Igaming Focus: Lobby wars

October 19, 2023 8:00 AM
Photo: Shutterstock
  • Jake Pollard, CDC Gaming Reports
October 19, 2023 8:00 AM
  • Jake Pollard, CDC Gaming Reports

The war of words that daily fantasy sports operators have been waging against the leading U.S. sportsbooks is revealing of what’s at stake on both sides of the argument.     

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The lobbying drive initiated by the U.S. online sports betting leaders DraftKings and FanDuel on the fantasy sports operators Underdog Fantasy and Prize Picks is instructive on a number of levels.   

One obvious point to make is that for all the industry talk of embracing competition and nurturing innovation, operators of all hues, whether they are commercial or monopolies, will always aim to protect their market shares and future proof against the possibility of meaningful challengers emerging. If that is not possible, they will at least aim to make it as difficult as possible for any new(ish) company to come up and compete meaningfully against them. 

Following on from that point, lobbying is par for the course. It happens with well-established and mature industries, but is especially true of newer and recently-regulated sectors such as online gaming and betting. To use a cliché, the stakes are important enough to warrant such moves and at such an early stage of the industry’s lifecycle, they can have a major impact on the fortunes of the companies involved. 

A third point is that this debate – whether daily fantasy sports (DFS), especially the latest version that we are currently witnessing, is the same as real-money gambling – is as old as the hills, and seemingly nowhere near to being resolved. 

Nonetheless, it’s a statement of the obvious to say the wave of sports betting regulation that has swept the U.S. since 2018 gives it added relevance. Indeed, the rise of DraftKings, FanDuel and a few others has been speedy, but the strange (near 10-year) symmetry that saw DFS act as the product that enabled their rise is noteworthy.  It’s also ironic that companies that are so young are already resorting to lobbying tactics they would have been the first to decry not that long ago. But such is the speed at which things change in business. 

Summer madness
Over the course of the summer, state regulators from Wyoming, Florida, New York and Michigan sent cease and desist letters to Underdog Fantasy and PrizePicks ordering them to stop marketing their pick’em games, with the latter two banning the companies from operating within their state boundaries. 

The states contend that the DFS companies’ pick’em games against the house are too close to or very similar to the prop bets that are found amid online sportsbooks’ offerings.

Underdog’s CEO Jeremy Levine was quick to blame DraftKings and FanDuel for the turn of events and didn’t hold back in his criticisms as he accused them of using their lobbying contacts to protect themselves against young and hungry corporate tyros like Underdog. 

Last week DraftKings CEO Jason Robins and his counterpart Amy Howe at FanDuel put on their best “we’re only trying to clear up the legal uncertainty” expressions as they debated all things online betting and gaming at the Global Gaming Expo in Las Vegas. 

But seeing once-challenger brands use the same tactics as grizzled monopolies to defend their newly-established business patches is always ironic – which, to be fair, Robins also admitted during his talk with CNN’s Contessa Brewer. 

Legalese and products
The debates about whether DFS is the same as sports betting will rage on forever, but the distinctions between fantasy and real-money betting products as they are today seem pretty thin (to this observer anyway). 

A column published in August by USA Today’s betting columnist contended that “the key distinction between fantasy sports and sports betting is supposed to be in how much skill each requires”. It added that the lines set by either a DFS company or a sportsbook, neither of whom are “in the business of losing money”, means “skill mostly goes out the window” and is why he struggles “to see the difference between pick’em-style games and prop bet parlays”.

More generally, whether at the beginning of a season or every weekend, fantasy players pick lines, study form and statistics to create their rosters and place their selections. How that practice is different from a real-money punter who places huge payout parlays at the start of a season or wagers every matchday is one of those mysteries lawyers are paid so handsomely to explain. Still, in such a setting it’s not difficult to see why DraftKings and FanDuel are using their considerable resources to put legal pressure on Underdog Fantasy and Prize Picks.

Speaking to SBC Americas, Underdog CEO Jeremy Levine conceded that the lines are very hard to distinguish. Fantasy sports may not be sports betting, “but is it gambling?”, he was asked. 

He replied: “Great question. Legally? No. Colloquially? It’s for people to determine. If you go to play a game of golf with a friend and bet money on it, is that gambling? If you say yes, you may say that real-money fantasy sports are. If you say no, it’s probably because, per the terminology of the laws, it is not. And if you say that is not, then fantasy sports is not.”

In the podcast SBC put out to go with the piece, article author Jessica Welman said that with Underdog already stating its plans to enter online sports betting and iCasino, the moves should also be seen through a commercial lens. Welman added that Levine had told her that Underdog already has more customers than DraftKings and FanDuel had when they were DFS-only brands nearly 10 years ago and if it were a current online sportsbook it would be number four. (But then he would say that.) In any case, the debate will rage on for as long as operators push the legal boundaries of the products they market to players. 

But for a stark contrast of how different things could be, we can just look across the ocean to France and its plans to regulate NFT-based fantasy sports leagues. The government is railroading Web 3-specific legislation, despite industry stakeholders including the gambling regulator disagreeing with it, to ensure NFT-fantasy sports companies like Sorare, a French tech unicorn that has the ear of the government, can operate openly and legally – but without the heavy taxes that real-money gambling operators are subject to. 

But maybe that’s what lobbying really boils down to – if you’ve got it, you better make full use of it.