Daily fantasy sports sites are built on a contradiction: They feel like gambling, but DraftKings and FanDuel insist that they are absolutely not gambling. This queasy coexistence is underlined by the companies' regulatory status -- they are regulated gambling entities in the United Kingdom, but in the United States they operate as unregulated companies that insist they don't engage in betting.
In contrast to traditional fantasy sports, which last an entire season, daily fantasy companies offer cash prizes based on a single day's performance. They have attracted hundreds of millions of dollars from investors and become a ubiquitous TV advertising presence during games.
But the sites have also attracted the scrutiny of regulators, who say they're just rebranded forms of illegal online sports betting.
Arguing in support of the response from deep in your brain stem that yes, of course daily fantasy sports is gambling and therefore should be shut down, New York attorney general Eric Schneiderman pointed out an awkward fact for the companies in a court filing Tuesday: Both DraftKings and FanDuel applied for licenses from the Gambling Commission in the U.K. (Sports gambling is legal and regulated in the U.K.)
DraftKings eventually received a license from the U.K. Gambling Commission, and FanDuel's license is pending.
The AG is trying to stop the sites from operating in the state.
Both companies say that their gambling licenses are simply a case of following the rules. In the U.K., all fantasy sports are treated as just another form of sports betting, which is legal and regulated.
"When DraftKings and FanDuel go over there and say 'We want to get a gaming license," Drake Law professor Keith Miller told HuffPost, "I think it's like so many things they have done: having a little bit of tone deafness about how it comes across to people who aren't as involved as many people are."
In other words, when your corporate line is that you are not running a gambling business, applying for and receiving a gambling license is not an ideal way to support that argument.
Miller points out that the U.K approach to regulation "makes a lot of sense."
"They regulate it in same way that they regulate sports betting generally," he said. "It's a different product, it appeals to a different group of people, but it is viewed as a gambling product." Unlike in the U.S., where sports gambling is illegal except in a few states, in the U.K., Miller says the view is "it's just another form of sports betting, and we're comfortable with sports betting. Here, we haven't gotten to that view yet."
A hearing is set for Wednesday to consider Schneiderman's motion for a preliminary injunction against both sites.