Fantasy sports betting isn't a federal crime, as no sports betting should be

If you have watched any football during the NFL season, you probably saw an advertisement for DraftKings or FanDuel. Part of the rapidly expanding industry of daily fantasy sports betting (DFS), each company is worth more than $1 billion and counting, with an estimate 57 million people in North American participating.

In addition to being big business, fantasy sports betting has become an integral part of the sports fan’s experience, which even the major leagues seem to recognize with individual NFL teams even forming official “partnerships” with DFS sites.

However, the aggressive advertising campaigns of DFS sites has raised some eyebrows, and now one lawmaker is calling for an investigation into their legal status. While some may see the hearing as a threat to the big business of fantasy sports betting, it may just be a chance for Congress to address the ludicrous federal ban on actual sports betting.

New Jersey Rep. Frank Pallone (D), the ranking member of the House Energy and Commerce Committee, has sent a letter to Committee Chairman Fred Upton, R-Mich., and Rep. Michael C. Burgess, R-Texas, the Commerce, Manufacturing and Trade Subcommittee chairman, requesting a hearing to examine the “murky” legal status of fantasy sports gambling, as well as sports gambling and the relationship between the professional leagues and fantasy sports.

“These sites are enormously popular, arguably central to the fans’ experience, and professional leagues are seeing the enormous profits as a result,” Pallone said in a statement. “Despite how mainstream these sites have become, though, the legal landscape governing these activities remains murky and should be reviewed.”

In his letter, Pallone noted the three relevant federal laws that could apply to online fantasy sports betting, but a hearing is necessary to review “the interplay between these federal laws.”

The answer to the question: “is fantasy sports betting legal,” is simple and it’s not.

The first law, the Federal Wire Act of 1961, (which I have written about extensively) prohibits individuals from using “wire communication facilities” for the interstate transmission of bets or wagers or information assisting in the placing of bets and wagers “on any sporting event or contest.” Courts and the Justice Department have seen fit to interpret “wire communication facilities” to include the Internet.

The second law, the Professional and Amateur Sports Protection Act of 1992 (PASPA), states that it is unlawful for a person to “sponsor, operate, advertise or promote … a lottery, sweepstakes or other betting, gambling or wagering scheme based, directly or indirectly,… on one or more competitive games in which amateur or professional athletes participate, or are intended to participate, or on one or more performances of such athletes in such games.”

The third law, the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA), prohibits the transmission or acceptance of funds in connection with “unlawful” online gambling activities. The law does not specify what counts as an unlawful online gambling activity. It does, however, specifically exempt fantasy sports gambling so long as participants adhere to certain guidelines.

Based on these laws, there’s no doubt that fantasy sports betting is legal. You may wonder, however, if the PASPA says gambling on sports is illegal, but UIGEA says fantasy sports betting is OK, which law applies?

While I’m no lawyer, I do work with several and based on what they tell me, UIGEA’s language on fantasy sports betting trumps the other laws for two reasons. In legal theory, the rules of statutory interpretation, there is a doctrine known as lex posterior derogat legi priori — or in plain old English, the “maxim of construction”  — which holds that the more recent or “younger” of two conflicting statutes governs. Similarly, lex specialis derogat generali, states that the more specific law prevails over the more general one. So, as long as sites adhere to the requirements of the so-called UIGEA fantasy sports “carve out,” they are legal.

However, because of PASPA, betting on non-fantasy sports (outside of the four states that had legalized sports betting prior to PASPA’s enactment) is illegal. New Jersey has been waging a war to overturn this federal prohibition (or at least to skirt around it) and allow gamblers in the state to bet on sports within the state — a change that could bring much needed revenue to faltering Atlantic City.

However, their efforts have been unsuccessful and have been opposed by professional and amateur sports leagues every step of the way. And perhaps that is the true intent of a hearing: not discuss the legality of fantasy sports gambling, but to discuss the illegality of non-fantasy sports betting.

The press release prepared by Pallone’s office, described him as “a strong advocate for legalized and regulated professional sports betting” and the money it would bring to New Jersey. “Fans are currently allowed to risk money on the performance of an individual player. How is that different than wagering money on the outcome of a game,” he asked.

He’s got me. Why is it legal for adults to spend money gambling on fantasy sports, buying lottery tickets, or hell, even making a bad $10 bet on a movie, but it’s illegal to apply one’s knowledge of sports to bet legally on the game? I hope, if Pallone gets the hearing he wants, other lawmakers will be at a similar loss and will consider repealing this ineffective and unconstitutional law once and for all.

 
Michelle Minton is the Competitive Enterprise Institute’s fellow specializing in consumer policy, FDA regulation of non-pharmaceuticals, alcohol regulation, food and beverage regulation, and Internet gambling. She wrote this for InsideSources.com.