David Klein Weighs In with Bloomberg Business on Player Participation in Daily Fantasy Sports

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Daily Fantasy Sports Growth Pushes Leagues to Regulate Players

fantasy-sportsThe rapid evolution of fantasy sports from casual season-long recreation to high-stakes daily Internet games has given U.S. professional sports another source of revenue as well as a headache in determining player-participation policies.

Over the last year, all four major U.S. sports leagues signed sponsorship deals with daily fantasy websites through players, teams or the league itself. They are now promoting a business that, while legal in most of the U.S., resembles sports gambling because participants profit by correctly predicting success.

As the Major League Baseball season gets under way Sunday, players for the first time won’t be permitted to join paid fantasy baseball leagues, following an agreement between the sport and its players’ union. The National Basketball Association and its players’ union disagree as to whether players are prohibited from participating.

“The leagues are fully embracing and monetizing daily fantasy, but simultaneously are putting rules in place to bar league athletes, coaches and trainers from participating,” according to Ryan Rodenberg, who teach sports law at Florida State University. Sports leagues are facing a “policy tightrope,” he said.

Legal in most states because of a 2006 federal law declaring it skill-based, entry fees for one-day fantasy games were $245,000 in 2013 and are expected to rise to $11 billion by 2018, according to Eilers Research LLC.

The most recent collective bargaining agreements between the leagues and players — signed before daily fantasy’s growth — ban gambling within their own sports. Fantasy, however, is more difficult to classify.

Fantasy Sports

The pastime, where team owners draft players and compare their statistics to determine a winner, has been growing since the 1980s as a season-long venture. In daily fantasy, players draft new teams every day, winning as much as $2 million.

MLB, which has a sponsorship deal with DraftKings Inc., the second-biggest fantasy site by entry fee, agreed with its players’ union during the offseason to ban players from participating in any fantasy baseball game that offers money or other prizes, according to league spokesman Pat Courtney.

“We want it to be about competition on the field and for on-field personnel to have no other outside influences on them with regard to the game,” Courtney said in a phone interview.

The deal doesn’t limit players’ ability to sign sponsorship deals or other business transactions with fantasy sites, Greg Bouris, a spokesman for the MLB Players Association, said in an e-mail.

Team Sponsorships

The NBA has an equity partnership with New York-based FanDuel Inc., the largest daily fantasy website. NBA teams, including the Los Angeles Lakers and New York Knicks, have sponsorship deals with the New York-based company. The Philadelphia 76ers and Golden State Warriors have agreements with DraftKings.

“Our policy is that NBA personnel are prohibited from participating in NBA fantasy leagues that require payment of an entry fee or award prizes to participants,” Mike Bass, an NBA spokesman, said in an e-mailed statement.

Gary Kohlman, general counsel of the National Basketball Players Association, said the union has never been advised of the ban.

“Irrespective of whether anyone would agree that such a rule is appropriate or not, the NBPA’s position is that rules affecting player conduct are a subject of collective bargaining,” Kohlman said.

National Football League spokesman Brian McCarthy said it wasn’t an issue and didn’t respond to further questions about it.

Players Inc.

Ahmad Nassar, NFL Players Inc. president, agreed with the league’s stand that it wasn’t an issue, though a situation the union was “watching closely.”

“We’ve been in discussions about it,” Nassar said in a January phone interview. “As a general matter, those are league rules and if they want to change the rules they’d have to talk to the union about it.”

The National Hockey League, also a DraftKings endorser, said in a statement from Deputy Commissioner Bill Daly:

“We do not consider fantasy sports (particularly ‘play for free’ fantasy sports) to constitute gambling, and neither do nearly all of the jurisdictions and legislative bodies who have opined on that issue. That said, the NHL’s rules do not permit players to participate in fantasy hockey-based games for cash prizes.”

Jonathan Weatherdon, a spokesman for the NHL Players’ Association, said in January that the issue hadn’t come up between the league and union.

‘Why Ban?’

The leagues’ stands create a question: If daily fantasy poses no threat to the integrity of sports, “Then why the ban?” asked Florida State’s Rodenberg.

The Unlawful Internet Gambling Enforcement Act, which carved out a legal standing for fantasy sports in 2006, makes no mention of one-day leagues. FanDuel began in 2009.

Philadelphia Eagles running back DeMarco Murray, whose fantasy statistics with the Dallas Cowboys were among the NFL’s best last season, said during Super Bowl week in Arizona that he doesn’t play fantasy football, but that some of his teammates do.

“I don’t want to name them, but they talk about it quite often,” Murray said during a news conference panel discussion.

“They’re just having fun, just like everyone else,” Murray said later in an interview. “I don’t think they would throw a game or try to get cute.”

‘It’s Gambling’

Former NBA player Roger Mason Jr., now deputy executive director of player relations for the NBPA, said that to his knowledge players aren’t playing daily fantasy basketball and that it remained under the radar of most.

“It’s gambling,” Mason said in an interview during All-Star Weekend in New York. “If you’re putting money down, and winning money in return, that’s gambling.”

Athletes have the ability to influence daily fantasy results in any number of ways, both on the field of play and through off-field access to inside information, such as injuries or disgruntled players, Rodenberg said in a phone interview.

“To the extent that daily fantasy is a skill-based game, your skill is going to be based on how quickly you can gather and assimilate information,” Rodenberg said.

Wayne Norman, an ethics professor at Duke University, said he didn’t find it hypocritical for leagues to be in business with daily fantasy websites while banning player participation, but that it did invite a legitimization of gambling.

Legal Gambling

Leagues don’t prohibit their players from legal gambling on other sports, which for now would require a trip to Nevada, the only state where bets on individual games are allowed. Access to legal daily fantasy, however, is as near as a smartphone.

David Klein, a managing partner at the New York law firm Klein Moynihan Turco LLP, which focuses on the gambling and fantasy sports industries, said bans on player participation eventually will be written into all the leagues’ bylaws. He also said pro athletes shouldn’t be able to play any fantasy sports, using the NBA’s Knicks and NHL’s Rangers, which share Madison Square Garden, as an example of why not.

“If I’m a hockey player and I’m friends with a basketball player in the same arena, I may try to influence them,” Klein said in a phone interview. “You get closer and closer to that and then you have collusion among the professional athlete community.”

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Source:  BloombergBusiness

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