On Friday night the New York Assembly approved a bill allowing DFS operators to acquire licenses and the Senate followed a day later—just hours before the legislative session ended. This action followed a cease-and-desist letter sent to the three main DFS companies by New York Attorney General Eric Schneiderman who called them “illegal gambling” operators under state law. Assuming that Gov. Andrew Cuomo signs the DFS bill (or takes no action in 10 days) state law will change, now declaring DFS to be a legal “game of skill.” Yet, as the Assembly voted to designate fantasy sports legal, they ignored another bill to license online poker operators—a measure that was nearly unanimously approved by the Senate just last week. Why is DFS considered a skill game, but poker isn’t? And should that even matter?
What is DFS: For those unfamiliar, daily fantasy sports (DFS) consists of individuals online who “draft” a lineup of professional athletes from a variety of teams. Each player accrues points based on their performance in their individual game—for example, a pitcher’s strikeout percentage or, in football, the number of touchdowns or yardage gained. In the end, the person whose team has the most points wins.
DFS has been around since 2007, but only recently drew the attention of regulators after two of the biggest operators—DraftKings and FanDuel—spent a combined $31 million in a splashy advertising blitz during the NFL’s first week. Suddenly, attorneys generals around the country were asking how this multibillion dollar industry rose to popularity and prominence without getting the express approval of state governments.
Skill vs. Luck: The skill versus luck question is important because many states, like New York, determine legality of certain games based on whether or not they are considered a “game of skill” or a “game of chance.” DFS had argued that they were legal and immune to gambling laws because DFS isn’t gambling—it’s a game of skill. But attorneys general like Eric Schneiderman disagreed, necessitating either the courts or the legislature to clarify how New York law viewed DFS.
According to New York law, gambling occurs when a person “stakes or risks something of value upon the outcome of a contest of chance or a future contingent event not under his control or influence, upon an agreement or understanding that he will receive something of value in the event of a certain outcome.” And a “contest of chance” is defined by New York law as “any contest, game, gaming scheme or gaming device in which the outcome depends in a material degree upon an element of chance, notwithstanding that skill of the contestants may also be a factor therein.” So, any form of game involving money and any element of chance can be considered gambling under NY law. Which brings us to poker.
Despite the fact that on the spectrum of luck-to-skill games, poker is firmly on the skill side, and that numerous courts have ruled that poker is “game of skill,” most states—including New York—still consider it gambling and illegal online.
But should it matter? DFS and poker both involve some skill and some luck, but certain games like the lottery and bingo are almost 100 percent based on chance. There’s absolutely nothing wrong with people choosing to spend their money on lottery tickets (or investing in the market or paying $15 for a movie they may or may not enjoy) and apart from Alabama, Alaska, Hawaii, Mississippi, and Utah all state laws respect adults right to make that decision for themselves. As Steven Titch and I argued in our recent paper, Game Changer: Rethinking Online Gambling Regulation in the Age of DFS, Over the last year, it’s time for states to do away with the skill versus luck distinction and to decriminalize all forms of gambling—including online poker and sports betting (which is still largely prohibited by federal law). If states really want to protect consumers from fraud and collect the taxes they feel they’re owed, the last thing they should do is continue to force online players into the black market where there is no oversight and no guarantee that operators are following the law or respecting players’ rights. Hopefully, now that New York and 10 other states have legalized online DFS, lawmakers will see how ludicrous it is to preserve these antiquated and ineffective restrictions in an age where an entire world of gambling options is just a click away.