The government of the state of New York has once again shown itself willing to prohibit peaceful activities in the name of its own warped version of a greater good. The activity supposedly in need of a statewide ban—at least this time, is online fantasy football betting. Specifically the betting that takes place on popular sites like DraftKings and FanDuel. New York Attorney General Eric Schneiderman has ordered these sites to cease and desist the taking of bets from New York residents. In his statement explaining his motivation for this, the AG claimed:
“It is clear that DraftKings and FanDuel are the leaders of a massive, multibillion-dollar scheme intended to evade the law and fleece sports fans across the country,” adding, “Today we have sent a clear message: not in New York, and not on my watch.” But who is actually being harmed by fantasy sports participation and what are the New York State Government’s real motivations for making it illegal?
The prime motivation cited for the need of government protection from fantasy football mega-sites is rooted in a recent scandal involving an employee at DraftKings obtaining knowledge of selected players within his company to win $350,000 at FanDuel. His advantage in this case has been compared to the illegal activity of insider trading. Responses from the New York Times, Sports Illustrated, and Deadspin either accuse or imply that the world of fantasy sports is “unregulated” and must be dealt with.
Even if this employee’s large pay day was due to inside information, it is still not a justification for government involvement. After the employee’s winnings were made public, the two sites claimed that they would each stop their employees from participating in each other’s fantasy sports contests. Each site then announced it would come up with a more formal policy to further govern employee behavior. This all occurred without the heavy hand of government, because those in the business of fantasy sports have a vested interest in keeping their customers coming back. If those customers feel that the game is rigged against them, then another site will emerge that regulates its employees in a way that the average fantasy sports participant feels comfortable with.
But this new attempt to better protect the integrity of their brand was apparently not good enough for Schneiderman. The Attorney General still went through with his statewide prohibition. Because he feels that fantasy sports represent contests of chance and not skill, they are therefore illegal in the state of New York. But if there is no skill involved, then what benefit could there even be to obtaining inside information?
The ultimate hypocrisy is that the New York state lottery is not only gambling, but also a complete game of chance. The odds of hitting the lottery are significantly lower than winning money in fantasy sports. Yet the lottery remains perfectly legal despite requiring no skill whatsoever. Does insider information about the lottery even exist? Would there be any point in trying to obtain it? Of course not, because there can be no strategically obtained information for games of total luck.
New York is not the only state with politicians needlessly beating the drums against online fantasy sports betting. Nevada’s Gaming Control Board issued its own cease and desist order to DraftKings and FanDuel ten days after the “scandal” broke. Two federal politicians from New Jersey; Rep. Frank Pallone and Sen. Bob Menendez, called for an investigation by the Federal Trade Commission (FTC) to “ensure a fair playing field.” The fact that Nevada is home to Las Vegas gambling interests, including billionaire casino owner Sheldon Adelson (who has consistently crusaded against online gambling), is no doubt a motivating factor in online fantasy sports prohibition in that state. Also included are the interests of Atlantic City gambling to Pallone and Menendez. The gambling establishment doesn’t like competition and has no problem using the state to spread enough fear to stifle it.
A significant unintended consequence is that fantasy sports actually are regulated, but will now cease to be so, creating a black market as a result of banning the activity. The FTC can regulate all legal businesses in the US to prevent cases of fraud and other unlawful activities. The only way an American business can be truly unregulated is if it is operating in a black market. Making an activity people want to participate in illegal—like fantasy sports, (or drinking alcohol, smoking marijuana, gambling, etc.) creates these unregulated black markets and the social problems that come with them. So as a result of the bogus complaints about an unregulated practice, a ban has now been put in place that will cause true unregulated activity.
Once again the media and powerful members of the government have come together to scare society away from something that is not worthy of their attention. The outcome of their actions create enough fear to cause the people to look to the state as the solution to a manufactured problem that they no doubt will make worse by trying to solve.