Daily Fantasy Sports could face similar fate to US online poker, says leading gambling consultant. 

After almost eight years under the radar, the Daily Fantasy Sports (DFS) sector is firmly in the sights of US regulators, and GBGC director Lorien Pilling thinks history could be repeating itself as state governments realise the lucrative potential of a regulated DFS sector.
With Nevada’s announcement last month that it considered Daily Fantasy Sports (DFS) a form of sports betting, US operators were catapulted into a wave of speculation and uncertainty.
Federal legislation had previously exempted fantasy sports from its remit, but with DFS operators like FanDuel and DraftKings finding success in the mainstream, state governments in Nevada, Pennsylvania and Florida have decided to think again.
“One of the results of poorly thought through legislation is unintended consequences,” said Lorien Pilling, director of leading consultancy firm Global Betting and Gaming Consultants (GBGC). “The 2006 UIGEA was poorly considered legislation (and didn’t actually achieve what it set out to do) and DFS was the unintended consequence it created.
“Fantasy sports games were given a carve-out to exempt them from UIGEA and the sector has simply evolved to make use of current technology, which has led to the creation of DFS.”
Pilling, who has monitored developments in the United States closely as part of GBGC’s renowned Global Gambling Report, sees a distinct parallel between the fate of online poker from 2000-2006 and the subsequent development – and potential regulation – of DFS.
“A new online service is launched and grows without much attention from law-makers and regulators – but then there comes that “breakthrough” period when it hits the mainstream and becomes the centre of attention,” he explained. “The first DFS games were launched in 2007/2008 but the breakthrough period could be argued to have started in late 2013 with the first $1m FanDuel game and DraftKings subsequently becoming an official partner of MLB in early 2014.”
A comparable instance, he points out, can be found in the instance of PartyPoker in mid-2005, whose IPO garnered the attention of legislators as it revealed exactly how much the company was earning. A year later, the Unlawful Internet Gambling Enforcement Act (UIGEA) was passed.
“Assuming the US does not ban DFS outright, then it will suffer the same fate as e-gaming in Europe when governments have got involved: regulation, licensing, taxation,” said Pilling. “As well as increased taxation and compliance costs, there will no doubt be calls for DFS operators to contribute to social responsibility and problem gambling funds too. Operating costs will increase, leading to consolidation and less competition for players.”
The situation is complicated by the devolved legislative powers that allow each state to formulate its own gaming legislation, coupled with what Pilling describes as a “patchwork of attitudes” toward fantasy sports. 
As he points out, Arizona, Iowa, Louisiana, Montana and Washington all specifically prohibit their citizens from collecting winnings from fantasy sports.
“If each individual state tries to impose its own regulation and taxes it could be a real headache for the sector,” he suggests.
Nevada is the first state to consider regulating DFS on a comparable basis to mainstream sports betting, which will make it one of a handful of states that can issue DFS licenses. 
According to Pilling, the move could serve to legitimise sports betting as a practice in the US, but it’s unlikely to pave the way to a full acceptance of online sports betting in the near future.
“The benefit of a licensed DFS sector would be to show that people can engage in sports games for real money without the integrity of US sports leagues being compromised,” he added. “But it still feels like a long-shot for DFS to act as the catalyst for full internet sports betting in the US.” 
This interview was conducted with GBGC by Imogen Goodman and first appeared in the November 2015 edition of Betting Business Interactive.