Fantasy Sports Scandal Equates to Potential Regulations

November 7, 2015 Posted in Fantsy Sports News by No Comments

Fantasy sports have actually been around for well over a decade, but it wasn’t until last year that they really started exploding in popularity across the Internet. Sites like DraftKings and FanDuel are taking in millions upon millions of dollars, while also paying out millions of dollars to their winners. There’s a slight hiccup here, however. You see, one of those winners included an employee of a fantasy site, DraftKings, who reportedly used inside information on draft statistics to win $350,000 on the competitor site FanDuel.

This quickly became seen as problematic by government officials and those advocates in the nation who want gambling to go away, primarily for morality’s sake. Since its inception, fantasy sports have been seen as games of skill, not of chance. The argument presented from the fantasy side is that players must be very knowledable of the game, and they must choose the best athletes who will score the most points. And this isn’t happening against house odds; it’s happening against other players. Fantasy team owner A is facing off against fantasy team owner B, both of whom picked their teams the same way and, logically speaking, start from the baseline of 0 before facing off against one another. This is why the game is considered skill.

However, as the United States government has proven before, all it takes is for the feds to sweepingly say that something is luck, and it’s thus going to be banned. Politicians aren’t necessarily concerned with logical, factual arguments. Were that the case, the nation wouldn’t be 18 trillion in debt, and we wouldn’t be stuck in the mud on so many vital issues. Politics is what matters to politicians, and if the morally-upright public starts questioning the legitimacy of fantasy sports, government may very well swoop in and ban it.

The Scandal in a Nutshell

But why would government even notice a scandal like the one that recently hit the fantasy world? Don’t they have bigger fish to fry. The issue with this fantasy scandal isn’t the money, nor is it really even to do with the genre itself. It’s how it played out that has government interested. Because an employee from DraftKings supposedly released an early report on draft percentages, not scheduled to come out for days, some people view this as equivalent to insider trading. What really makes it stick in the haughty crawl of many is that this employee actually won a whole lot of money. He didn’t just use insider information, he appears to have capitalized on it to the tune of $350,000. For most people, that’s like 8 full years of salary, and he won it in a single day, using information that he got earlier than the general public.

As anyone who followed the Martha Stewart case already knows, only government officials are allowed to participate in insider trading. It is literally part of American law that a federal politician is allowed to use insider knowledge to play the Stock Market, but no one else is allowed. So when other people do it, government acts. Even to the extent fantasy sports isn’t the market, and no real laws were broken, government is still looking a lot harder than fantasy today than they were yesterday.

What’s Coming on the Back End

In states like Florida and South Carolina, their federal representatives aren’t trying to clean up the streets, create jobs, promote fairness in pay and hiring, or improve schools. What they’re trying to do is ban gambling. Marco Rubio, and Lindsey Graham, among other Republican politicians, are trying to pass a bill into law called The Restoration Of Americas Wire Act that would make it illegal to offer online gambling in the entire nation. So even states that are allowed to set their own gambling laws, after the Department of Justice ruled they were allowed to do so in 2011, would have to ban gambling. This authoritarian measure might just get through, and it could theoretically end up including fantasy sports.

The likes of Rodger Goodell, the NFL’s Commissioner, claim that this fantasy scandal will not affect the NFL negatively. It won’t tarnish the brand, claims the Commish, but it’s not a bit of shade thrown on professional sports that the NFL needs to worry about. For about six or so years now, millions of dollars in revenue that have poured into the NFL come by way of fantasy players. The NFL was always popular, but it isn’t Tom Brady and Peyton Manning who made it a global powerhouse. It was fantasy sports that did that. More people watch games and buy more NFL-specific merchandise these days, like cable packages and dish sets, not only jerseys, specifically because of fantasy football. Were politicians to make fantasy football illegal, this means no more sites like DraftKings and FanDuel, and this means the NFL taking a monetary hit, not just a hit in reputation.

Let’s be honest. The NFL can survive a reputation hit. Look at Ray Rice, or dozens of other athletes who have had legal troubles. The public doesn’t rightly care. However, the NFL might not bounce back so quickly from a monetary hit, like what could come of a law making fantasy sports illegal.

In no way would these leagues collapse. The NFL, NBA, MLB, and other pro leagues still profit plenty enough that they wouldn’t fold were fantasy to become illegal. However, they would take a big financial hit in profits, and this means renegotiating with players’ unions and readjusting salary caps. This could lead to lockouts and even long-term strikes in the pro leagues that people love. So not only would anti-fantasy laws really screw fantasy players up, but it would hurt sports fans who might end up having to watch scabs play or wait an extra six months before the season kicks off.

This isn’t purely speculative nonsense. Let’s consider two very solid, very valid, historically accurate points here.

Point number 1: The American government is famous for passing laws that ban gambling. Any time the public starts to get on its moral high horse about gambling being damaging, government typically acts by banning it. For over a century now the federal government has had a clear attitude of prohibition as policy; e.g. if you disallow Americans the right to do something, they won’t do it. And although this is demonstrably untrue, as illustrated by the “war” on drugs, government continues to operate in this fashion. So it’s not outside the realm of possibility that government will ultimately try to ban fantasy sports.

Point number 2: Anytime in NFL or NBA history, even toss in the MLB, there has been a dispute with money, the leagues have been put on hold while players fight the owners. Generally speaking, we’re talking about a few million dollars, or a few percentage points of guaranteed salaries, average salaries, and other incentives like benefits. Imagine the NFL suddenly making $60 million less in profits because they lose the fantasy angle. This means NFL teams earning less profit, and this means either paying players less, and/or charging fans more. Any way you slice it, this could lead to a revolt. It wouldn’t crash the league, but it could potentially result in strikes and hold-outs.

Now, we’re not necessarily predicting that any of these things happen. It’s just important to note that since the fantasy scandal, government has been looking a lot harder at legal fantasy sports and considering whether or not they should start regulating the genre. With regulation comes bans, and with bans comes a lot of bad things that no sports fans want.

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