2024 Business Of Fantasy Sports Series: Education & Politics | How It Started | Mainstream Explosion | CBC v MLBAM | UIGEA | The Rise of DFS | The Fall of DFS | The Repeal of PASPA | Sports Betting Crossover | Fantasy Sports Feeds Sports Betting

 

By June 2018, the fantasy sports industry was diligently passing state-by-state legislation. More than 100 fantasy sports businesses shut down. FSTA membership went from 330 companies in 2016 to less than 200 within two years. 

 

 

 

The Professional & Amateur Sports Protection Act Is Repealed & Opens Up Sports Betting In The U.S.

In the previous weeks, we talked about how politics affect the fantasy sports industry. We explained the origins of fantasy sports with the first battles, the emergence into the mainstream, the watershed CDM case and UIGEA and what it meant. Then the last two weeks we explained the rise and fall of daily fantasy sports. 

Today, we look at The Professional and Amateur Sports Protection Act of 1992 (PASPA) and examine one of many scandals that caused the government to take this action. This law coupled with the safe harbor in UIGEA explains how federal lawmakers saw fantasy sports and sports betting as very different. We need to fight to keep it that way. First, my personal journey with…

The Fall Out From The Fall Of Daily Fantasy Sports

After the sky fell on DFS in late 2015 and early 2016, we at Fantasy Alarm had to reinvent the company. Our strategy was to create infotainment to support DFS, make people better players, and have more fun. Two major things had happened in the fall of 2015 and early 2016:

  • The New York Attorney General’s attacks caused a ripple effect, effectively causing the loss of about 40% of the addressable market. 
  • DraftKings and FanDuel stopped much of their advertising spending, crushing revenue projections for DFS companies.

We lost all subscribers in the states that were now excluded, as well as all advertising revenues from the DFS companies. One of our major advertisers, a DFS operator, commingled funds, did not have the cash flow for withdrawals associated with the states that were now illegal and declared bankruptcy. 

We needed an answer. We needed to cut costs, or we would be like the 100+ companies that didn’t make it. We talked about the potential of just closing the doors. Instead, it was time to PIVOT PIVOT PIVOT. The team worked together on potential plans. First, we leaned into technology. 

We rebuilt the website tools and created an easier workflow for our talented content creators. This allowed fewer people to do more. Also, no one was above any job. We all banded together. We renegotiated every vendor license. We killed the print magazines and any projects that did not make money.

Recognizing that many companies were leaving the space, we bumped pricing and added more seasonal coverage than before. We always had seasonal coverage, but we leaned in.

Our year in 2016 was awful, and we needed to take more drastic steps. In early 2017, everyone had to take a pay cut, or we would have to let go of our news department, RotoInfo. 

In March 2017, Jeff Mans, Ray Flowers, and Ted Schuster left Alarm. We felt we had lost family members. Our future was in jeopardy. Later that month, a close friend’s daughter passed. I was at the funeral when Ray, Jeff and Ted were making the announcement on SiriusXM. It gave me perspective. Less than a month later, my family lost a close friend of our youngest son. He died by suicide. It was hard to reconcile going forward with anything, let alone fantasy sports. 

At this point in my life, Fantasy Alarm was so lucky Howard Bender was with the company. He had many talents, was super funny, serious about winning, and ready to take a bigger role. Many others stepped up with his leadership. My son was coming into his own technically and we were moving mountains on technology. We branded ourselves, FAmily. 

Time to PIVOT…PIVOT…PIVOT again.

Discussions with friends at SiriusXM encouraged us to pursue Jim Bowden, who loved fantasy football. No one in the media would think outside the box and have a former GM in baseball talk football all day. Ed Bunnell, who had hired Bowden at FOX Sports years back, endorsed him as someone who would ATTACK the challenge. 

In July 2017, Fantasy Alarm signed Jim Bowden to co-host The Fantasy Alarm Show with Howard Bender and analyze fantasy baseball AND fantasy football. 

Bender and Bowden were a match made in heaven. The new era of Fantasy Alarm was on its way!

 

 

 

The Rest Of The Fantasy Sports Industry

By 2018, many paid fantasy sports laws were passed nationwide to codify regulations surrounding fantasy sports contests with entry fees and cash prizes. Paid fantasy sports include DFS, High Stakes, and league play like at CBS, Yahoo!, and RTSports.com. DraftKings and FanDuel still led the lobbying efforts, and Peter Schoenke with Stacie Stern from the FSTA are in the conversations. 

These two defenders of all companies in the FSTA are amazingly helpful to the cause. The two powerhouses are still leading the conversation, but we are being listened to.

Enter Sports Betting - The Repeal Of PASPA

PASPA was created in response to numerous news stories of college and pro athletes being paid to shave points to pay off organized crime bets. Shaving points is where a team is favored to win and key players from that team are compromised in order to win bets on the other team to beat the spread.

The Boston College scandal during the 1978-79 season is the most famous. The Henry Hill gang sent the Perla brothers to Boston to pay off the players and shave points to beat the spread against them. Boston College was good. They were 22-9 that year, but high spreads allowed them to still win, but win for the Lucchese family, who gave orders to the Henry Hill gang. You know Henry Hill; he was played by Ray Liotta in Goodfellas. The federal government wanted to stop these situations. The athletes had to shave points on spread bets because there was no such thing as a “player bet” or what is also called a prop bet.

PASPA did not make gambling illegal, it only told states that they could not make it legal. It ran into constitutional issues under the principles of federalism when four states were exempted. Of course, Congress can and, in my opinion, should act to pass one universal set of laws nationwide that regulates and taxes gambling properly. We discussed the politics that didn’t allow that to happen in the last article.

In 2009, New Jersey, led by Chris Christie, felt that PASPA was unconstitutional since four states were allowed sports betting. In 2012, New Jersey passed a law allowing sports betting at licensed locations.

The NCAA, NBA, NFL, NHL, and MLB challenged the law. After the courts sided with the leagues and upheld their decisions on appeals, in June 2017, the Supreme Court accepted the case and determined that PASPA was unconstitutional. 

State Senator Raymond Lesniak had been the champion for sports betting in New Jersey for more than a decade before said about the repeal of PASPA: “...it’s a legitimate business in Las Vegas, and in New Jersey, it’s an illegitimate business. It’s run by organized crime and offshore internet sites. They’re bringing in millions of dollars a year. This will put the bookies out of business.” He was inducted into the Sports Betting Hall of Fame!

Kevin Vela said it best in this article. We knew that DraftKings and FanDuel's DFS companies were waiting for a result like this. The fallout is well stated in the article, where paid fantasy sports were included in the state-by-state clarification.

What is not in this article is that when the FSTA, DraftKings, and FanDuel decided not to fund the FSCA in October 2015, it set up the chaos that created the state-by-state legislation, with only DraftKings and FanDuel having deep enough pockets to make it all the way through. In 2015, the two powerhouses began to set their companies up for sports betting by acquiring millions of daily fantasy players. Research showed that more than 65% of fantasy sports players would be bettors as soon as it was legal and regulated. 

Why Is This Important Now?

So, we understand now that PASPA was an attempt to stop organized crime syndicates and offshore sportsbooks from compromising players. With the repeal of PASPA and more player bets at all sports betting outlets to support fantasy players, there is a greater risk of compromise. 

We can argue that the main reason fantasy sports got the UIGEA safe harbor is because requiring multiple athletes from multiple real-world games minimizes the chance that someone could corrupt the sport. You can imagine that fixing a fantasy contest is practically impossible.

Compromising a single player as was the case with the Jontay Porter scandal and subsequent lifetime ban, is way different from the Henry Hill gang compromising nine players from Boston College.

Player performance contests MUST be left to fantasy companies, where the entry fees are fixed. No one would consider compromising multiple players from different teams in any sport to protect their small contest entry. It is the size of the wagers coupled with single-player bets that creates the risk. 

Leave player-oriented contests to fantasy companies where they belong. Eliminate single-player bets at sportsbooks. Allow fantasy sports and sports betting to both be safe and fun.

Next week, let’s dive into the origins of the player bet and the emergence of innovative fantasy sports games!