Why are DraftKings and FanDuel ending College Fantasy Sports?

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DraftKings and FanDuel will no longer offer daily fantastic sports competitions on university sport after having reached an agreement with the NCAA, as first reported by ESPN.

The news comes as three states have formally agreed to regulate the DFS industry, including two – Indiana and Massachusetts – who have prescribed a ban on university fantasy contests.

Why is this happening? And why now?

Basics of the agreement

ESPN’s David Purdum broke the agreement here, in which DraftKings and FanDuel agreed to stop college contests at the end of the men’s event NCAA Basketball Tournament.

NCAA President Mark Emmert offered this in a statement to ESPN:

“We appreciate and applaud the action of DraftKings and FanDuel to stop offering contests involving college, high school and youth sports. This action culminates months of hard work between all parties to reach a place that is good for amateur sport and, most importantly, the young people who participate in it. We will be working diligently with our member schools over the coming year to ensure that these “exclusions” from amateur sport are included in pending state legislation. “

(Note: DraftKings and FanDuel have never offered high school or youth sports contests.)

FanDuel offered this statement on his media site:

As part of a new deal with the NCAA, we have decided to voluntarily and indefinitely suspend college athletic competitions in all states upon completion of college basketball games this week. As a leader in calling for smart, common sense regulations for the fantasy sports industry, FanDuel has had months of productive conversations with the NCAA, their member institutions, and various state lawmakers to better understand their concerns. regarding fantastic sports competitions based on amateur athletics. Clearly this is an issue that matters to a variety of constituencies and we believe the best way forward is to suspend the offer of these contests pending resolution of the issue in the legislatures of the constituencies. States.

The NCAA’s home state of Indiana and our home state of New York were two of the first states to address this debate. Indiana has passed and New York is considering fantasy sports laws that protect consumers, protect the right to participate in fantasy sports, AND contain exclusions stating that fantasy contests involving amateur sports are prohibited in their states. The Massachusetts Attorney General has issued regulations with a similar waiver. We have supported all these efforts and in the future we will actively support bills containing the same provisions. We’re excited to be able to work with the NCAA on smart regulations for the fantasy sports industry.

The FSTA issued this statement:

“The FSTA continues to support our members who provide fantastic college sports. NCAA football and basketball have been a part of fantasy sports for almost as long as the hobby has been around. “

The history of DraftKings, FanDuel and the NCAA

The NCAA and other interests in college sport have arose as an opponent of DFS in many ways, dating back to last summer. The commissioners of the major collegiate conferences of the time had letters written to DraftKings and FanDuel calling on them to stop offering university competitions.

The NCAA has also pushed to exclude DFS ads from serving during college football playoffs and NCAA tournaments.

The NCAA has recently focused on an “educational” effort – the Alliance for the Protection of Student Sport – ban academic fantasy contests under state regulatory bills.

Why are DraftKings and FanDuel making a deal with the NCAA?

While DraftKings and FanDuel could have had discussions with the NCAA behind closed doors, they have shown no sign of bending to their will so far.

Both sites – and a number of smaller operators – continued to offer college contests despite protests from the NCAA. There are several possible reasons why sites are nodding now:

A possible PASPA challenge?

Any theory as to why this deal is happening now? DraftKings and FanDuel try to avoid a challenge under the Law on the Protection of Professional and Amateur Sports.

PASPA is the law that prohibits almost all states from legalizing sports betting. It allows you to bet on Nevada and limited sports betting in Oregon, Montana and Delaware. The law is the central issue of the New Jersey sports betting case, in which this state tries to allow sports betting.

Then how fantasy sports, PASPA and the NCAA intersect?

States have started to pass DFS legislation, which could be seen as an “authorization” for sports betting, which PASPA is supposed to stop. There is a question of whether PASPA could be applied to DFS in court, but some legal analysts believe state regulation could be a violation.

So theory goes, DraftKings and FanDuel might try to keep the NCAA happy so as not to dare them challenge DFS regulations in court, under PASPA. (Professional sports leagues and the NCAA are the groups that can challenge through PASPA, under the law, and all are plaintiffs in the NJ sportsbook case.)

The Massachusetts Gaming Commission broached the subject in his white paper on DFS:

Notably, the interests of amateur sports organizations and professional leagues are not always aligned, as evidenced by the NCAA’s demand that DFS operators cease offering contests based on their varsity sports, thus leaving the NCAA as the potential complainant of PASPA.

Is this a driving motivation for DraftKings and FanDuel? It’s a matter of speculation at this point. Only one law – that of Virginia – would give the NCAA status at this point, as it allows college competitions.

Changing the NCAA from enemy to friend at the state level?

The NCAA has started to enter the DFS regulatory discussion in significant ways in recent months; this was responsible for banning the university competition make it Indiana law.

As noted above, the NCAA has also attached its name to an emerging education / lobbying group, the Student Sports Protection Alliance (which is called SPAN). This is a one-issue advocacy group, only trying to prevent fantasy contests based on amateur sporting events (including high school and college.)

SPAN has emerged in recent weeks after Virginia passed its law without banning amateur fantasy contests.

Maureen Riehl, Executive Director of SPAN, applauded the decision to speak to Legal Sports Report on Thursday:

“SPAN members look forward to working with both companies to ensure that the laws and regulations they promote for the DFS industry in the United States include an exclusion of DFS betting for all student – college sports, high school and youth, ”said Riehl. .

“Obviously in the same spirit as this deal, it will be good to know that they would also be willing to support and push for an amendment to the Virginia law that they just helped push through to update this. law to include exclusion from student sports, too. “

The NCAA has been a pretty wise and calm lobbyist on DFS, at this point. Dropping college contests might simply be aimed at minimizing NCAA opposition to DraftKings, FanDuel, and the rest of the industry.

The movement could also be used to make the NCAA a supporter of regulation, instead of an opponent, when the legislation includes the exclusion of amateur sport.

Why fight for a small market?

The current market for daily fantasy sports at college competitions is quite small. FanDuel said college football and basketball made up about 3% of its activity in the ESPN report. Estimates place the entire Daily College Fantastic Market between 5 to 10% of SFN’s turnover. (The entire universe of all DFS income in 2015 was around a quarter of a million dollars.)

The college DFS market is paltry compared to the revenue generated by major professional team sports – the NFL, NBA and Major League Baseball.

There would certainly be room for fantastic university vertical growth move forward, if DraftKings and FanDuel were to continue to offer sports. But in the current environment, the calculation of upset an enemy like the NCAA to keep a small slice of income might not make sense.

At the same time, it is a further erosion of the market for DraftKings and FanDuel, who have has withdrawn from New York, Mississippi and Hawaii in recent weeks and months. FanDuel goes leave Texas in May.

What will other DFS operators do?

This will be an interesting question in the future – or at least when the the college football season is unfolding in autumn.

In general, small DFS operators use DraftKings and FanDuel as legal coverage in states with negative environments and as a witness. But it remains to be seen whether they will align on this topic.

Not all DFS operators currently offer college contests, but for those that do, will they be ready to give up income from university exams, when DraftKings and FanDuel essentially cede the market to them? It might be too tempting to pass up.

It is also possible that DFS operators not belonging to the university market begin to offer competitions to capture income that DraftKings and FanDuel avoid.

However, a new pressure group – the Small Fantasy Sports Companies – is also pushing for a ban on college fantasy contests. This group includes several DFS operators.

So is the NCAA over on this issue?

Based on comments from NCAA’s Emmert and SPAN’s Riehl, this does not signal the end of efforts on the question of fantastic sports in college.

Today’s deal could signal a relaxation between DraftKings, FanDuel and the NCAA. However, getting laws codifying that fantasy sports based on amateur sports are not allowed – not just a deal with the two biggest operators – seems to be the key. NCAA Finals.

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