New Partnership Indicates FSTA Is Warming To 'Daily Fantasy Sports'Marc Edelman in Forbes, September 17, 2013
Last week, Fantasy Sports Trade Association president Paul Charchian announced a new partnership between his company, LeagueSafe, and the daily fantasy sports website DraftKings. This venture marks a notable change in the working relationship between the FSTA’s leader and daily fantasy sports.
Until recently, Charchian and his trade association seemed somewhat wary of daily fantasy sports. For example, at the FSTA meeting in January, Charchian warned that daily fantasy sports websites needed to change to “do more than highlight [just] the monetary element of fantasy sports.“ At the time, Charachian feared that gambling-like aspects of daily fantasy sports could lead to more outside regulation of the fantasy industry overall.
Since January, however, much has changed. A handful of wealthy private equity firms have invested into daily fantasy sports websites such as DraftKings. In some cases, these private equity firms, which include Comcast CMCSA +1.76%, IAC, MGT Capital Ventures and Atlas Venture, have even shown heightened levels of sensitivity toward traditional fantasy sports companies’ legal concerns.
At the same time, there have not been any public investigations of the daily fantasy sports websites.
All of this has led some fantasy sports traditionalists such as Charchian to gain more confidence in daily fantasy sports — so much so that Charchian is now even willing to partner with DraftKings.
Nevertheless, even these recent developments do not remove all risks that may lie ahead for daily fantasy sports. Although potentially less damaging than a government investigation, there are still two private lawsuits against daily fantasy sports winners that remain on the docket in the state of Illinois. Both of these lawsuits seek to use Illinois state gambling law to disgorge the winnings of daily fantasy sports participants by arguing that their winnings represent illegal gambling proceeds.
In addition, there are a number of other states where operating a daily fantasy sports contest seems very likely to violate state law. Some daily fantasy sports contests seem to do a better job than others of excluding participants in these states.
Based on the remaining legal uncertainty, many of the largest fantasy sports providers such as ESPN ESPN, CBS CBS -0.05% and Yahoo YHOO +3.45% have still not launched any daily fantasy sports contests. CBS, however, may be slowly moving in that direction with its recent launch of a four-week fantasy football contest.
Marc Edelman is an Associate Professor of Law at the City University of New York’s Baruch College, Zicklin School of Business, where he has published more than 20 law review articles on sports law matters.
In addition, he is an adjunct professor at Fordham Law School, and a legal consultant on sports, antitrust, gaming and intellectual property matters. Nothing contained in this article should be construed as legal advice.