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DraftKings, FanDuel Ride the Pine During Congressional Daily Fantasy Hearings

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By Christopher Coble, Esq. on May 12, 2016 3:56 PM

The House Subcommittee on Commerce, Manufacturing, and Trade held hearings yesterday to examine the legality of daily fantasy sports and whether further federal oversight is needed to regulate the industry. But some major players were missing from that hearing, most notably representatives from DraftKings and FanDuel, the two largest daily fantasy ventures, or anyone from any of the major sports leagues or media companies partnering with daily fantasy sites or pushing their products.

So were the hearings a tree falling in the forest, or a breakthrough for daily fantasy sports?

All Bets Are Off

Congressional leaders began calling for hearings and increased regulation of daily fantasy sites after an insider gambling scandal rocked both DraftKings and FanDuel last fall. As many state officials have done, House representatives turned a critical eye towards daily fantasy on consumer protection grounds. Rep. Janice Schakowsky, D-Ill., noted that "[e]ven if some skill is required, daily fantasy... involves betting on sports," and John McManus, executive vice president for MGM Resorts International, added, "[a]s soon as you're taking money from citizens and promising to pay it back under certain scenarios, you should be regulated."

But without the industry's all-stars or the leagues, team owners, and media companies that invest in them present at the table, how much can get done? Daniel Wallach, an attorney who specializes in sports gaming, was skeptical, telling Huffington Post:

"For Congress to have a hearing on daily fantasy sports without any of the key stakeholders is going to be a challenge. If you're going to have a hearing on sports gambling, you need the NFL, NBA, baseball, hockey, the NCAA. If you're going to hold a hearing on daily fantasy sports, you need DraftKings and FanDuel."

Feds May Need to Ante Up

For now at least, online fantasy leagues and contests have a legislative exception to federal gambling laws. As daily fantasy sites are quick to point out, fantasy leagues are defined under the Unlawful Internet Gambling Enforcement Act (UIGEA), which makes it legal to wager in online contests that have "an outcome that reflects the relative knowledge of the participants, or their skill at physical reaction or physical manipulation (but not chance), and, in the case of a fantasy or simulation sports game, has an outcome that is determined predominantly by accumulated statistical results of sporting events."

That has left many of the most important legal battles against daily fantasy sports to be fought by the states. A few have legalized and regulated daily fantasy sites, while many have declared the sites in violation of state gambling laws and shut them down. Whether Congress will step in and begin daily fantasy regulation at this point is unclear, and there's no evidence yesterday's hearing got us any closer to an answer.

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