or gambling, which does. In a November 2015 interview with Fox Sports 1, Trump indicated he would not oppose sports betting or daily fantasy sports. “I’m OK with it because it’s happening anyway,” he said. Trump owned three casinos in Atlantic City, as well as one in Indiana for a time. Two of his former Atlantic City casinos, Trump Plaza and the Trump Taj Mahal, have closed. The third, Trump Marina, was sold to Texas billionaire Tilman Fertitta, who now runs it as the Golden Nugget. Steve Norton, an Indiana casino consultant who worked with Trump in the 1980s, predicted he will ultimately oppose nationwide approval of internet gambling, due in part to Adelson’s opposition, but said he does not think Trump would move to strip it from states that already offer it. “Sports betting, on the other hand is a multibillion-dollar industry, mostly illegal,” Norton said. “I believe the positives of oversight, taxing and ensuring fair odds outweigh any negatives, and hopefully Mr. Trump will support individual states rights, and help overturn” a federal ban. Norton predicted daily fantasy sports will be “a non-issue” for Trump, who will leave it to states to regulate or not. The association’s letter asks Trump to make sure Yucca Mountain in Nevada is not reconsidered as a repository for the nation’s nuclear waste because it is just 90 miles from Las Vegas. Republished with permission of The Associated Press.
Daniel Sutter: An economics lesson from daily fantasy sports
New York Attorney General Eric Schneiderman announced last week that daily fantasy sports (DFS) sites Fan Duel and Draft Kings will stop paid contests in the state, because DFS amounts to illegal sports betting. Accusations last fall of “insider trading” against the sites, which seem to have precipitated legal action, offer a lesson on the discovery function of economies. First some background. Fantasy sports players choose pro players for their team, with game stats counting for the fantasy team. People generally play in season-long leagues with friends; fantasy football originated in the 1960s and Rotisserie league baseball in the 1980s. DFS involves one day (or week in the NFL) games, which particularly appeals to fans not interested in managing a fantasy team for an entire season. Large DFS tournaments draw thousands of entries and offer prizes over $1 million. Whether DFS constitutes gambling depends on the details of state law and is not my concern here. Massachusetts’ Attorney General just last week decided DFS sites could continue to operate, subject to regulation. States laws clearly differ on this question. The insider trading allegations involved employees playing on other DFS websites, which could provide an unfair advantage. A contrarian lineup offers the best hope of winning a large prize in a contest with thousands of entrants. A team with the best, most popular players might be more likely to win, but lots of players will split the prize. Really big wins require teams of less frequently selected players who have great games. Employees could use selection patterns in tournaments on their site to craft contrarian teams to field on other sites. Such information offers an advantage, but not the guaranteed profit of true insider trading. Discovery in economies was first highlighted by economist Friedrich Hayek and refers to the knowledge we gain through the operation of the economy. Most of our economic knowledge emerged from economic action. We know now that the corporation is an efficient business organization and that oil has hundreds of economic uses. But we did not know these things before economic activity. Oil deposits became a valuable resource only when people learned how to drill for and refine oil. Competition in sports offers a parallel. We discover the best college football teams each year through the season’s contests. Unexpected Heisman Trophy candidates and national championship contending teams can emerge. These surprises personify discovery, and demonstrate that we must play the games to learn the best teams and players. Economic discovery means that we constantly learn new things and must always be ready to adjust our plans accordingly. Any business which gets too wedded to the old ways of doing things runs the risk of obsolescence. We cannot know what we will learn during the operation of the economy. Consider now the evaluation of the DFS insider trading charges. Draft Kings and Fan Duel already did not let their employees play on their own sites – they recognized the potential conflict of interest. But neither recognized the potential use of selection patterns by employees on other sites for unfair advantage. Both Fan Duel and Draft Kings banned their employees from playing for money on other DFS sites after the recognizing the problem, and for good reason. Customers will play less if they thought that DFS contests were unfair. In a world with discovery, this is part of the learning process. Someone who does not recognize the role of discovery is more likely to see nefarious activity. If DFS knew everything when they began operations, the choice to let their employees play on other sites looks calculated. Hindsight is usually 20/20, and if we ignore discovery, we might also believe that foresight is 20/20. Unfortunately too many policymakers and even economists ignore the role of discovery. This may not be an accident. For policymakers seeking to run the economy, discovery is a subversive concept. Would-be government planners want us to believe that they know how to solve all of our problems. Economic discovery explains why would-be planners cannot know everything needed to run society. • • • Daniel Sutter is the Charles G. Koch Professor of Economics with the Manuel H. Johnson Center for Political Economy at Troy University and host of Econversations on TrojanVision.
