The fallout from the ongoing ‘lobbying files’ – aka the regulatory battles DraftKings and FanDuel are taking part in to prevent the daily fantasy sports (DFS) brands Underdog Fantasy and PrizePicks from operating across a number of states – continues apace.
The ‘files’ (CDC Gaming Reports advises the term be used very loosely) shed light on how the sports betting market leaders have been using their corporate clout to lobby state regulators into banning Underdog Fantasy and PrizePicks. As ever with these types of revelations the information provides rarely seen, if widely suspected, insights into how these activities take place.
Recall, DraftKings and FanDuel contend that the fantasy operators are undermining their real money betting revenues with products that, they say, fly too close to the sun when it comes to their legality. Both companies believe pick’ems are in fact very much like the prop bets punters can find on licensed online bookmakers’ websites across the U.S.
Run for the hills
As I wrote last week, the debate around the legality of real money and fantasy sports betting is as old as the hills and likely to continue for many years.
But where the initial fantasy wave initiated by DraftKings and FanDuel in 2014-15 might have been the ‘old school’ equivalent of DFS, the legal battles taking place now are turbocharged by the sports betting regulations and product innovations of the past five years.
Indeed, it’s fair to state that DraftKings and FanDuel view the similarity of the DFS brands’ products to their own as much more of a threat than they ever were to any incumbent nearly 10 years ago. In fairness, that’s also because there were no established online betting brands to challenge at the time – but the point is still worth making.
PrizePicks CEO Adam Wexler alluded to the innovation factor in a recent interview he gave to Yogonet: “Product innovation has surpassed what are now antiquated views on what fantasy is and isn’t – views primarily pushed by large sportsbook casinos. There is an immediate need among consumers, vendors, and operators for clarity in DFS.”
More revealing of the view he and other executives probably held of DraftKings’ and FanDuel’s (very) aggressive marketing campaigns at the time, and the attendant negative regulatory scrutiny they attracted, Wexler said: “The aggressive tactics of DraftKings and FanDuel brought the entire industry to the brink of existence.”
In other words, DraftKings’ and FanDuel’s growth strategies at the time boiled down to intense marketing sprees that pushed the legal boundaries as far as they could go. The resulting regulatory scrutiny they attracted led to DFS getting regulated in certain states, but little else.
Plus ça change…
Still, as Brendan Bussman, founder of the government and public affairs consultancy B Global, noted in his introduction to a recent Truist legislative update on U.S. gambling, “the more things change, the more things stay the same”.
Bussman made the point that “the wide world of gaming continues to evolve but also continues some of the same conversations that it has faced over the course of its first expansion from Las Vegas to New Jersey some 45 years ago”.
From that initial expansion of slots to that of sports betting and iGaming, “many of the same conversations have occurred and will continue to occur over the course of time”, he wrote.
… plus c’est la même chose
Bussman added that “technology, innovation and loopholes in the legislative and regulatory construct” meant some executives “will always push the envelope” and this is clearly visible in the debates “between sports betting and Daily Fantasy Sports on the games that are allowed”.
The battle “will continue to rage between existing licensed operators in the market versus those that are pushing the envelope in other ways”, he added.
One good thing, if that term can be used, about the arguments currently raging between the fixed odds betting leaders and the DFS operators, is that the pick’em products at the heart of their disagreement come from the tech advances and product developments the whole sector has undergone in recent years.
Indeed, beyond pick’ems, the rise of in-play bets, micro-betting or same game parlays in real money sports betting is revealing of a sector that is constantly developing and looking for new products that will resonate with the public.
But equally, another facet of the tech advances of recent years can be seen when looking at the progress of web3 companies in the gaming space. As opposed to Underdog Fantasy or Prize Picks, the web3 platforms operate on the blockchain, but the game mechanics of their fantasy formats are the same, and, having closely followed France’s regulatory developments in the past six months and its passing of regulations related to what it calls ‘games with monetizable digital objects’ as part of its digital safety bill, web3 companies’ perspective on the vertical is miles apart from that of the real money gambling sector.
In short, the new regulations will allow crypto-backed, NFT-based fantasy operators like Sorare to offer their products in a fully regulated environment, and the only tax that will be levied on those web3 operators is 20% VAT, which has caused consternation among gambling industry stakeholders, especially as online casino is still not regulated in the country.
But for this observer, one of the most striking aspects of the debates was the disconnect between how those web3 companies view their activities and the reality of online gambling when it comes to issues like age verification or fighting money laundering.
The parliamentary debates revealed that as part of the new regulations, lawmakers would not make age and ID checks mandatory at sign up or cash out. The measure was reversed following protests from MPs, while the web3 companies were told that the regulations related to fighting money laundering were non-negotiable. As one of the lawyers present at the debates noted, “in the end the web3 sector came to understand this”.
In common with the U.S. it must be said, those French regulations also completely ignore the huge real-money crypto gambling sector, which not only dwarfs those fantasy operators, but is also rivaling and in some cases ahead of the ‘traditional’ sector when it comes to revenues and financial muscle.
Still, things may change in the future, but for the next few years at least, they are certainly staying the same.