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Online Gambling



All Reason.com articles with the "Online Gambling" tag.



Published: Sat, 10 Dec 2016 00:00:00 -0500

Last Build Date: Sat, 10 Dec 2016 23:23:38 -0500

 



A Republican Ban on Internet Gambling Would Repeat a Costly Democratic Mistake

Thu, 24 Nov 2016 00:01:00 -0500

(image) Many on the left have taken Donald Trump's surprise victory poorly, responding with considerable hand-wringing and emotional outbursts. Instead of simply focusing on the many evils that they anticipate will take place under President Trump, they would do well to look in the mirror and recognize that there would be far less cause for concern had they not spent the past eight years cheering on the expansion of executive power under President Barack Obama.

Republicans, soon to control all elected branches for the first time in a decade, ignore this lesson at their peril.

A group of congressional Republicans has been trying to undo the Department of Justice's acknowledgment in 2011 that the Wire Act—passed before the internet existed—never should have been interpreted to prevent all forms of online gambling (such as poker and lotteries), as opposed to the "bets or wagers on any sporting event or contest" that the statute explicitly addresses.

They're worked up about it because billionaire casino owner Sheldon Adelson is a GOP megadonor and some states have begun authorizing online gambling within their borders. Adelson hates online gambling, as it competes with his bricks-and-mortar Las Vegas casinos for customers.

More than five years ago, on what has become known to the poker world as Black Friday, the federal government unleashed a legal jihad against online poker companies and their top executives. Online poker is not itself illegal—a fact clarified by the DOJ's reinterpretation of the Wire Act—but the 2006 Unlawful Internet Gambling Enforcement Act made it illegal for payment processors to transfer funds to and from gambling sites.

The problem for Adelson and his allies is that the UIGEA and other federal statutes apply only when state borders are crossed. The 10th Amendment and the principles of federalism mean that federal lawmakers should have no say regarding activities that take place entirely within one state's borders. So if state governments wish to authorize online gambling for their citizens, they are and should remain free to do so.

Adelson's gang has been trying for some time to pass the Restoration of America's Wire Act to stop states from setting their own gaming rules. Despite its misleading name, RAWA would go even further than the original and erroneous interpretation of the Wire Act, as even that dealt only with interstate activity.

RAWA has failed to muster enough support to move forward thus far, but another bill, SB 3376, was recently introduced by Sen. Tom Cotton, R-Ark., with very similar language, suggesting there may be an attempt to sneak it through during the lame-duck session. Trump's campaign received significant support from Adelson, so Republicans might also try to take it up in the new Congress.

Doing so would mean ditching their oft-claimed support for the 10th Amendment and state sovereignty. It would also set a precedent for Democrats, who will eventually hold power again, to similarly prohibit the forms of online commerce they find distasteful, such as gun and ammunition sales.

Republicans should learn from today's dismayed Democrats and resist the temptation—while in power—to operate beyond constitutional limits so that such limits might still be around to keep the other side in check once control of the federal government inevitably changes hands again.

COPYRIGHT 2016 CREATORS.COM




Overzealous Washington State Gambling Regulators Target Popular Video Game Developer

Tue, 18 Oct 2016 00:01:00 -0400

Valve is best known as the developer of popular games like Counter-Strike: Global Offensive and its Steam gaming platform. But to Washington state regulators, the company is a rogue outfit, enabling illegal games of chance through the nefarious means of… well… making its software user-friendly. As in many American states, gambling is legal in Washington if overseen by politicians' friends and if the house—the government—gets its cut. The state hosts tribal casinos, raffles, card rooms, bingo, fund-raising casino nights, amusement games, and a state lottery. But state residents can't legally wager online because "Internet gambling has never been authorized and is illegal in Washington State," according to the Washington State Gambling Commission. Strictly speaking, regulators aren't accusing Valve of actually operating games of chance. They're not even accused of offering a venue for gaming. Instead, the company is allegedly "guilty," if that's the right word, of letting players exchange in-game items—known as "skins"—with one another. This is somehow a violation because players and third-party companies working independently of Valve found a way of using those skins as markers in betting on other platforms that have nothing to do with Valve. Basically, players discovered they could use the neato stuff they acquired in the game as poker chips. "The Gambling Commission expects Valve to take whatever actions are necessary to stop third party websites from using 'skins' for gambling through its Steam Platform system, including preventing these sites from using their accounts and 'bots' to facilitate gambling transactions," according to a press release issued October 5. The Commission was quite cross that skins continued to be used in gambling months after it first "contacted Valve Corporation in February 2016" about the issue. Actually, the Gambling Commission was a bit late to the issue—Valve itself was there first. "In 2011, we added a feature to Steam that enabled users to trade in-game items as a way to make it easier for people to get the items they wanted in games featuring in-game economies. Since then a number of gambling sites started leveraging the Steam trading system, and there's been some false assumptions about our involvement with these sites. We'd like to clarify that we have no business relationships with any of these sites," the company noted in July 2013. "Using the OpenID API and making the same web calls as Steam users to run a gambling business is not allowed by our API nor our user agreements. We are going to start sending notices to these sites requesting they cease operations through Steam, and further pursue the matter as necessary." And Valve did just that. But as the Seattle Times reported, some of the gambling companies "found a workaround: They began taking bets in virtual coins, which could be traded for skins, which could then be traded for cash, adding a layer of abstraction while allowing the basic activity to carry on." So the Washington State Gambling Commission is essentially complaining that Valve has been no more successful than playing card manufacturers in preventing the use of its products in ways that violate stupid and presumptuous local laws. The company acted, but it couldn't predict the innovative ways players and gambling sites would react to keep their fun going. "The Washington State Gambling Commission has notified Valve Corporation that it must immediately stop allowing the transfer of virtual weapons known as 'skins' for gambling activities through the company's Steam Platform," the October press release adds, though it offers no ideas for how to do that promising greater success than the company's prior efforts. Eliminating unapproved games of chance has proven an elusive goal for the Washington State Gambling Commission itself, which is why it can continue to announce raids on poker games decades after its creation. But in its diligent efforts, it has frequently picked unlikely targets for threats and enforcement actions. At the [...]



Republican Senators (Including Mike Lee) Again Attempt to Blockade Online Gambling

Wed, 28 Sep 2016 17:15:00 -0400

What do a couple of the least libertarian Senate Republicans in office, Lindsey Graham of South Carolina and Tom Cotton of Arkansas, have in common with libertarian-leaning GOP conservative Sen. Mike Lee of Utah? All three of them are down on the idea of unfettered gambling on the Internet, and the day after casino magnate Sheldon Adelson gave $20 million to a Super PAC that helps Senate Republican races, the three of have revived legislation to try to ban it. The proposed legislation is remarkably short. The actual text of the bill is about as long as its title. We might as well excerpt the whole thing: To ensure the integrity of laws enacted to prevent the use of financial instruments for funding or operating online casinos are not undermined by legal opinions not carrying the force of law issued by Federal Government lawyers. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. REAFFIRMATION OF PROHIBITION ON FUNDING OF UNLAWFUL INTERNET GAMBLING. The Memorandum Opinion for the Assistant Attorney General of the Criminal Division of the Department of Justice, dated September 20, 2011, shall have no force or effect for the purposes of interpreting section 5362(10) of title 31, United States Code. Interesting how a bill doesn't have to be wordy to be incomprehensible. To explain, the "opinion" being referenced in this text is a recent legal interpretation of the 1961 federal Wire Act—which bans interstate sports betting—that has determined that the Act does not actually ban other types of internet gambling on the federal level. Thus states have authority to decide for themselves whether to allow it. And so some states, like Nevada, legalized online poker in a very, very limited fashion. The growth of online gambling presents a massive threat to the bottom line of brick-and-mortar casino magnates like Adelson (though some other casinos are embracing online betting). So, much like a restaurant owner trying to convince a city council to ban food trucks, Adelson has committed a ton of money to try to fight internet gambling. This bill would be an attempt to legislatively overrule the Justice Department's interpretation of the law. Despite Lee's libertarian leanings, this opposition to Internet gambling is not new, and it's unlikely that Adelson's support influenced in position. He has previously attempted to pass legislation to undo the Justice Department's interpretation of the law. In an interview with Reason in 2014 he explained that because internet gambling crosses state borders, it is appropriate for the federal government to play a role in defining the rules. In particular, he thinks federal regulation needs to be set up specifically so that people can't use the internet to bypass their home state's own laws or restrictions: [T]his is actually a necessary step to take to respect each state's right to decide whether or to what extent to allow gambling and that's necessary in order to preserve each state's right to decide. Otherwise, you could have one state here or there authorizing gambling and if no one is able to prohibit Internet gambling, then people in every state would be able to gamble. In May, Veronique de Rugy broke down the intense crony protectionism undergirding attempts to ban online gambling. Read more here.[...]



Fantasy Sports May Return to New York After State Secures Its Cut

Mon, 20 Jun 2016 16:25:00 -0400

(image) Fantasy sports leagues like DraftKings and FanDuel are set to return to the state of New York if the governor signs new legislation passed over the weekend. It's going to cost the private companies millions of dollars, of course.

The companies stopped operations in New York earlier in the year as Attorney General Eric Schneiderman went after them, challenging the legality of their businesses and trying to force the companies to pay back New Yorkers who lost money while voluntarily playing in the fantasy leagues.

It may now becoming back under new legislation that authorizes fantasy sports leagues under a very expensive regulation scheme that has pages of requirements, allegedly to "protect consumers" but also, obviously, to make sure New York profits from these online competitions. From The New York Times:

Under the deal agreed to by lawmakers, highly skilled and high-volume players will have to be clearly identified on the sites, a provision intended to protect casual players from being targeted and taken advantage of by more sophisticated players, something that some class-action lawsuits have alleged takes place and that law enforcement has investigated.

Companies will pay the state the equivalent of 15.5 percent of their revenue to operate, an amount that supporters have estimated to be nearly $6 million a year. Funds collected by the state will be directed to an education fund run by the state lottery.

The Times notes that these state government-level attacks on fantasy sports have done major damage to the companies' bottom lines, so much so that these two once-massive rivals are talking about merging in order to survive. What that means is, despite this claim that they're protecting consumers from fraud, all this regulatory action is driving businesses to either merge or shut their doors, reducing consumer choice. Competition is the surest way to keep consumers from being abused. And note that Schneiderman is going to continue his lawsuit even if the bill becomes law. He wants his share of the money, too.

Read more from Reason on the push from state governments to regulate (and really—cash in on) fantasy sports leagues here. And watch ReasonTV below pointing out how fantasy sports competes with the states' lottery monopolies and other approved forms of gambling:

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Crony Capitalists, Place Your Bets on the Wire Act

Thu, 12 May 2016 00:01:00 -0400

(image) Some members of Congress want the Department of Justice to know that they are unhappy. The source of their consternation is the correct DOJ's finding in 2011 that the 1961 federal Wire Act—long believed to prohibit all forms of interstate gambling—is in fact "limited only to sports betting." To show their displeasure, language was recently inserted into a Senate appropriations bill, which made the obvious point that the Wire Act didn't change in 2011, and that it is up to state courts to interpret criminal laws.

The explanation for why this statement was slipped into a bill four years later is yet another cautionary tale of the corrosive effects of government-granted privilege to special interests, also known as cronyism.

Prior to 2011, the Wire Act—passed long before the emergence of the internet—was interpreted to prohibit all manners of internet gambling, from lottery sales to online poker. This never made sense, as the statute expressly addresses "bets or wagers on any sporting event or contest," among which lotteries and card games are not logically included.

This interpretation of the Wire Act was understood at the time it was passed as well. When asked during Senate hearings on the bill whether it would apply to other forms of gambling, Assistant Attorney General Herbert J. Miller replied, "This bill, of course, would not cover that because it is limited to sporting events or contests."

The DOJ's reversal of its earlier expansive interpretation was a move toward more faithful enforcement of the law, which ought to please Congress. Contrary to the language in the Senate's recent admonition, however, simply encouraging prosecutors to enforce law—rather than make it—is not the objective of the powerful interests bankrolling this fight.

The Senate language, which is now being pushed in the House, comes after years of failed attempts to enact the Restoration of America's Wire Act, a bill championed by billionaire casino owner Sheldon Adelson. Adelson has no moral objection to gambling, he just doesn't like it when people gamble somewhere other than one of his casinos.

The legalization of online poker in New Jersey, Delaware and Nevada—and the likelihood that others will soon follow suit—poses a direct threat to Adelson's brick-and-mortar casinos. In response, he has spent a lot of money courting politicians to help protect his interests at the expense of consumers.

The irony of both RAWA and the Senate's recent complaint is that even if the previous interpretation of the Wire Act (as including not just sports betting, but also other forms of gambling), the current efforts by states to legalize online gambling only for citizens within their borders still ought not to be prohibited. This is because the Wire Act is an interstate prohibition, not an intrastate one. That's why RAWA would go one step further and prohibit states from setting their own policies.

A House hearing last year on RAWA did not go well for its backers. Too many legislators saw it for what it is: a government handout and a blatant attack on federalism. But rather than fold, its backers have decided to double down, and are clearly looking for any opportunity to sneak through protections for the businesses of a favored donor. So far, their efforts have failed to gain steam through the open legislative process. For them to fail in the future requires that lawmakers be extremely vigilant in recognizing cronyism, even when camouflaged as concerns for regulatory overreach.

COPYRIGHT 2016 CREATORS.COM




The Nanny Always Wins: Daily Fantasy Sports Stop Operations in New York

Mon, 21 Mar 2016 14:50:00 -0400

(image) Thousands—perhaps tens of thousands—of New Yorkers have been saved from the terrible possibility of enjoyment and/or failure (and winning or losing money) playing daily fantasy league sports. DraftKings and FanDuel have agreed today to immediately stop allowing New Yorkers to join their paid fantasy sports league contests.

The "exchange" for agreeing to stop while New York Attorney General Eric Schneiderman goes after the legality of their businesses is that Schneiderman will wait until after the two companies appeal before trying to force them to pay back the money New Yorkers lost participating in the programs.

According to ESPN, it's not just about letting the two fantasy sports juggernauts fight the legal threat. There is a possibility of a legislative remedy:

No specific date for the September hearing has been announced, and it may not take place if the state legalizes daily fantasy sports during this legislative session. Several daily fantasy bills have been introduced in the New York legislature, which runs until the middle of June.

Nevertheless, pulling out of New York, even temporarily, is likely going to be a huge financial hit for the two companies. New York is the second-highest source of revenue for the daily fantasy sports companies, behind California. There are fights right now in Texas and Illinois (both states with obvious high revenue potentials) over the legality of fantasy sports.

Jim Pagels explored the legal fight over whether consumers have the right to participate in these fantasy leagues and the huge amounts of money involved in Reason's January issue. And watch ReasonTV below for more about the conflicts involved:

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March Madness Is Here! Let’s All Pretend We Don’t Gamble.

Sun, 13 Mar 2016 17:00:00 -0400

The NCAA college basketball championship—known as March Madness—officially kicks off today with Selection Sunday where college officials unveil the 68 teams selected to make the tournament. Not only is the sporting event a popular television ratings get, but it’s also big time business for sports gaming. 

Marc Edelman, a sports law professor at Baruch College, notes that in 2015 the American Gaming Association estimated that nearly 40 million Americans would bet $9 billion on the NCAA tournament. Most of this wagering is done underground because sports gambling is illegal in most parts of the country. 

While many fans of college basketball will be filling out their brackets and putting money down in office pools, a growing segment of fans are turning to daily fantasy sports sites to cash in on the action. But if you live in states like New York— where lawmakers are claiming daily fantasy sports are illegal games of chance— you may not be able to take in part in all the fun. 

Reason TV recently looked at the daily fantasy sports issue and asked why state-sponsored forms of gaming were okay, while other forms of gaming were deemed to be too harmful for the public. 

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Virginia General Assembly Approves Guidelines for Fantasy Sports

Sun, 28 Feb 2016 09:30:00 -0500

The Virginia legislature has approved a set of rules for daily fantasy sports leagues, declaring that those contests which follow the guidelines are not illegal gambling.  SB 646 requires clear explanation of prizes to be awarded, prohibits athletes involved from participation, and requires operators of fantasy contests to register annually with the Department of Agriculture and Consumer Services.

Virginia is the first state to pass such a bill, but it still needs a signature from Governor Terry McAuliffe.

For more on the fight over Daily Fantasy Sports, watch Is Playing Daily Fantasy Sports Any Different From Playing Powerball?

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Is Playing Daily Fantasy Sports Any Different From Playing Powerball?

Fri, 05 Feb 2016 11:15:00 -0500

"When you just think back to the enormous Powerball fervor that gripped the entire country—that’s okay," says daily fantasy player Brian Greenwood. "But for me to develop a lineup and enjoy the aspect of becoming a general manager for a team for a day and essentially risking something by putting in an entry fee—that's not okay. That doesn’t really hold water for me." Greenwood is a professor, husband, and father. He also represents the typical fantasy sports player. Last year, over 56 million Americans participated in fantasy sports play. And since the first sites went online in 2007, daily fantasy has grown to a multi-billion dollar business with DraftKings and FanDuel leading the industry.  Unlike traditional fantasy leagues that span over the course of an entire season, daily fantasy contest typically last a single day. While sports betting is mostly illegal in the United States, fantasy sports has a special exemption under the Unlawful Internet Gambling Enforcement Act of 2006. But even with the federal carveout, the shortened span of daily fantasy contests combined with each state’s ability to define gambling in their jurisdiction has left daily fantasy in a legally murky area.   "A contest is considered to be illegal gambling if three elements are met: consideration—which is an entry fee, prize, and chance. While that standard is the same in all 50 states, what differs state-by-state is the definition of chance," states Marc Edelman, a professor at Baruch College—part of The City University of New York (CUNY)  system—and contributor to Forbes magazine. Edelman is a law and sports business expert who has covered daily fantasy since its emergence in the early 2000s. "If one wants to be honest, daily fantasy sports represent a gray area under the law." Despite questions of its legality, fantasy sports sites set up shop and operated mostly under the radar until late 2015, when a DraftKings employee was reported to have used insider information to win a $350,000 cash prize on rival company FanDuel’s platform. News of potential wrongdoing drew the attention of New York’s attorney general, Eric Schneiderman, who promptly launched an investigation to determine if DraftKings and FanDuel constituted illegal gambling. In comments made to CBS this Morning in November, Schneiderman stated that daily fantasy sports "is not some new version of fantasy sports, it’s really just a new version of online gambling." In a cease and desist letter issued to both FanDuel and DraftKings on November 10, 2015, Schneiderman demanded that the companies stop accepting illegal wages in the state of New York and claimed that FanDuel and DraftKings engaged in illegal activity as they "promote daily fantasy sports like a lottery, representing the game to New Yorkers as a path to easy riches that anyone can win." And though Schneiderman sees daily fantasy as a "massive, illegal gambling operation" and describes it as a lottery, in New York the lottery is legal—as are other forms of state-sponsored gambling including horse racing and Indian casinos.  And these state-run gambling institutions are often prone to the same corruption that occurs in private sector operations. So why are those forms of gaming okay, but not daily fantasy sports? "I think to an extent recent state actions are about protecting innocent victims and ensuring player protection, but another big piece of that has to be protecting their monopoly to regulate and offer gambling services within their state," explains David G. Schwartz, director of the gaming research center at the University of Nevada, Las Vegas. He says that America has a complicated history with gambling that have led to cycles of legalization and recriminalization.  "Since the early days there’s been two different competing feelings in America. O[...]



Bush Gets Slapped Down by Christie After Calling for Fantasy Sports Regulation

Wed, 28 Oct 2015 23:55:00 -0400

In the midst of the massive train wreck that was this evening's CNBC-"moderated" Republican presidential candidate debate, the scattershot bouncing between topics landed oh-so-briefly on fantasy sports regulation. The question was first directed to former Florida Gov. Jeb Bush, who seems to be fading further and further behind the pack in this race. Tonight's performance is not likely to provide a boost. Bush was asked whether he thought fantasy sports should be considered gambling and regulated by the federal government. Bush responded: I think this has become something that needs to be looked at in terms of regulation. Effectively it is day trading without any regulation at all. And when you have insider information, which apparently has been the case, where people use that information and use big data to try to take advantage of it, there has to be some regulation. If they can't regulate themselves, then the NFL needs to look at just, you know, moving away from them a little bit. And there should be some regulation. I have no clue whether the federal government is the proper place, my instinct is to say, hell no, just about everything about the federal government. Note how he instinctively seems to go straight for regulation, but then kind of backs off a bit and wonders if the federal government is the right choice to regulate. New Jersey Gov. Chris Christie thought even bringing up fantasy football regulation at this debate was just absurd and he didn't wait to be called upon (an ongoing theme this evening) to cut in: Are we really talking about getting government involved in fantasy football? We have — wait a second, we have $19 trillion in debt. We have people out of work. We have ISIS and al Qaeda attacking us. And we're talking about fantasy football? Can we stop? How about this? How about we get the government to do what they're supposed to be doing, secure our borders, protect our people, and support American values and American families. Enough on fantasy football. Let people play, who cares? [Transcripts courtesy of Washington Post] Christie garnered both laughter and applause from a crowd that may or may not have agreed with him, but was definitely very annoyed by the kinds of questions being asked and definitely perceived the moderators as hostile to the candidates. When you're getting pantsed on regulations by Christie of all people, a big government Republican who loves government surveillance, hates marijuana legalization, and openly derides any sort of libertarian streak within the party, you have truly lost your way. Anyway, the major fantasy sports leagues have agreed to create a self-regulating body to ensure ethical behavior by the companies, though no doubt it's not going to be enough for some who want to regulate (and get their cut of the money, obviously). Jim Pagels delved into the subject for Reason and details how government meddling will no doubt end up hurting fantasy sports' consumers. [...]



Should Daily Fantasy Sports Be Regulated by the Government?

Mon, 26 Oct 2015 10:00:00 -0400

If you've spent any part of the last few months within earshot of a television, it's likely you've seen a DraftKings or FanDuel commercial parading a series of mid-20s and 30s men bragging about all the money they've won playing daily fantasy sports (DFS). Buzz around the sites has escalated dramatically since the NFL season started in September, but the hype hit a speed bump earlier this month when The New York Times reported that a DraftKings employee accidentally leaked proprietary lineup usage data from his company and allegedly used it to garner an advantage that helped him win $350,000 on the competitor website FanDuel. Many reports have described the incident as "insider trading." but that's not quite right. Insider trading requires the trading of stocks, bonds, or other securities of a company by individuals with nonpublic access to information about that same company, but this incident did not involve stocks and was used to gain a profit via a separate firm. In addition, reports have tended to downplay the fact that the DraftKings employee is reported to have received the information only after his FanDuel roster had been locked, which means that he would not have even been able to use this leaked information to affect his entry. Yet that hasn't kept the story provoking a strong response from public officials. In the last two weeks alone, daily fantasy companies have already been hit with a request for a U.S. congressional hearing, nearly a dozen class-action lawsuits in five states demanding $5 billion in compensation, a probe by the New York attorney general, a review from the Massachusetts attorney general, an investigation by the U.S. attorney's office in Tampa, an investigation by the FBI and U.S. Justice Department, and dozens of states proposing laws to regulate or license DFS operators. By the time this article is published the list is almost certain to be even longer. Sports attorney Daniel Wallach, one of the cohort of go-to sports law experts, in an appearance on C-SPAN last week declared that DFS "will be regulated," predicting it would be in place by this time next year. Wallach, who offered few solid regulatory answers other than evoking buzzwords of "transparency," "oversight," and "accountability," said, "We're going to see regulation, and the transparency that you're looking for, the safeguards, the accountability, that apparatus will ultimately be in place, and operators will be accountable through uniform regulation, there's going to be licensing, there's going to be monitoring. This industry will thrive and survive, but it can't do so in a completely self-regulated environment." However, it's unlikely regulation, as opposed to market-driven forces, would work as advocates claim or bring meaningful real reform. Instead, it would serve mainly as a narrow benefit to state officials and gambling industry competitors. It seems a future DraftKings commercial should read, "I entered a contest on DraftKings and won $350,000 plus a multi-billion dollar regulatory bureaucracy." An activity enjoyed by millions of fantasy players is now in serious turmoil. So, in a country where sports gambling is widely prohibited, how did we get to this point? The first major American gambling legislation came with the signing of the Federal Wire Act in 1961, which prohibited the transmission of wagers on sporting events, ushered in after a series of high-profile mob-related fixings of college basketball games the previous decade. This law remained relatively unedited for 30 years until the major American professional sports leagues and NCAA pushed through Congress the Professional and Amateur Sports Protection Act (PASPA) in 1992, which confined legal sports betting to Nevada as well as three other states. In 2006, with rising concerns about Interne[...]



The New York Times Exposes the Futile Stupidity of Banning Online Sports Betting

Mon, 26 Oct 2015 06:30:00 -0400

(image) If American customers of Pinnacle Sports are finding that the gambling website's pages take longer to load than usual, they can probably thank The New York Times. The paper's investigation of how Pinnacle communicates with sports bettors in the United States seems to have caused a sudden, inefficient shift in the website's traffic from American to European servers.

Officially, Pinnacle has no American customers, since online sports betting is illegal in the United States—unlike in Curacao, the Caribbean island where Pinnacle is based, or in the various European countries that the company openly serves. But as a Times reporter discovered after consulting with Bet-IBC, an agent of Pinnacle Sports, Americans can get around Pinnacle's policy against accepting bets from people in the U.S. by using a VPN service to disguise their locations and wiring money to a jurisdiction where sports betting is legal:

After The Times informed Pinnacle that it was able to make bets on the website from the United States — despite Pinnacle's insistence that this was not possible—the agent sent an irate message. "We have closed your account and confiscated the funds," the message said.

"We are also obliged to report your fraudulent activities to the relevant authorities," it said.

Pinnacle's anti-American policy seems somewhat inconsistent with its efforts to improve its website's speed within the United States, which according to the Times included hiring contractors with servers in "New York, Miami, Chicago, Dallas and elsewhere." Knowingly facilitating online sports betting is a federal felony, which may help explain why Pinnacle's traffic was suddenly rerouted after the Times started asking questions.

The Times story, which is part of a series produced in collaboration with the PBS documentary series Frontline, is presented as an exposé. But exactly what it exposes is open to argument: Pinnacle's subterfuge or the stupid laws that make it necessary? The Times highlights the futility of trying to stop people from betting on stuff in the privacy of their homes and offices:

For years, offshore sports books like Pinnacle have used technology and other means to keep prosecutors at bay. In the United States, field agents are arrested, money is forfeited and the illegal gambling rings are seemingly dismantled. Yet they rise again, with different street soldiers and a new arsenal of deception. The one constant is the Internet, which allows for the electronic brain of these sports books to evolve, beyond the reach of American prosecutors.

This pattern raises a persistent question: Are the successes of law enforcement tantamount to cutting off a lizard’s tail only to see it grow again, and if so, is the battle even worth fighting? Is the better way—with gambling increasingly woven into the fabric of American sports—to simply legalize it so it can be regulated?

Yes.




Nevada Goes Protectionist on Fantasy Sports Leagues

Fri, 16 Oct 2015 10:25:00 -0400

(image) For the first half of the year, Nevada logged more than $5.5 billion in taxable revenue from gaming and related entertainment. That worked out to about $500 million in taxes collected up until the end of June. Nevada saw nearly $4 billion in sports betting in 2014 and the numbers have been increasing for years.

So it should probably not comes a surprise that as daily fantasy sports leagues start getting more and more attention, Nevada would notice that those top national leagues are promising billions in winnings (it's impossible to ignore, given the ad blitz). And what happened next is extremely predictable: Nevada both wants to protect its powerful gambling industry and probably also get some of that revenue. The state has declared that fantasy sports leagues count as gambling. If those national leagues want to allow Nevadans to participate, they'll have to get gaming licenses. From ESPN:

FanDuel, one of the two most prominent daily fantasy operators, said in a statement released Thursday night that it is "terribly disappointed that the Nevada Gaming Control Board has decided that only incumbent Nevada casinos may offer fantasy sports."

"This decision stymies innovation and ignores the fact that fantasy sports is a skill-based entertainment product loved and played by millions of sports fans," Justin Sacco, director of communications for FanDuel, said in the release. "This decision deprives these fans of a product that has been embraced broadly by the sports community, including professional sports teams, leagues and media partners.

"We are examining all options and will exhaust all efforts to bring the fun, challenge and excitement of fantasy sports back to our Nevada fans. In the interim, because we are committed to ensuring we are compliant in all jurisdictions, regrettably, we are forced to cease operations in Nevada."

Draft Kings made a similar statement. The argument that winning fantasy sports leagues involves skill, not chance, does not matter in Nevada, and the chairman of the Nevada Gaming Control Board was very blunt about it. The government decides what is and isn't gambling, not logic, he said.

Nevada will then join Arizona, Iowa, Louisiana, Montana and Washington as states that don't allow fantasy sports leagues. Now whether players in those states find ways to participate in these games anyway and therefore keep their winnings (in the event they actually have any) secret from the tax collectors entirely, well, I'm sure that's not happening at all. 




Fantasy Sports League Employee Win Prompts Class Action Suit

Fri, 09 Oct 2015 11:35:00 -0400

(image) It was probably destined to happen. The news that employees at major fantasy sports league companies also continued to compete for winnings at other sites (and the possibility of access to inside information) has prompted a class action lawsuit.

ESPN is reporting that DraftKings and FanDuel (if you don’t know who they are, turn on your television to any sports network for about five minutes) are being accused of negligence, fraud, and false advertising by a player with a $100 account at DraftKings:

The suit claims that daily fantasy games put forth by the two companies are misrepresented as fair. That case is made mainly through the recently revealed policies of the two companies that allowed employees to enter contests on the other's site for cash prizes, along with the rest of the population.

"DraftKings performs analytics to determine winning strategies, return on investment of certain strategies and even how lineups on FanDuel would do if they were entered into DraftKings contests," the suit alleges.

With these strategies potentially available to some employees, those employees could have a potential advantage by playing on a competitor's site.

A spokesperson for FanDuel said that employees from DraftKings had won .3 percent of FanDuel’s cash prizes. That percentage appears small, but adds up to $6 million given the huge prize pools these companies are boasting.

The sites have said they’re both going to permanently ban their employees from competing in other fantasy sports leagues, and they’ve hired third-party employees to investigate and evaluate their own practices.

Actual fraud problem or just the growing pains of a young industry that blew up so fast it hadn’t previously had to really examine these sorts of practices? I guess it’s a court matter now.

There are some (actually, more than "some") who have argued that the problem is that the fantasy sports league business is not regulated by the federal government. A couple of days ago I explained how that claim is simply not true. The Federal Trade Commission has the authority to intervene in any sort of fraudulent behavior or anti-competitive business practices by these companies.




Yes, Fantasy Sports Companies Are ‘Regulated’

Wed, 07 Oct 2015 17:10:00 -0400

The New York Times simply cannot wait to point out how "unregulated" the recreational (and for some, extremely lucrative) activities of fantasy sports leagues are. The paper's story this week about what is being called a scandal involving two massively growing online fantasy sports companies prompted the Times to describe fantasy sports as "unregulated" in both the headline and in the lede paragraph.  They're not alone. A recent Sports Illustrated explainer on the scandal calls the activity "largely unregulated." Deadspin describes an "absence of any sort of official regulatory oversight" on these companies when talking about the scandal. Nearly every story about fantasy sports references a lack of regulation. The reality is a lot more complicated. The federal government may not be treating fantasy sports leagues the same as online gambling, but that doesn't mean these companies can just do whatever they please. But let's take a step back and explain the scandal, first of all. Fantasy sports leagues, like video games, are an example of a wildly popular activity that is treated like an odd, little, mistifying subculture, even though everybody knows somebody (or is somebody) who participates in it. Participants play pretend owners and build teams from actual playing athletes. The "owners" are competing against each other to build the best team, and the winner is determined based on how these actual athletes perform in real-world games. Anybody watching sports or television (but especially those watching televised sports) has discovered that fantasy sports have blown up big time. Two major companies, Draft Kings and FanDuel are offering daily fantasy sports competitions and huge prize pools. Draft Kings boasts "More than $1 billion guaranteed in 2015." FanDuel claims they're expecting to pay out $2 billion. There are generally fees involved in participating in fantasy sports leagues in order to win the big bucks. The winnings have to come from somewhere, right? So fantasy sports has the whiff of gambling to it. Yes, there's skill involved in building teams, but of course, there's no small amount of luck. Julian Edelman could unexpectedly blow out his knee in the middle of a game, and there go millions of fantasy sports players' chances of winning. Setting the luck aside, what also helps determine success is being able to evaluate huge amounts of information about players and make some rather technical team makeup decisions. That's where the supposed scandal comes in. An employee of DraftKings had access to information about which athletes players within his company were selecting. Though DraftKings says he didn't get the information until it was too late to use it, he subsequently participated in competing FanDuel's leagues and won $350,000. The behavior has been compared to insider trading. Though the employee obviously had no idea how these athletes would perform on the field, he could have known the choices other players were making (and more importantly, not making) to maximize his odds of winning. The employee's behavior, though, isn't exactly insider trading, and it's not clear that anything illegal happened. A lot of folks clearly don't like the outcome that an employee of one company is winning the contests offered by another company, and so now the calls for more regulation are coming. The two companies themselves came forward and disclosed what had happened and announced they would stop their employees from participating in other sites' fantasy sports programs while they developed a more formal policy. New York's attorney general has announced a probe into the two companies. It's ridiculous to say that fantasy sports compa[...]