Skill or Gambling

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In 2006, Congress passed the Unlawful Internet Gambling Enforcement Act. This resulted in several online gambling sites having to be shut down.  This included many poker and online casino sites.  One area of strong popularity in the United States is fantasy football.  Millions of Americans participate in fantasy football, and some websites force you to pay a fee for joining a fantasy league.  The 2006 gambling enforcement act included a section that stated games of skill were exempt from this rule, mainly so fantasy football would not be affected.

New sites have emerged following this rule such as DraftKings and FanDuel. The sites allow you to play weekly fantasy football games and include multiple formats and prices for gaming.  The websites collect a small fee for every entry into their games and they have become very successful.  Their business model is walking a fine line between what is considered a game of skill, which is legal, and a gambling site, which is not.  According to the Washington Post, DraftKings and FanDuel will pay out over $1 billion in prize money this year and thir earning in 2014 were about $57 million.  The sites have used a large portion of their earning on advertising and aren’t trying to hide their business model.

However, a recent scandal involving one of the sites employees involves insider information being used on a rival site to win a large prize payout. The controversy has forced the FBI to look into the matter, as well as the legitimacy and legality of the sites.  This decision has resulted in the state of Nevada banning the use of these sites on the basis of requiring them to possess a gambling license.  So, in other words, the state is taking the FBI investigation very serious.  The public relations departments for the websites have jumped into action defending their clients. A PR representative for FanDuel released this statement, “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.  Many former consumers have filed lawsuits against the sites and scrutiny is rising for the popular entities.  This shows just how vital it is to follow the rules of the industry.  A slip up by a single employee can lead to devastating consequences for businesses and their PR divisions.

Sources

Jacobs, H. (2015, October 14). The FBI and US Justice Department are looking into DraftKings and FanDuel. Retrieved October 17, 2015.

Sports, B. (2015, October 16). DraftKings, FanDuel among daily fantasy sites ruled gambling by Nevada. Retrieved October 17, 2015.

 

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