A lively discussion about the future of the multibillion dollar daily fantasy sports industry in New York and beyond served as one of the highlights of the 20th annual Fordham Sports Law Symposium, hosted by the Fordham Sports Law Forum, on April 1.
Daily fantasy sports giants DraftKings and FanDuel, which collectively account for 90 percent of industry revenues, have temporarily ceased operations in New York while state legislators decide whether the games are based on skill or chance, in accordance with state gambling laws. Daily fantasy’s legal quagmire could lead to a New York state constitutional amendment on gambling and future regulation and taxation of the contests, panelists said.
The symposium also featured panels on persistent gender inequality in sports and recent challenges to the arbitration process in professional sports. Fordham Clinical Law Professor Paul Radvany moderated the arbitration panel.
Keynotes were delivered by DeMaurice Smith, executive director of the NFL Players Association, who discussed his contentious relationship with the NFL, and alumnus Ken Hershman ’88, former president of HBO Sports, who spoke about the future of entertainment programming.
End of the Fantasy?
The daily fantasy sports industry has exploded in popularity in the past two years, with hundreds of millions spent on advertising and massive investment from private equity firms, professional sports leagues, and major media outlets.
Increased visibility and value have resulted in increased scrutiny, notably in New York where Attorney General Eric Schneiderman has equated the contests to gambling, in violation of state law.
Now the issue in New York, as in many other states, rests with the state legislature. If the state does not legalize the contests by June 30, daily fantasy operators will need to wait for a court to rule on appeals of injunctions against them.
The question of whether a “material element of chance” exists in the games makes it unlikely the legislature will resolve the issue without a court decision, said Fordham Law Adjunct Professor Marc Edelman, who also serves as associate professor of law at Baruch College’s Zicklin School of Business and is a frequent media commentator on daily fantasy sports.
“Everybody wants to get to the same place: to allow New Yorkers to play the daily fantasy sports they love to play,” added Jeremy Kudon, a partner with Orrick Herrington & Sutcliffe and daily fantasy sports lobbyist.
That path, as Edelman alluded, might not be so cut and dried.
Even if a bill passes before June 30, that might not be enough to legalize daily fantasy sports in New York.
Panelist Daniel Wallach, a shareholder with Becker & Poliakoff, suggested that, before any daily fantasy sports legislation can take effect, a voter referendum may be required under Article 1, Section 9 of the New York Constitution, the provision that prohibits all forms of gambling unless specifically exempted. That prompted sharp debate among the panelists about whether the anti-gambling provisions of the state constitution applied to daily fantasy sports and whether legislators were free to characterize daily fantasy sports as not ‘gambling.’
“Ultimately, the whole daily fantasy sports industry, particularly in New York, is going to be regulated and taxed,” predicted Irwin Kishner, partner with Herrick Feinstein.
Daily fantasy operators could face challenges in other states, panelists said, pointing to DraftKings’ single NASCAR and golf offerings as potential problem areas.
A federal criminal court indictment related to daily fantasy sports is not out of the question, said Daniel Wallach, a shareholder of Becker & Poliakoff, noting such an action could take place in Florida before year’s end. That state bans wagers on contests of skill or chance.
Data Game
Prior to the fantasy sports panel, Hershman shared insights into another rapidly evolving field: entertainment programming.
Today’s original dramas and comedies on Netflix, Amazon, and other streaming sites arise from data collected on viewers’ habits, Hershman said.
Depending on how it’s used, this information can be successful or not in creating new content, as Hershman illustrated with a side-by-side comparison of recent Amazon and Netflix political shows.
Amazon used data from eight TV pilots to create a marginally popular political satire called “Alpha House.” Netflix used its data, instead, to provide people a choice of what they wanted to watch. The show that resulted from Netflix’s experiment became the Emmy Award-winning “House of Cards.”
Data is also “all-encompassing” in sports, Hershman noted, pointing to its use in rating players and measuring ticket and beer sales.
Even in sports, data is not foolproof, Hershman said, highlighting his beloved New York Jets’ decision to pass on a future Hall of Fame quarterback in the 1983 draft.
“At the end of the day, you want to draft Dan Marino over Ken O’Brien,” Hershman said, referring to the Jets’ oft-criticized decision to pick O’Brien two spots before the Miami Dolphins selected Marino. “Don’t forget about the most important equation: the human part.”