Americans have been betting on sports since the first time a Puritan pilgrim boasted that his horse was the fastest in Massachusetts Bay Colony and another said, "Wanna bet?" But fish gotta swim, birds gotta fly and government gotta fret about gambling on fantasy sports.
Torrential television advertising by DraftKings and FanDuel is creating millions of customers for these sports fantasy businesses, thereby creating government anxiety lest Americans make unregulated choices inimical to their material and moral well-being.
In today's un-puritanical America, betting on sports is illegal, except where it isn't (Nevada, Oregon, Montana, Delaware). Besides, much more money is wagered illegally on sports than in legal casinos. Someday the number of Americans who bet on the Super Bowl will be approximately equal to the number of Americans.
In 2006, a year after an estimated 15 million Americans wagered $6 billion online, Congress, evidently convinced that Prohibition was a resounding success at ridding the nation of Demon Rum, launched Prohibition 2.0. Congress enacted a prohibition of Internet gambling, making it illegal for banks or credit-card companies to process payments to online gambling operations. Mother-hen government said such gambling was already illegal under the Wire Act, passed in 1961, before there was an Internet. But this law, which has predictably failed to stop Internet gambling, exempted fantasy sports, which were not then considered a serious commercial opportunity.
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When government action restricts Americans' choices, ostensibly for their own good, the paternalism usually has a pecuniary motive. America's principal promoters of gambling are the 48 states with some form of legalized betting, including 44 that have gambling-addiction problems: They are addicted to revenues from their lotteries and resent fantasy sports poaching "their" gamblers.
Players in fantasy sports assemble make-believe teams from actual athletes -- most commonly, NFL athletes -- and the teams succeed or fail based on the players' achievements on a given day. This is obviously gambling: Players risk money wagering on variables -- individual athletes' performances -- beyond the players' control. It is, however, gambling leavened by skill: Players can improve their odds by acquiring advantageous information -- by studying athletes' performances more assiduously than those they are playing against.
One supposed problem (according to people who see problems when transactions between consenting adults result in unequal outcomes) is this: In fantasy sports, as in real sports and the rest of life, some people excel, usually because they work harder than others. Justin Van Zuiden, writing in Sports Illustrated, says that "so far this year I've made more money -- the low six figures as of last weekend -- from fantasy sports than from my CPA job." He is good with numbers. Life is unfair.
DraftKings' advertisements promise "a new fantasy millionaire every week" and the company says it will disburse $1 billion in winnings this year. FanDuel says its patrons win $75 million a week and might receive $2 billion this year. The stakes increase with the entry fee, which can be as low as free and more than $5,000. Major League Baseball, the National Football League, the National Basketball Association, NBC Sports, Fox Networks Group and other entities see not only investment opportunities but ways to deepen fans' interests in professional sports.
Not for the first time, the law is a lagging indicator of where society is going without asking the government's by-your-leave. What technology -- the Internet -- makes possible (a multitude of fantasy games and instantaneous payouts), enough determined people will do until the laws proscribing it become too embarrassing to enforce.
The fantasy sports industry already has a trade association. The industry will need it. When politicians say the industry is unregulated, they mean it is not supervised by them. It is, however, sternly regulated by market forces, as the fierce DraftKings/FanDuel competition indicates. Another indication is the speed with which both reacted to a recent mini-not-really scandal: When a DraftKings employee won $350,000 playing on FanDuel, both businesses instantly moved to prevent the equivalent of "insider trading" -- players utilizing special access to pertinent information.
According to ESPN The Magazine, "The FBI estimates that $2.6 billion was wagered illegally in 2013 on March Madness alone; pro gamblers would bet it's 10 times that." The law will accommodate all sorts of sports gambling not when government becomes a friend of liberty by allowing victimless pleasures, but when government recognizes in fantasy sports something it loves more than liberty: something to regulate and tax.