New York, New Dawn

Daily fantasy sports returned to New York last month and the ripple effects could be felt across the US egaming industry. Brad Allen investigates

“In old New York, if I can make it there I’ll make it anywhere,” sang

Frank Sinatra, who was singing about singing, but could well have been talking about the DFS industry and the influence of the Empire State.

On August 22, five months to the day after they agreed to leave the market, DraftKings, FanDuel and some smaller rivals announced they had returned to New York.

The symbolism for the industry was obvious. Just five months after being chased out of the state, the result of a cease-and-desist order from Attorney General Eric Schneiderman, the companies triumphantly returned with the backing of the state legislature and Governor Andrew Cuomo, to operate as tax-paying, regulated entities.

That turnaround could have a positive ripple effect on the whole industry, according to Rich Roberts, CEO of DFS provider DraftDay, although it may also have an impact that extends to the wider gambling landscape.

“There’s already been a domino effect with states introducing pro DFS legislation because New York is just that kind of state,” Roberts says. “Along with Massachusetts, it has established an important precedent that DFS is a skill game.

“There are approximately 38 states across the US that already allow skill-based games, so this could really help the legislative effort,” he adds.

Momentum

But perhaps of greater significance for the gaming industry in the US was the announcement by one of the bill’s sponsors and chairman of the New York Assembly’s Racing & Wagering Committee, J. Gary Pretlow, that he would not stop at DFS. In the aftermath of the bill’s passage, Pretlow announced plans to introduce legislation to decriminalize sports betting, much like New Jersey has tried to do.

“I’m a big believer in legalizing sports betting,” Pretlow told a local news site, adding that the bill would hopefully pressure Congress into repealing or amending the anti-sports betting law, PASPA.

“I’m considering this year putting in legislation similar to New Jersey’s legislation and hopefully it gets to court in the Second Circuit [federal court], and hopefully we get a different opinion,” Pretlow told the Democrat & Chronicle.

And Pretlow would appear to be the perfect man for the job, having supported the DFS bill and previously passed legislation to allow video lottery terminals in New York.

“Chairman Pretlow is very experienced and knowledgeable and after his success with the DFS bill, he is increasingly aware that there’s opportunity here for movement,” says Bill Pascrell III, a New Jersey lobbyist, who specializes in gaming.

“The landscape is shifting. The NBA has said it is on board with betting, Major League Baseball has partnerships with betting odds providers and there’s a sense it is inevitable. New York wants to be well positioned so it’s ahead of the curve when it happens rather than playing catch up,” he adds.

Chinks in the armour

While the New Jersey case has failed in several different courts, industry experts are confident that the cracks are appearing in the sports leagues’ case and that a different court might take the side of a state.

“It’s inevitable there will be a court decision in the states’ favor,” says Daniel Wallach, a gaming and sports law attorney. “The New Jersey loss doesn’t end the debate.

“We’ve had five dissents in these various cases. In my opinion PASPA is on wobbly legs. If this were a boxing match, PASPA has received a couple of standing eight-counts and I think it may be left to another state to deliver the knockout blow.

“Does New York want to leave it to another state or take it into its own hands and get ahead of the game?”

The American Gaming Association recently described DFS as the “gift that keeps on giving”, adding that “it’s mainstreamed our business,” and Wallach said that after New York, the legal challenge could come from another state that had enacted DFS legislation like Massachusetts or Mississippi.

“If a state has DFS laws, they’ve essentially already taken steps towards legalising sports betting,” Wallach says.

They could also benefit from a “selective enforcement” legal argument, where they could claim that the pro leagues did not object when the states passed gambling laws in the form of DFS legislation, and therefore should not be able to object to any sports betting laws under the guise of upholding PASPA.

Alongside New York, Massachusetts could be in play by virtue of its newly-created casino industry and new DFS regulation, while Mississippi has also enacted DFS legislation, is one of the largest land-based gambling markets in the US, and belongs to one of the most conservative federal court circuits in the US, where judges are considered more likely to uphold states’ rights over the long arm of the federal government.

Empire state of mind

But of course none of these states have the same influence and power as New York, which is why its DFS success has excited so many across the entire egaming industry.

“It’s a tremendous opportunity to continue to explore legalised sports betting,” says Pascrell. “The fact that New York is moving ahead of the curve on DFS, it lends itself to the next question which is straight up sports betting. This is opening up the door for that opportunity.

“I know there are conversations between New York, New Jersey and Pennsylvania about making this a more collaborative effort rather than leaving New Jersey out there on an island,” Pascrell adds.

He says this collaboration would continue the litigation battle, but also see senators and house representatives lobby at the Congressional level.

“The more states that get involved in this fight, the more legitimacy we have,” he adds.

But while the majority of the DFS industry seems relatively indifferent to sports betting hitching a ride on its lobbying coattails and mainstreaming the idea of wagering money on sporting events, there is a growing concern that the relationship might not prove to be symbiotic.

“I think the introduction of sports betting will hurt DFS,” says Pascrell. “I’ve talked to a lot of people in the industry and they’re not concerned, but I have a different opinion.

“The American citizen does DFS because they have an interest in getting some action, having some money on a game. The DFS folks continue to believe they’ll have a market but I just know the American people and they’re yearning for legalized regulated sports betting and when that happens, fantasy will be less of an interest.”

Pascrell’s opinion is shared by Wallach, who adds: “DFS only matters because it’s the only form of sports wagering that Americans can engage in. You look at the UK, and it is next to impossible for DFS companies to get a significant market share because sports betting is so simple and widely available.

“I think DFS will remain a part of the American gambling landscape but in my view it is a pilot programme for sports betting.”

Weather the storm

Of course the UK example risks oversimplifying the issue, with firms trying to crack a mature saturated betting market with a relatively alien product designed for US players. In the US the roles, would be reversed, with the DFS operators the established incumbents with brand recognition and the name value built up by a billion dollar ad blitz last year.

“Sports betting is not going to hurt us,” insists DraftDay’s Roberts. “Fantasy has become its own industry. DFS is a game you play with your friends. You’re trying to prove your skill in building a team of players. It’s not betting, it’s paying an entry fee to a contest.”

He adds that the US is already spending $150bn on sports betting through the vast black market. “The only things that legalizing it is going to do is take money away from illegal and offshore bookies.

“Will there be some impact? Certainly, but will it destroy DFS? Absolutely not. No-one has come to me with an argument as to why that would happen.”

End in sight

The final impact, as ever is likely to be somewhere in the middle. There are certainly millions of Americans who play DFS because of the social aspect and because they love fantasy sports, and these customers probably aren’t going anywhere.

However there will also be that faction who want money in action on an NFL Sunday and plump for a DFS contest because they don’t trust their local bookie or an offshore site with their money, and these people will surely be attracted to the simplicity of a single wager over fiddling with a line-up.

And despite the disagreement over the impact, the consensus is pretty clear that sports betting is on the horizon in the US.  Geoff Freeman of the AGA recently tweeted that Americans would be freely able to bet on the 2020 Super Bowl due to be held at the Hard Rock Stadium (named after the casino operator), and the legal experts agree.

“I view what New York has done as a significant movement towards organised sports betting and I fully believe we’re on track to see major progress on that front within the next 2-4 years,” Pascrell says.

If it does happen, the sports betting industry will likely have DFS and New York to thank for clearing a path. Those operators will just be hoping they haven’t blazed the trail for their own destruction.