If sports gambling is illegal in most states, then why is fantasy sports for cash allowed in most states?
That's what Energy and Commerce Ranking Member Frank Pallone Jr. (D-New Jersey) is trying to figure out, having requested his committee to review the legal status of fantasy sports and sports betting, according to Forbes. With fantasy sports outlets like DraftKings – which raked in $300 million in opening-round funding in July – nearly minting money, it looks like fantasy sports operators are going to have to substantially explain to Congress why fantasy sports for cash is not sports gambling.
The usual answer that fantasy sports operators have provided in the past is that fantasy sports is a gaming experience that takes more skill than chance. Operators have even cited the 2006 Unlawful Internet Gambling Enforcement Act (UIGEA) to explain the difference between a bet and an entry fee into a fantasy sports game.
Yet the money some fantasy sports operators are earning have made this unavoidable for Congress.
The problem with the UIGEA is that it's only 195 total words, leaving many questions unanswered. Thus, Pallone Jr.'s prompt could pose a challenge to fantasy sports operators continuing to be legal, except for the few states that have banned fantasy cash leagues.
One of the biggest fantasy sports players, DraftKings, might have seen this coming, as it has a section on its website dedicated to explaining why it's legal. Still, the skill versus chance argument laid out in the UIGEA needs to be elaborated upon.
Under Pallone Jr.'s inquiry, it will be interesting to see if the UIGEA holds up, allowing fantasy sports operators to continue to receive and spend millions.
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