“Do not gloat when your enemy falls; when they stumble, do not let your heart rejoice.”
This Biblical proverb has characterized the casino industry’s response so far to the stunning run of scandals and negative publicity that has surrounded the largest daily fantasy sports operators in the past month. At the very least, anyone who has giddily rejoiced has done so behind closed doors.
As easy as it would have been to urge authorities to move in for the kill on an industry that many regard as arrogant and reckless, the American Gaming Association has opted for the long game – recognizing that any decisions made in haste regarding this sensitive area will surely have unintended consequences in the future.
For months, the meteoric rise of DFS has left casino minds scratching their heads, concerned that their key growth market, millennials, was being taken by unregulated operators claiming to be more like chess or the stock market than gambling. Prominent figures such as Jim Murren and Joe Asher were highly critical of DFS companies and their contention that the games were fundamentally different from other types of wagering.
Rather than a full assault, the AGA has opted for the middle ground, standing by its plea for greater legal clarity for the games and the UIGEA exemption that they operate under. The AGA has even – in a sense – come to the defense of DFS after a bruising New York Times editorial urged a crackdown on “online fantasy sports gambling,” shortly after the insider information scandal at DraftKings became public.
While The Times was the first to smell blood with its editorial, following that with a deep read that linked DFS to other types of illegal gambling and offshore betting rings, other vultures have quickly converged on DFS. Negative coverage of DFS has metastasized.
Mainstream media coverage of DFS has now made a full 180 degree pivot. Articles highlighting how single, overweight, acne-plagued guys could win six-figure sums playing DFS from their parents’ basements are gone. Now starring are news stories describing how these games are largely rigged against the average player, lack any meaningful compliance procedures, and operate on highly dubious legal grounding.
It is difficult to overstate how much the past month has been an avalanche of bad news for the daily fantasy sports business. The decision by the Nevada Gaming Control Board to require DFS sites to apply for gaming licenses, new investigations by federal law enforcement and prosecutors, and the NCAA’s deeming of DFS operators as “sports wagering entities” have morphed what was initially an insider trading scandal into a larger catastrophe with serious reputational wounds.
But as the business model of the DFS operators faces ruin, the AGA and similar parties seem largely content to simply watch the havoc. One reason is that a crackdown on DFS wagering could have problematic implications down the road for other traditional forms of internet gambling and could stifle innovation in the space. The trade group had previously pushed Internet gambling to the back burner, but it is still a major consideration.
Also, amid the carnage, there remains a sports wagering game that is still extremely popular, something held out to young consumers as the ticket to the Promised Land. And because of its nauseating ad blitz, the industry is now widely known. Given this appeal and the fragile financial states of DFS operators, it is not difficult to imagine a casino company making a splash with a too-good-to-refuse bid for either FanDuel or DraftKings, or for a smaller rival.
Under the right circumstances, casinos taking over the operations of daily fantasy sports could be like having one’s cake and eating it too. If federal and/or state regulations are introduced to govern DFS – a virtual certainty at this point – casinos would be the ones best positioned to navigate and manage in such a new world, given their longstanding history of operating in heavily regulated environments.
The other advantage of a casino venture into DFS is that the games are embraced by sports leagues because they drive consumption while limiting the match-fixing risks posed by traditional daily sports betting. Such an alliance would allow casinos and sports leagues to set aside the contentious issue of legalizing traditional sports betting, which the National Football League – the most powerful sports league in the U.S. – still vigorously opposes.
