Report: US Attorney probing daily fantasy sports for illegal gambling violations

us-attorney-investigating-daily-fantasy-sportsThe US Attorney’s office in Tampa, Florida has reportedly convened a grand jury to investigate whether daily fantasy sports (DFS) operators are acting in violation of the Illegal Gambling Business Act (IGBA).

Gaming law attorney Daniel Wallach (@WALLACHLEGAL) broke the news late on Friday, the perfect capper to what is undeniably the single worst week in daily fantasy sports history. If you’ve just emerged from a coma and wondering why your favorite DFS operator is wearing tar and feathers, start here, then go here, here and here.

The IGBA defines an illegal gambling business as one that is operating in violation of a state law and Wallach has written extensively on the quirk in Florida law that could prove dangerous for DFS operators, who have long argued that their product isn’t gambling due to its reliance on skill.

Florida law prohibits wagering on “the result of any trial or contest of skill, speed or power or endurance of human or beast.” The prohibition applies equally to bettors and those who facilitate such wagers, including operators, financial institutions and those who “aid, assist or abet in any manner” this activity.

In 1991, then-Attorney General Robert Butterworth issued an opinion which said this prohibition applied to any “fantasy sports league whereby contestants pay an entry fee for the opportunity to select actual professional sports players to make up a fantasy team whose actual performance statistics result in cash payments from the contestants’ entry fees to the contestant with the best fantasy team.”

Butterworth’s opinion predates the rise of DFS and has yet to be tested in court. Prior to the reports of the grand jury investigation, Capitol News Service had quoted Florida’s current Attorney General’s office saying it was “not currently investigating” any DFS companies.

Florida is currently examining its gaming market following the expiration of the state’s compact with the Seminole tribe, and the Fantasy Sports Trade Association (FSTA) hopes DFS can be included in the conversation. The FSTA recently ramped up its lobbying efforts in Florida to help ‘educate’ legislators on “the dynamics of fantasy sports” and has given $10k apiece to four political action committees in the past two weeks.

Rob Bradley, who chairs the state Senate’s Regulated Industries committee and acts as the Senate’s lead negotiator on gambling issues, apparently has yet to receive his FSTA check. Bradley told the Miami Herald that he’d seen some of DraftKings and FanDuel‘s ubiquitous DFS TV commercials and believes “they are promoting a product that looks a lot like sports betting.”

In the day’s other DFS developments, Yahoo has joined the chorus of DFS operators who have banned their employees from playing real-money DFS contests at rival sites. The National Hockey League, which has a multi-year partnership with DraftKings and already bans its players from playing real-money hockey DFS contests, announced it was extending the prohibition to league employees.

Following a solo media blitz by CEO Jason Robins, DraftKings’ three founders sent emails to all their players on Friday asking them to ignore the mainstream media’s torches and pitchforks. For anyone who’s been following this story, the epistle by Robins, Matt Kalish and Paul Liberman won’t break any new ground.

The trio acknowledges that the mainstream media drumbeat regarding the scandal will likely get louder but insists it is “our prerogative to keep driving that conversation ourselves.” They promise to “work to respond to your concerns in complete transparency” but one gets the sense they live in houses with frosted windows.

For instance, the trio continues to insist that the scandal hadn’t driven their decision to hire law firm Greenberg Traurig to evaluate DraftKings’ internal policies and procedures, yet the company continues to employ very non-specific language that fails to articulate a definitive timeline of events. Instead, players are told that “long before this happened, the wheels were in motion for an external review.” And remember kids, Bill Clinton did not have sexual relations with that woman.