Report: Florida grand jury investigating daily fantasy operators

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[Editor’s note: FanDuel is an advertiser of PFT and PFT Live on NBC Sports Radio. Also, NBC Sports has an equity stake in FanDuel.]

It’s one thing for a successful industry to face civil litigation; every large business inevitably gets sued. It’s quite another for a successful industry to face potential criminal liability.

According to Florida attorney Daniel Wallach, via Michael McCann of SI.com, the United States attorney’s office in Tampa currently is investigating daily fantasy sports operators for violation of the federal Illegal Gambling Business Act of 1970 and Florida law.

The Illegal Gambling Business Act defines an illegal gambling business as one that: (1) violates the laws of a state where its business is conducted; (2) involves five or more persons who manage, operate, or own the business; and (3) has been in operation for more than 30 continuous days or has gross revenue of $2,000 in any one day.

Section 894.14 of the Florida statutes provides that “[w]hoever stakes, bets or wagers any money or other thing of value upon the result of any trial or contest of skill, speed or power or endurance of human or beast” shall be guilty of a crime. So if DFS violates Florida gambling law, an operation with five or more persons running the business violates the Illegal Gambling Business Act.

That’s where the express permission for daily fantasy provided by Congress (and reportedly lobbied for by the NFL) in 2006 potentially intersects with state law that still considers daily fantasy gambling, even if federal law doesn’t. It’s the “B” side of the current national marijuana conundrum, where some states have made it legal and federal law still hasn’t. For daily fantasy, it’s not a federal crime standing alone, but where it’s a violation of state law it can become a federal crime based on the size of the operation.

In English, this means that the industry needs to tread lightly in states where the law conflicts with the federal finding that daily fantasy isn’t gambling because it’s premised not on chance but on skill.  Currently, the daily fantasy industry does not operate in Montana, Louisiana, Arizona, Washington, and Iowa. (Montana has the only clear, specific ban on fantasy sports.)

“[S]tates are the ones that make the determinations about whether something is legal or not legal,” Commissioner Roger Goodell told reporters on Wednesday when discussing the DFS phenomenon. “We follow the law and we will do that.”

Daily fantasy companies are and have been operating in Florida. The language of the Florida anti-gambling law cited by Wallach specifically encompasses games of skill. As noted in this excellent legal primer from Professor Marc Edelman, a 1991 advisory opinion from the Florida Attorney General concluded that it is illegal to participate “‘in a fantasy sports league whereby contestants pay a fee for the opportunity to select actual professional sports players.'”

The mere existence of a federal grand jury exploring violations of the Illegal Gambling Business Act and Section 894.14 of the Florida statutes means that the U.S. attorney in Tampa already believes that: (1) Florida law prohibits DFS; and (2) federal law imposes criminal liability on any five-person-or-more DFS operation doing business in Florida. At some point, a federal judge may have to decide whether that interpretation is accurate.

Regardless of whether DFS is gambling in Florida, betting that it isn’t instantly has become a high-stakes game of chance for the DFS companies, with federal penalties of up to five years in prison and forfeiture of all money used in whatever is determined to be an illegal gambling operation in Florida.

The U.S. attorney in Florida may end up being flat-out wrong. And, ultimately, I continue to believe that people should be allowed to risk their money on any and all games of chance, games of skill, and/or the game of Risk. But it’s human nature for folks to push back against the perception of unregulated windfalls, and whether it’s class-action lawsuits or grand-jury investigations, the accelerated life cycle of the DFS industry already has reached the point where it has become a very large target for its enemies.

40 responses to “Report: Florida grand jury investigating daily fantasy operators

  1. If we follow liberal thinking (like blaming the gun in a shooting and not the criminal pulling the trigger), then NBC should be responsible if Fanduel has cheated….they prop these companies up and make millions off them.

  2. I don’t agree that DFS is a skill contest. I’m very good at re-draft fantasy football (at least in my circle of friends & players), consistently ranking in the top 3 most seasons. I’m usually the “guy to beat” in my leagues.

    I gotta say it: I suck at DFS. You can throw your FF “skills” out the window. DFS is about randomly picking those one or two players that blow up any given week unexpectedly. It’s like betting on a weak horse or dog and hoping they win. It’s more about betting on long shots than anything. That’s gambling, not skill.

  3. This is straight up gambling just like anything else and the NFL and other large shareholders lobbied congress for a loophole. Now that it is also coming out that they use ghost competition like online poker the house of cards will be crumbling!

  4. DFS is a just a new method to swindle money out of people. Listen, in these DFS you’re playing against professionals who have 1000+ plus teams going at a time, they also have teams in the same leagues. You’re getting scammed if you’re playing. #FACT

  5. I don’t know much about Fantasy Football, but I what I have learned over the passed few years is whatever Roger Goodell says, the truth is somewhere in the opposite direction.

    Also, Daniel Wallach tends to be right on most legal issues. (Let’s hope ESPN doesn’t consult Lester Moron for his opinion again–otherwise opposite of that too.)

  6. DFS is a ripoff. It was shown that 1.4% of the players win 90% of the money.

    How the heck this is legal but online Poker isn’t just boggles my mind. Poker is way more a “skill” game than DFS.

  7. Commercial daily fantasy football is gambling “pure and simple” and the ads are misleading at best. Open opportunity for players and/or coaches/officials to be corrupt. Owners, leagues and networks all know thisand don’t care!

  8. Why bother the warning in beginning says it all. The really bad part is that people don’t realize that professionals are betting 100s of times per contest with insider info. Regular Joe has a tiny chance to win. Enough people, like myself, will constantly lose and will quit. The thing about gambling is you have to give people a taste. The $1 win isn’t what I call a feeling of winning.

  9. DFS is gambling. Whether Congress says otherwise does not change the fact that everybody knows gambling when they see it and this is gambling. I’m fine with DFS being legal, but let’s call it what it is, regulate it appropriately, and exact some tax revenue out of it.

  10. With PowerBall which is legal in FLA, you pick random numbers and hope to win. With FanDuel, you pick random players and hope to win. If you know the statistics, you have a better chance at both.

    If employees and their families are benefiting from inside information, that’s a problem. Employees should follow the same standards as pro players and gambling. But how do you regulate family and other potential surrogates. Considering the win percentage of employees at Draft King (in addition to the the one dude that won $350K), we got a problem.

  11. Targeted by enemies? Nobody said boo about DFLs until it was discovered that executives were exploiting inside information to profit off their customers. We all despise Tom Brady & the Patriots for being cheats…at least they weren’t siphoning money out of unwary people’s pockets like these frauds. They should be investigated & they should be subject to civil & criminal liability if the results of the investigation so merits. That’s American jurisprudence. There’s nothing wrong with it…good Lord, it’s our system of laws that differentiates us from them!

  12. dabears and crap are exactly right. The DFS are a stupid trend that invoke pure luck in picking total long shots with perhaps one or two obvious picks. And who knows the people against whom you’re playing? Could be the employees themselves who may not be paid, but do take up the money spots. It’s a waste of money and I would advise any and all to avoid the scam.

  13. And why is it every state that is trying to outlaw fantasy football has a state lottery which is essentially played by the poor. Some would say the lottery system is geared towards the poor since the overwhelming majority of people who buy lottery tickets are lower income. Some of these states actually have thriving casinos in their states and yet again like online poker they are trying to cut out what they fear as the competition to them bilking people with true games of chance. Fantasy football like poker is in part a game of chance but unlike buying a scratch ticket or playing a slot machine it does require some skill. This is why their are people who are consistently winners at Fantasy football as their are consistent winners at poker.

    Note to the politicians:
    Regulate it.
    tax it.
    then leave me alone to do with my money as I wish.

  14. If I see that freaking Fan Duel commercial one more time I’m smashing my television. No thanks, I don’t want to gamble my money away.

  15. NFL should never have linked itself to this daily fantasy sham. Mark Cuban has warned the league about its greed. I don’t watch NFL Network right now because I don’t want to be sold like I was at a Ponzi Scheme meeting.

  16. Fantasy sports is not skill. I can select Brady or Rogers as QB and even with their skill it’s all on chance/luck like a lottery. There is no guarantee they will score high. Plus I have to rely on 8-9 other players to score high.

    Like the numbers I select for the Florida lotto. I can select any number but there’s no guarantee that number will come up.
    Florida govt. needs to just chill out. They just mad they are taking $ from the lotto.
    Also if the Florida lottery is supposed to help education how come all these Florida schools still need money lol. Go investigate that Florida.

    If you don’t like fantasy sports then don’t play.

  17. So, if there were DFS games back in the 1980’s and Pete Rose played DFS instead of gambling, he would be in the HOF now?

  18. Did anyone really believe that this non-gambling gambling thing would just mosey along on its merry way?

    The only interesting aspect of this situation is that the major sports leagues are finally making money off of suckers gambling, so they love it. Otherwise it’s rather ho-hum.

  19. Remember the draft kings commercial w/ those frat boys w/ the backward hats like someone referred to from above….how did draft kings know to put their cameras there??? How did they know they will win or were getting close? Did they just randomly go to people who played and film them hoping they would win to use for a commercial?

    This is daily fantasy after all. The CEO is in that commercial also handing them the million dollar check.

  20. Its a shame that everyone has to deal with the consequences of Fanduel and Draftkings mistakes. They are corrupt and have used the lack of regulation in their industry to their advantage.

  21. I wonder very much that when state attorney generals and the Feds dig into this how much ownership of these sites by the league on the back side will be exposed. And or bspn for that matter. Would not surprise me at all to find them heavily invested, or in the case of the league receiving huge licensing fees.

  22. First of all one of the posters above, playing DraftKings and winning against people all over the world is a heck of alot different than dominating your stupid circle of friends. I mean seriously. I almost spit out my sunflower seeds after reading your ridiculous post.

    Second of all, how does this violate the Illegal Gambling Act in Florida? There are casinos in Florida which guess what, the odds are in the casinos favor. But Im guessing the state Attorney General is getting a piece of the pie from the casinos. Very hypocritical if you ask me.

  23. Just because you have that information doesnt mean you can win with the information.

    Like anything, its half luck and half skill.

    Take Texas Hold Em, you can make the right play and still lose. You can take a long shot, and make a stupid play and win.

    You can do all the research and still lose. You can just make up a lineup with no research and win.

    You can draft Aaron Rodgers, Eddie Lacy etc and they can all have a bad day and u dont win anything

  24. I’m glad I haven’t heard anything about starsdraft since i have been using it. I would only use draftkings or fanduel if i could get in on that insider trading.

  25. thebrownsrclowns says:
    Oct 10, 2015 6:32 PM
    Take Texas Hold Em, you can make the right play and still lose. You can take a long shot, and make a stupid play and win.
    ——————————————-

    So why is this legal and online poker isn’t? There is a whole lot more skill involved in Poker than this DFS.

  26. There are basically 2 kinds of DFS contests – Tournaments (or Guaranteed Prize Pools) and Cash Games (Head to Head, 50/50s, Double Ups) –

    Tournaments are long shots and I would agree that there is more luck than skill in such contests.

    However, the reverse is true in cash games. Players who do their research will more often than not beat those who don’t. This is where the game of skill argument has merit and most good players (at least in Football and Basketball) will put most of their money on these cash games.

    I wonder how the U.S. Attorney’s office is only going to pick on DFS and not sites that have offered Season Long Fantasy Football contests for years. The Hypocrisy.

    They should just legalize all wagering. Sports Betting. Online Poker. Fantasy Sports. All of it. and leave us alone.

  27. They should ban this daily fantasy sports as it is completely legalized gambling no different than betting on horses or race dogs. The difference is that there is so many big players invested in the enterprise that they will try to pretend it is not gambling while not allowing their employees and players to play any of them. The next thing is that they try to censor any kind of criticism but thanks to the NYT at-least we have the knowledge of what is going on and who the investors are. 2 pieces of financial advice to Sport Fans Do Not 1) Use payday loan companies to buy Super Bowl tickets or 2) play Daily Fantasy Football.

  28. I used to play DFS. Mostly NFL and some NBA. I’d win $5-$10 bucks here and there. Then one day I decided to look at the winners of the tournaments I was in, and “people” were winning with bench players that just happened to go off that one night that no one else picked! Happened too many times, played until my deposit was done then stopped.

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