The Death of Daily Fantasy: Welcome to the Beginning of the End
You can blame it on those damn ads.
The daily fantasy sports industry faces a crucible of various legal challenges that could result in anything from slight regulation of the billion-dollar business to its all-out collapse. The latest marker includes New York Attorney General Eric Schneiderman’s call for daily fantasy giants DraftKings and FanDuel to cease operations in the state, which, in and of itself, could deal a crippling blow to business.
Operators face a confluence of legal obstacles that include the Nevada Gaming Control Board’s recent ruling that daily fantasy is no different than gambling, a growing number of class-action lawsuits from New York to Florida against them, the intense scrutiny in some state legislatures as to how to deal with the growing industry and Schneiderman’s letter this week, which demanded the companies stop accepting wagers from New York residents, and gave them five days to comply with his orders.
“They all share the same connective tissue of being brought about by the rapid growth of daily fantasy sports. I think if that growth would have happened in a more organic way, stretched over a number of years, you wouldn’t see necessarily the confluence of those factors at this particular point in time,” says Chris Grove, the editor of LegalSportsReport.com. “I think, in many ways, the advertising campaigns served maybe not as a trigger for these efforts, but certainly as fuel. It may not be the factor for why each one of these [legal challenges] exists, but it’s certainly a reason why they are all coming to a head simultaneously.”
All four separate but equally impactful legal fronts have materialized in a relatively short span, and all have the industry fighting for its life in the courts. Daily fantasy has quickly and forcefully injected itself into popular culture, and that assault has made it an easy and newsworthy target for politicians and lawyers.
“The massive advertising spend by DraftKings and FanDuel created an atmosphere where one slip up, one mistake, caused the roof to cave in,” says Daniel Wallach, a sports and gaming legal expert and a shareholder at Becker & Poliakoff in Ft. Lauderdale, Florida.
That slip came with the revelation that DraftKings employee Ethan Haskell accidentally leaked data about player ownership percentages that was equated to insider trading, though many within the industry maintain the controversy was largely manufactured and the information was already available to players. Still, it didn’t smell right, and the accusations provided enough traction for future legal challenges to the industry and inquiries into its business practices.