No chance the 50 states will allow Daily Fantasy Sports “very soon”

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[toc]People like to do hot shots at conferences and when they appear on billboards. These plugs often get even hotter when it comes to daily fantastic sports and sports betting.

One particularly hot opinion caught my attention this morning, when one lawyer appears to believe – or at least said – that the 50 states would “authorize DFS very soon.”

Here is the catch in question:

This, however, defies reality.

First, what states “allow DFS”?

Following what the States are doing with DFS is my purpose. Or at least that’s one of the things I get paid for.

Let’s break this down. Even the most optimistic look at the state level says that 40 states “allow DFS”. And when I say that, it’s a generous interpretation of what’s going on at the state level.

This number comes from states where most DFS operators accept customers for paid entry. DFS is not expressly legal in about 80 percent of all states. But companies – DraftKings and FanDuel – claim that their contests are games of skill under most of the laws of those states and that they do not violate the rules of the game.

They have a good argument in a lot of states. But it’s far from a lock that they are 100 percent legal in every jurisdiction where the state legislature has not passed a fantasy sports law.

Very gray or black markets for DFS

Here is an overview of the operators who take customers in which states. And here is the list of states where most DFS operators do not take customers due to the current legal climate:

  • Montana
  • Iowa
  • Washington
  • Louisiana
  • Arizona
  • Texas
  • Alabama
  • Hawaii
  • Nevada
  • Delaware
  • Idaho

There are caveats to this list:

  • Nevada Actually authorizes DFS, but you must license it under the existing gaming licensing structure. This is not something that DraftKings, FanDuel, and other operators are interested in. (Note: a company offering a DFS pari mutuel product – USFantasy – works in Nevada.)
  • In Texas, DraftKings takes customers but not FanDuel.

Even DFS industry lobbyists will likely admit to you in private that the passage of new laws in all 10 (or 11) of these states has no chance of happening. The designation “very soon” obviously has some leeway, but even using a two to three year horizon, I see no chance that all of these states – or even most of them – will expressly legalize DFS.

The states fall into two categories:

States where DFS has never been legal

The first five states in the above list are jurisdictions where there has never been a paid entry DFS. This is because the laws of those states are not conducive to this. Here are those states and what happens:

  • Montana: The state runs fantasy contests like a monopoly. Nothing has been done to change this in a material way.
  • Iowa: There is a bill currently active, and it seems like any state on this list’s best chance to turn the legal climate around.
  • Washington: Legislation has been introduced over the past two years, but both efforts have stalled without progress.
  • Louisiana: The state made real progress towards a new law in 2015, but there has been little movement since.
  • Arizona: The efforts were largely unsuccessful due to concerns about the state’s gaming pact with the tribes.

I would say it would be a big win for DFS if it took one of those states out of the black market category, let alone the five, over the next few years. The probability of the latter occurring is approaching zero percent.

Additionally, Montana is such a small market that it is unlikely to be the focus of any lobbying effort given the issues in other states.

States where DFS operators have withdrawn

The other five states (or six, if you include Nevada) on the list represent places where the legal climate has changed over the past two years. All this happened when the State Attorneys General Ruled DFS Illegal Gambling under state law.

These states certainly represent a better chance of reversing a negative climate than the other five. After all, DFS has successfully passed laws in three of those states where GAs have given negative opinions: new York, Mississippi and Tennessee.

But there are still problems in these states:

  • Texas and Hawaii have very little legal gambling. And despite the tale that DFS doesn’t bet gaining traction in many places, it’s not clear the industry will win this battle in those states.
  • Nevada officials have shown little interest in changing their laws to allow DraftKings, FanDuel and others to enter the state under a regime different from its gambling laws.
  • Idaho and Delaware are small markets like this are unlikely to attract real lobbying efforts from the industry.
  • Alabama is the best candidate to overturn GA opinion with a new law. But a legislative effort failed in 2016.

The other 39 states and DFS

All of this doesn’t even take into account other states that are variables for DFS.

Eight states passed laws in 2016. Maryland passed a law on fantastic sports in 2012; however, his legality has been called into question. Kansas passed a bill simply legalizing, not regulating, fantasy sports in 2015.

This leaves many other states with different levels of gray. The main one of them is Illinois, where FanDuel and DraftKings continue to operate despite a negative GA opinion. Although nothing particularly negative has happened in Florida Where California, the legal landscape is far from ideal for DFS in both states.

It is also hard to believe that Utah – a state like Hawaii without gambling – has not acted on the DFS.

Regardless, the above analysis only takes into account the current climate, and not possible future events in other states.

Conclusion: no, 50 states will not allow DFS

In short: the realization that every state will authorize DFS in a short period of time is nonsense.

Although the point of view that is the basis of this column is obviously only an opinion / an analysis, little basis in reality.

The momentum for the legalization of DFS has been palpable in recent years. But it is not to the point where its eventual legality is everywhere a foregone conclusion.

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