Thursday, October 29, 2015

Remember a Day, Before the UIGEA

Fantasy sports actually came up as a topic during last night’s debate among Republican presidential candidates, although only long enough for one candidate (Jeb Bush) to make a weak joke about his own fantasy football team then add a generic reference to the need for regulation, and another (Chris Christie) to complain about it being a trivial issue then add a generic reference to the need for the federal government to leave fantasy sports alone.

It reminded me a little of people in poker back in the day sometimes wondering -- usually in a humorous way -- if online poker was going to come up in debates or speeches. Of course the topic never would, being so tangential, so it was kind of remarkable to think that daily fantasy sports (DFS) had made its way far enough into the cultural center to get that mention last night.

Of course, it took a few weeks worth of drama including lots of legislators on both the state and federal level wanting to examine DFS for that to happen. Against that backdrop, ESPN shared an interesting article yesterday titled “The true Congressional origin of daily fantasy sports” that provides some historical perspective on the legality of fantasy sports, in particular looking at the years preceding the passage of the Unlawful Internet Gambling Enforcement Act of 2006 which some have argued made the DFS industry possible, even if the bill’s authors never quite envisioned what that industry has become.

After looking into that history for several weeks, ESPN points out how the inclusion of fantasy sports as a so-called “carve out” in the UIGEA wasn’t actually the result of lobbying by the NFL or other sports leagues (as many have stated). About a month back I posted a list of UIGEA-related items here without comment that perhaps suggested as much, but according to ESPN this really wasn’t the case.

In that post I quoted the line from the UIGEA stating how “the term ‘bet or wager’... does not include... participation in any fantasy or simulation sports game or educational game or contest in which (if the game or contest involves a team or teams) no fantasy or simulation sports team is based on the current membership of an actual team that is a member of an amateur or professional sports organization.” Remember the UIGEA prohibits businesses from facilitating the funding of “unlawful Internet gambling” which refers to placing, receiving, or transmitting a “bet or wager” online, so saying fantasy sports doesn’t involve bets or wagers means funding online fantasy sports is not prohibited.

The whole idea for what eventually became the UIGEA arose in response to the growth of the internet in the 1990s and the initial appearance of gambling sites, including both poker and sports betting sites. But as the ESPN article points out -- and as many others have been explaining, too, especially over recent weeks -- the “fantasy sports” being exempted back in the late 1990s when legislators first began sharing early versions of online gambling-related legislation wasn’t at all like DFS.

There are references in the article from various folks (including legislators) characterizing those earlier fantasy leagues as being similar to friendly home games in poker -- that is, mostly between friends and for small stakes. There’s also a distinction made between longer (e.g., season-long) fantasy sports contests and shorter ones such as what has become the daily or weekly games. Only one brief exchange between former Arizona senator Jon Kyl (one of those often called an orginal “architect” of the UIGEA) and an attorney alludes to the possibility of shorter-interval fantasy sports contests, and that’s only in passing (and without any subsequent effect on how the law was ultimately worded).

Interestingly, the Department of Justice offered an opinion in 1999 that there should be no fantasy sports exemption in any federal legislation regarding online gambling. Then the topic wasn’t revisited at all over the next several years, making it seem as though the language relating to fantasy sports just kind of lingered there to be quietly included in the final version of the bill that was passed into law.

“There was no evidence in the Congressional Record that the final version of the UIGEA was openly debated in the lead-up to the Sept. 29, 2006 vote,” reports ESPN (a vote that technically didn’t finish until after midnight that night, thus 9/30/06). A lot of us well remember that part of the story. After it passed some legislators complained about the carve outs (including for fantasy sports), and of course there followed the ultimately unsuccessful efforts of Barney Frank and others to pass new legislation regarding online gambling. But the UIGEA remains the law of the land as far as federal legislation focused on online gambling goes, despite its abundant ambiguities.

The article concludes with some forward-looking thoughts about how things might proceed from here when it comes to this reconsideration of DFS’s legal standing. Included are quotes from current major sports leagues commissioners on the subject.

It’s obvious that DFS is almost entirely different from what “fantasy sports” was intended to signify in the UIGEA, which I suppose will be a central part of the debate among legislators going forward. In any event, today I’m lamenting we didn’t think to start calling online poker a “simulation sports game” at some point prior to October 2006.

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