[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.]
Nine years ago, Congress laid the foundation for the phenomenon now known as daily fantasy. Fueled by the 2015 football season and a cola-war ad blitz from the two leading DFS operators, DraftKings and FanDuel, multiple states are now trying to blow the house down.
Nevada, in an obvious effort to protect its own gambling industry, has ruled that daily fantasy constitutes gambling, and that anyone doing daily fantasy business in that state must have a license to do so. DraftKings and FanDuel have complied.
Yahoo, which is sort of like the RC Cola in the Coke-and-Pepsi battle between FanDuel and DraftKings, also has pulled the plug on Nevada. Yahoo likewise has alerted customers that it will suspend operations in Florida, where a federal grand jury is exploring whether daily fantasy violates Florida law and, in turn, federal law regarding gambling operations of a certain size that violate the gambling laws of any given states.
That’s why the major daily fantasy operators already have avoided Montana, Louisiana, Arizona, Washington, and Iowa. Nevada now joins the list, and (at least for Yahoo) Florida, too.
Meanwhile, federal prosecutors in Florida have served a subpoena to the Fantasy Sports Trade Association, which confirms the existence of the grand-jury investigation. According to the Wall Street Journal, the subpoena seeks copies of board-meeting minutes.
With Florida law arguably preventing fantasy sports for money (and the major DFS operators believing Florida allows it), the question now becomes whether other states have obscure laws that have been overlooked — and whether other states that hope to protect their own legal gambling operations (from casinos to scratch-off tickets) will take action against daily fantasy.
There’s a certain amount of hypocrisy that arises from a state realizing that its own gambling operations are being undermined by daily fantasy and taking steps to preserve their own gambling operations by enforcing little-known laws on the books or passing new laws aimed at either shutting DFS down or, perhaps more accurately, allowing the state to get a piece of the action over and above any taxes paid by winners.
So the DFS experience will now become a story of lawyers and lobbyists, with companies being forced to spend more and more money dealing with the unanticipated (but not really all that surprising) reaction of politicians who realize there’s an out-of-state ox to be gored.
Along the way, these states could be creating plenty of in-state criminals, depending upon how far they go to get a slice of the DFS pie. As FTSA president Paul Charchian told Fortune last month, “Daily fantasy is extremely popular, right? So if you are a state that is thinking about criminalizing it, boy, you’d better think twice about how many millions of your citizens you may be criminalizing.”
For now, it looks to be less about states criminalizing millions of citizens and more about states getting their hands on some of the millions of dollars that are flowing away from in-state activities that obviously are gambling toward an endeavor that Congress has decided isn’t.