VALUE PLURALISM IN LEGAL ETHICS

115

GO TO YOUR ROOM, FANDUEL AND

DRAFTKINGS: DAILY FANTASY SPORTS, NEW

YORK & PATERNALISM

JAMES E. HAVEL



INTRODUCTION

On October 4, 2015, Ethan Haskell, an employee of DraftKings, the

nation’s second-largest Daily Fantasy Sports (DFS) website, won

$350,000 in prize money on FanDuel, the nation’s largest DFS website.

At the time, the two companies attracted attention with their seemingly

incessant national advertising campaigns that blanketed the internet,

television and sports-talk radio, which promised exciting entertainment

and prize money resulting from playing daily fantasy leagues without

season-long commitment. Haskell’s win was newsworthy, because he had

access to pertinent and non-public DraftKings information that could have

been used for his gain on FanDuel.

This potential insider-trading scandal

gave New York an opportunity to first examine, and then try to shut down

the two websites as illegal gambling operations.

In defense, the DFS

websites claim they are games of skill and remind their critics that fantasy

sports have a specific exemption under the Unlawful Internet Gambling

Enforcement Act (UIGEA) of 2006.

DFS’ position has not stopped New York from aggressively pursuing

the companies in court and demanding that they return $200 million as

 J.D. Candidate (2017), Washington University School of Law

. Patrick Redford, DraftKings Employee With Access to Inside Info Wins $350K at FanDuel,

DEADSPIN.COM (Oct. 5, 2015, 7:50 PM), http://deadspin.com/draftkings-employee-with-access-to-

inside-info-wins-35-1734719747. The proprietary information he published was ownership and lineup

data. This data is so valuable, because in order to win money in a DFS contest, it is important to have a

player on your team that is not in the lineup of another team. In other words, a DFS player is looking

to exploit “market inefficiencies” to help his team win at the expense of another team, while staying

within the budget.

. Id. DraftKings later determined that Mr. Haskell did not use the information to his advantage

and won the $350,000 without it.

. See Schneiderman, infra note 6. This Note will focus mostly on New York’s legal actions,

because they have made the biggest headlines and New York was one of the first states to ban FanDuel

and DraftKings as illegal gambling after the Ethan Haskell scandal. Nevada, Illinois and Texas have

also declared DFS to be illegal gambling. Their arguments as to why DFS is a game of chance and not

of skill are nearly identical to New York’s arguments. To avoid repetition and for the sake of brevity, I

focus exclusively on New York.

. LIVING THE FANTASY (LPA Productions 2015). 28 of the 32 teams in the NFL have

sponsorship deals with either DraftKings or FanDuel.

116 WASHINGTON UNIVERSITY JURISPRUDENCE REVIEW [VOL. 9:115

restitution to the numerous users in New York who lost money in 2015.

New York claims that every DFS player is a “victim,” because over 90%

of prizes are won by just 1.3% of players.

Despite seemingly noble

intentions, New York’s Attorney General is using paternalistic arguments

to help shut down both of the billion-dollar startup companies to increase

the state’s power over the decisions of free-thinking New York residents.

The main test in the court system to determine whether a game is either

illegal gambling (chance) or a legal game (skill) is the predominant

elements test (described more fully below).

This test is arbitrary and

subjective. Nevertheless, courts, regulators and legislators apply and use it

inconsistently.

John Stuart Mill, the nineteenth-century English philosopher, would

object to New York’s outright ban of DFS because of “public health” and

“safety” concerns. Instead, he would argue, correctly, that adults who are

fully capable of making their own decisions should be able to do what they

choose with their time and money so long as they are not infringing on

anyone else’s rights or liberties.

Mill’s analysis and beliefs are the most

compatible with that of a free society. Rather than allow government to

control their decisions, citizens should be able to decide for themselves

whether DFS, as an entertaining game, is worth their investment.

Similarly, New York should have the ability to warn its citizens of the

low likelihood of winning money playing DFS, and, further, the state

should be able to collect tax revenue on winnings in an attempt to

discourage play. However, the state should not have the right to use an

arbitrary and inconsistent test to make a decision for its citizenry on an

issue that has little to do with “public health” or “safety.”

The first part of this Note examines fantasy football, generally. It

begins with an explanation of how to play traditional fantasy football, the

history of and how to play daily fantasy football, and the daily fantasy

sports’ business model. The second part analyzes relevant United States

. Associated Press, In Latest Salvo, New York Attorney General Sues to Get DraftKings,

FanDuel to Return Money, U.S. NEWS (Jan. 1 2016, 3:42 PM), http://www.usnews.com/news/sports/

articles/2016-01-01/new-york-sues-to-get-draftkings-fanduel-to-return-money.

. Eric T. Schneiderman, Notice to Cease and Desist of Proposed Litigation Pursuant to New

York Executive Law § 63(12) and General Business Law § 349 (Nov. 10, 2015), http://ag.ny.gov/

pdfs/Final_NYAG_FanDuel_Letter_11_10_2015_signed.pdf. FanDuel and DraftKings received

identical copies of this letter on the same day.

. M. Christine Holleman, Note, Fantasy Football: Illegal Gambling or Legal Game of Skill?, 8

N.C. J.L. & TECH, 59, 68 (2006).

. JOHN STUART MILL, ON LIBERTY 8 (Dover Thrift ed., Dover Publications, Inc. 2002) (1859).

. Michael Trippiedi, Note, Daily Fantasy Leagues: Do You Have The Skill To Win At These

Games of Chance?, 5 UNLV GAMING L.J. 201, 204 (2015).

2016] GO TO YOUR ROOM, FANDUEL AND DRAFTKINGS 117

gambling laws. This part also evaluates the rationale behind these

gambling laws and considers the positive and negative externalities

associated with gambling. The final part explores the 2015 “insider trading

scandal” at DraftKings through John Stuart Mill’s paternalism lens, and

leaves the reader with concluding remarks.

I. HOW TO PLAY TRADITIONAL FANTASY FOOTBALL

A brief introduction to modern fantasy football in standard scoring

leagues follows.

In standard scoring leagues, each team starts with one

quarterback, one tight end, two running backs, two wide receivers, one

kicker, one defense, and one “FLEX” player (any tight-end, wide receiver,

or running back).

Each team also has seven bench spots to fill out the

sixteen-man roster.

Before the season starts, each league holds a draft. There are two styles

of drafting: “snake” or “auction.” In a “snake” style league, the order of

the teams picking “flips” after the completion of each round, so the person

who picks first in the first round picks last in the second round. The

pattern repeats until the draft is concluded.

In an “auction” style draft,

each team is given a budget to build a team. Once the draft is final, teams

in the league can begin to offer trades, add players from the “waiver wire”

and cut players from their own team. No one player can be on multiple

teams at a given time.

For example, if a team in a league drafts Aaron

Rodgers, quarterback of the Green Bay Packers, so long as Rodgers

remains on that active roster, only that team may play him.

Each week, players and their teams are matched up in a head-to-head

contest against an opponent in that league. The object of the game is to

score more fantasy points than the opponent. It is possible for the top two

scoring teams in the league to play each other in a week while the bottom

. In standard scoring, players do not earn points for the number of receptions they have during

the course of game. Rather, scoring only includes yards gained and touchdowns scored, which vary by

position. For example, a throwing touchdown (usually from a quarterback) earns four points, while

running touchdown earns a full six points. There are many scoring varieties in fantasy football, such as

Points per reception (PPR) or “touchdown only.” For more information, see Scoring Settings for

Standard Leagues, ESPN.COM, http://games.espn.go.com/ffl/resources/help/content?name=scoring-

settings-standard.

. Roster Settings, ESPN.COM, http://games.espn.go.com/ffl/resources/help/content?name=

roster-settings-standard.

. Jon Bales, Differences Between Season Long and Daily, ROTOGRINDERS.COM (last visited

Jan. 4, 2016), https://rotogrinders.com/lessons/differences-between-season-long-and-daily-174278. See

also Trippiedi, supra note 9, at 207.

. Id. A waiver wire, generally, is the pool in which unclaimed players reside until a team

selects him.

118 WASHINGTON UNIVERSITY JURISPRUDENCE REVIEW [VOL. 9:115

two scoring teams play one another in the same week. One of those teams

in each matchup will win and the other will lose. The second highest

scoring team in this scenario might be happy with the points scored, but

will be disappointed by losing the match, while the second lowest scoring

team will feel lucky for their good fortune in winning against that week’s

lowest scoring team.

For serious players, managing a fantasy football team for a fourteen-

week season (or longer if the team makes the playoffs) takes a significant

amount of time and effort.

Serious players study match-ups, scoring

trends, injuries and every possible statistic to try to beat their opponents.

Television networks like ESPN, NFL Network, and NBCSN have hours of

programming dedicated to fantasy football to help players get ready for

each week’s matchups.

At the end of the season, the winner of a league could win significant

prize money and bragging rights for an entire year.

Regardless, the odds

of winning a twelve-man league are 1/12 when the season starts. Daily

Fantasy Football (DFF) condenses this process into one week.

II. HISTORY OF DAILY FANTASY FOOTBALL

DFF is the extension of the modern era of “instant gratification” in the

world of fantasy sports and fantasy football. Nigel Eccles capitalized on

this trend when he launched FanDuel.com in 2009, a daily fantasy sports

website that offers users a chance to compete in contests/games on the

website for cash prizes. There is no long-term commitment. The teams can

be selected in less than thirty seconds, and by the end of the day, results

are available. In traditional fantasy football leagues, it takes at least

fourteen weeks to determine a winner and award prize money.

FanDuel started with five employees in a New York office. Eccles

convinced angel investors and other financial backers to invest seed

. Id. at 207–08. I monitor Twitter frequently to read articles about certain players or to read

updates from NFL “insider” journalists on the recent transactions or explanations of a coach’s thinking

process and matchups. Because I play in three to four leagues a year, I spend roughly 4 hours a week

researching and making decisions to improve my teams to make the playoffs.

. For three hours leading up to kickoff on NFL Sundays, ESPN 2 airs, “Fantasy Football

Now,” where the hosts talk fantasy football exclusively. The NFL Network’s Redzone channel airs

fantasy football advice an hour before kickoff.

. The Commissioner of the league, with the members’ approval, sets the prizes for the winner,

second place and, occasionally, third place. The league dues (what each member contributes at the

beginning of the season) determine the size of the pot. In the years I have won the championships in

my league, the money is nice, but the bragging rights are far more important to me.

2016] GO TO YOUR ROOM, FANDUEL AND DRAFTKINGS 119

money to expand its operations.

His main sales pitch was the provision

in the Unlawful Internet Gambling Enforcement Act (UIGEA) carving out

an exemption for fantasy sports.

This exemption gave Eccles an

opportunity to create his vision. Eventually, additional investors signed on

to partner with and fund FanDuel, thereby subsidizing expanded

operations and offerings.

In 2012, FanDuel launched its first mobile app and earned over $1

million in revenue while hosting tournaments with cash prizes worth

$500,000.

FanDuel has grown exponentially since 2012. The website

now claims to pay out over $75 million in prize money per week to its

players.

Professional sports leagues have taken notice, too. The National

Basketball Association, National Football League and Major League

Baseball all have partnerships with FanDuel.

Additionally, the Leagues’

broadcasting partners; NBC, CBS, FOX, ABC/ESPN, and Time Warner

each have partnerships and ownership stakes in FanDuel.

DraftKings.com was a small, Boston-based start-up at the time

FanDuel became an industry leader in daily fantasy sports (DFS).

However, DraftKings grew rapidly, thanks to funding from hungry

investors.

DraftKings now has many of the same partnerships with

professional sports leagues (and their broadcasting partners) as FanDuel.

In addition, many professional teams in various leagues have an ownership

stake in DraftKings and have exclusive advertising contracts with the

website.

. History | FanDuel, FANDUEL.COM, https://www.fanduel.com/history (Last visited Jan. 4,

2016).

. 31 U.S.C. § 5362(1)(E)(ix) (2012) (definition of bet does not include “participation in any

fantasy or simulation sports”).

. See Redford, supra note 1.

. Id.

. Gregg Easterbrook, DraftKings and FanDuel Are Not Your Friends, N.Y. TIMES, Oct. 5,

2015, http://www.nytimes.com/2015/10/07/upshot/the-big-winners-in-fantasy-football-and-the-rest-of-

us.html?_r=0.

. Drew Casey, DraftKings, FanDuel Make Millions, and Give Them Away, as Fantasy Revs

Up, CNBC (Sept. 20, 2015, 11:31 AM), http://www.cnbc.com/2015/09/20/draftkings-fanduel-make-

millions-and-give-them-away-as-fantasy-revs-up.html.

. Id.

. Darren Heitner, An Abbreviated History of FanDuel and DraftKings, FORBES (Sept. 20,

2015, 9:41 AM), http://www.forbes.com/sites/darrenheitner/2015/09/20/an-abbreviated-history-of-

fanduel-and-draftkings/.

. Id. In 2014, the company acquired DraftStreet.com, the third largest player in the industry, to

become the true number two daily fantasy sports website behind FanDuel.

. See Redford, supra note 1.

. LIVING THE FANTASY, supra note 4. The tournament featured 50 qualifying teams competing

for a first place prize of $1 million. To determine which 50 teams will compete, DraftKings held

several “King of The Beach” qualifying tournaments during the course of the fantasy football season.

120 WASHINGTON UNIVERSITY JURISPRUDENCE REVIEW [VOL. 9:115

III. HOW TO PLAY DAILY FANTASY FOOTBALL

Daily Fantasy Football (DFF) operates exactly how its name suggests.

Players are given a chance to draft a completely new team every Gameday

and potentially compete against thousands of new opponents at the same

time.

The scoring is virtually the same as traditional fantasy football, but

there are some significant differences concerning how the teams are

drafted. Rather than drafting in a snake or auction style, players are given

a salary cap as a budget to build a team.

Each player is assigned a

specific dollar value.

However, there is a possibility every team in the

league (contest) may have at least one common player. Again, using

Aaron Rodgers to illustrate, it is possible in a contest on FanDuel

consisting of 1000 teams, for all 1000 teams to draft Aaron Rodgers as its

quarterback.

The only draft restriction is the salary cap.

Another difference is how winners are determined in DFF. Instead of

competing against one opponent head-to-head to determine the winner that

week, the teams compete against the entire pool [of teams].

Therefore,

the object is to score the most points in the pool to defeat every team

competing to win the league/contest that day.

Because the players draft a

new team every week, DFF does not require the same “micromanaging” or

commitment to the team as is necessary in a traditional fantasy football

league. Rather, a player can simply wake up on Gameday morning, log in

to DraftKings or FanDuel, and set a lineup in less than a minute.

The biggest difference between DFF and traditional fantasy football

(TFF) is the chance to win or lose money on a weekly basis in DFF, rather

than only at the end of the season in TFF leagues. DFF players can wage

any amount of money they desire each week.

In fact, the strongest

players usually wage thousands of dollars each week for the opportunity to

DraftKings also has the largest tournament for its players, offering $2.5 million dollars in prize money

for a tournament in Bermuda.

. Nathaniel J. Ehrman, Out Of Bounds?: A Legal Analysis of Pay-To-Play Daily Fantasy

Sports, 22 SPORTS LAW. J. 79, 85 (2014).

. Bales, supra note 12. This is the most common DFF game and this Note will focus

exclusively on those styles of DFF games.

. Id.

. Ehrman, supra note 28, at 104.

. DraftKings and FanDuel have some “head to head” contests on their website, but these are

the most basic DFF games and do not represent the real difference between DFF and Traditional

Fantasy Football. It is far more common for DFF players to play 50/50 or “up down” games.

. Ehrman, supra note 28, at 87. In a 50/50 game, the teams finishing in the top half

(cumulative points) win money; the teams in the bottom half do not.

. LIVING THE FANTASY, supra note 4.

. Id.

2016] GO TO YOUR ROOM, FANDUEL AND DRAFTKINGS 121

win hundreds of thousands of dollars each week.

This is possible because

there is no limit on how many teams one DFF player can enter in a given

contest.

DraftKings and FanDuel games range anywhere from $1 buy-ins

to $10,000 buy-ins.

These daily games attract hundreds to thousands of

players per game on the website.

DraftKings and FanDuel host

thousands of games per week.

Playing multiple teams weekly is not an

overwhelming proposition for the player, since the players do not have to

worry about making trades or “working” the waiver wire to acquire new

players. As mentioned above, the rosters are filled one each week and the

players are then left to enjoy the games. The most serious and financially

successful players in DFF play on a “volume” basis, just like professional

gamblers.

The more teams a player enters per game/contest, the greater

the odds of winning some prize money or even the league.

IV. DAILY FANTASY SPORTS BUSINESS MODEL

DraftKings and FanDuel control 95% of the North American Daily

Fantasy Football market.

Investors over the last six years have

contributed a combined $575 million into the two companies to make

them giants of the industry.

Some experts say the Daily Fantasy Sports

industry, on the whole, is worth billions of dollars.

The primary source

of revenue FanDuel and DrafKings generate is derived from the entry fees

players pay for games/contests. DraftKings, which is privately held,

claimed they earned $30 million in 2014 even after paying out $300

. Id. A DraftKings executive, in the documentary, encouraged players to play more volume if

they were struggling because the “law of big numbers” dictates players will have a better chance to

win the more they play.

. Id. In the documentary, one player had 25 teams in a $1,000 per team buy in order to qualify

for King of the Beach Tournament. Some players in the documentary called that unfair and

encouraged DraftKings and FanDuel to change that policy.

. Id.

. LIVING THE FANTASY, supra note 4.

. Id.

. LIVING THE FANTASY, supra note 4, Sarah E. Needleman, Storm of Criticism Engulfs

DraftKings, FanDuel, WALL ST. J. (Oct. 6, 2015), http://www.wsj.com/articles/storm-of-criticism-

engulfs-draftkings-fanduel-1444107475, Ehrman, supra note 28, Casey, supra note 22, Similar to

much of TFF, DFF is not a winner take-all proposition. DraftKings and FanDuel have multiple payout

structures. For example, DraftKings and FanDuel host 50/50 games where the teams finishing in the

top fifty percent win money. FanDuel is estimated to pay out more than $10 million per week in prizes

during football season.

. Needleman, supra note 41.

. Id.

122 WASHINGTON UNIVERSITY JURISPRUDENCE REVIEW [VOL. 9:115

million in prize money.

According to Eccles, cash prizes mostly come

from entry fees.

Eccles describes his business as “self-funding” after

considering the Company’s ten percent cut from entry fees.

According to the Fantasy Sports Trade Association (FTSA), 56.8

million people play daily fantasy sports in North America.

Despite this

large number, FanDuel and DraftKings continue to see an opportunity to

grow and expand their market. There are over 228 million self-identified

sports fans in North America.

Trying to capture this market, FanDuel

and DraftKings have invested heavily in advertising on all available

platforms. From January 1, 2015, to October 5, 2015, DraftKings and

FanDuel spent an estimated $206 million on advertisements.

However,

this business strategy and volume of activity has brought unwanted

attention to the industry.

FanDuel’s and DraftKing’s business models are based on a “shark and

fish” theory.

Essentially, the contests need a large number of players to

participate to allow payout of even a small amount of money. Bigger

prizes can only be offered by attracting even more people to play.

This is

essentially how lotteries work as well. Since the companies are betting on

increasing user traffic and attracting new players, the recent industry

“insider trading” scandal noted above has been problematic from a

consumer trust standpoint.

. See Casey, supra note 22. FanDuel made $57 million in revenue while giving away $564

million in prizes in 2014.

. Id.

. Research, FANTASY SPORTS TRADE ASSOCIATION, http://fsta.org/research/ (last visited Jan.

2016).

. Id.

. Ilan Mochari, Why DraftKings and FanDuel Spent $206 Million on Ads this Year, INC, (Oct.

9, 2015), http://www.inc.com/ilan-mochari/fantasy-sports-betting-startups-206-million-tv-ads. html.

DraftKings spent $131.4 million, while FanDuel spent $74.5 million on advertising during that period.

. Darren Rovell, Class Action Lawsuit Filed Against DraftKings and FanDuel, ESPN (Oct. 9,

2015), http://espn.go.com/chalk/story/_/id/13840184/class-action-lawsuit-accuses-draftkings-fanduel-

negligence-fraud-false-advertising. The lawsuit claims FanDuel and DraftKings’ commercials are false

advertising, because they promise every day people can win money just by placing an entry into a

contest.

. Drake Baer, Fantasy Football has been Infiltrated by a ‘Shark and Fish’ System that Crushes

Most People’s Chances, TECH INSIDER (Sept. 16, 2015, 12:09 PM), http://www.techinsider. io/fantasy-

football-favors-the-sharks-heavily-over-the-fish-2015-9. 1,400 DFS players were surveyed and, “70%

of fantasy sports players report losing money. Insiders call these casual players “fish,” since more

advanced players—“sharks”—feed on their losses.” In an extreme case, one “shark” plays $140,000 a

week with an average of an 8% return on investment.

. See Casey, supra note 22.

. Daniel Roberts, Everything you Need to Know About the DraftKings and FanDuel Data

Scandal, FORTUNE (Oct. 5, 2015 9:13 PM), http://fortune.com/2015/10/05/draftkings-fanduel-data-

scandal/. If the DFS games are rigged in favor of DraftKings and FanDuel employees, then the entire

2016] GO TO YOUR ROOM, FANDUEL AND DRAFTKINGS 123

V. HISTORY OF RELEVANT SPORTS BETTING LAWS

The three most pertinent laws to sports betting in the United States are

the Interstate Wire Act (IWA), the Professional and Amateur Sports

Protection Act (PASPA) and, most important for DFS, the Unlawful

Internet Gambling Enforcement Act (UIGEA).

A. The Interstate Wire Act

The IWA enacted in 1961, sought to end the operations of illegal sports

books.

The law makes it illegal for a gambling enterprise to take bets on

a daily basis using a wire service.

The IWA was specifically designed to

deter organized crime, whose main source of funding was illegal gambling

proceeds from control of illegal gambling rackets.

The law was rarely

utilized by the government from 1970–1990, but has found new life in the

age of the internet.

B. PASPA

The NFL aggressively pursued action against state lotteries in the

1970s for creating contests involving NFL games.

Though they were

unsuccessful in stopping the lotteries through the court system, the NFL

and the other professional sports leagues noticed a trend around the nation

of legalizing some forms of sports betting.

Finally, by 1992, amidst

perceived threats to the integrity of their games, the leagues went to

Congress to seek relief.

The relevant language of PASPA reads:

It shall be unlawful for—(1) a government entity to sponsor,

operate, advertise, promote, license, or authorize by law or compact,

or (2) a person to sponsor, operate, advertise, or promote, pursuant

to the law or compact of a governmental entity, a lottery,

sweepstakes, or other betting, gambling, or wagering scheme based,

directly or indirectly (through the use of geographical references or

business model is likely to collapse given that most of the players who lose money currently believe

they lose it in an equitable fashion. Nobody would willingly give money to a contest they knew they

had 0% chance of winning.

. Ehrman, supra note 28 at 89.

. Trippiedi, supra note 9 at 211.

. Id.

. Ehrman, supra note 28 at 89.

. Trippiedi, supra note 9 at 212–13.

. Id.

. 28 U.S.C. §§ 3701–3704 (2012).

124 WASHINGTON UNIVERSITY JURISPRUDENCE REVIEW [VOL. 9:115

otherwise), on one or more competitive games in which amateur or

professional athletes participate, or are intended to participate, or on

one or more performances of such athletes in such games.

Over time, professional and collegiate sports have suffered through serious

scandals involving sports bets, such as the infamous Black Sox scandal of

1919.

A point shaving scandal even brought down one of the most

notorious mobsters in in the 1980s, James Conway (aka Jimmy Burke),

and inspired the movie “Good Fellas.”

It is not good business for the

sports industry in the United States to have the fans question the integrity

of the contests they are watching.

C. UIGEA

The internet provided an expanded avenue for casinos and gambling

websites to promote their product. Poker sites, such as Pokerstars.net,

began operating where players could use credit cards to get “virtual” chips

and sit at virtual tables to play Texas Hold-em and other popular card

games with people from across the country and around the world.

Congress attempted to regulate the industry and eventually passed UIGEA

in 2006. According to Congress, gambling leads to and causes theft,

societal disorder, identity theft, fraud and money laundering.

It is

interesting to note, however, that the majority of Americans did not want

. Id.

. See generally ELIOT ASINOF, EIGHT MEN OUT: THE BLACK SOX AND THE 1919 WORLD

SERIES (Owl Books ed., Henry Holt and Co., LLC 1987) (1963); Black Sox Scandal, BASEBALL

REFERENCE (Nov. 7, 2:58 PM), http://www.baseball-reference.com/bullpen/Black_Sox_Scandal.

Several players on the Black Sox, far and away the odds on favorites to win the 1919 World Series,

worked with gamblers to “fix” games against the Cincinnati Reds. To this day, this is the most

significant gambling scandal in professional sports.

. Rob Hohler, When ‘Goodfellas’ Collided With BC Basketball, BOSTON GLOBE (Mar. 16,

2014), https://www.bostonglobe.com/sports/2014/03/15/and-goodfellas-sports-scandal-and-its-lingering-

toll/nvlXKiXCYsGpUqBUtg9BRN/story.html. Conway was suspected of pulling off the Lufthansa

heist in 1978. While the FBI was never able to prove that definitively, they were able, with the help of

Henry Hill, to convict him for fixing Boston College Basketball games in the late 1970s. Conway was

sentenced to twelve years in prison for that crime. Robert De Niro portrayed Jimmy Burke in the film,

GoodFellas.

. Anthony N. Cabot & Robert D. Faiss, Sports Gambling in the Cyberspace Era, 5 CHAP. L.

REV. 1, 4–5 (2002).

. Lawrence G. Walters, On Second Thought . . . —What Does the UIGEA Really Mean for

Internet Gambling?, WALTERS LAW GROUP, http://www.firstamendment.com/site-articles/UIEGA

(last visited Jan. 4, 2016).

. Ehrman, supra note 28 at 111.

2016] GO TO YOUR ROOM, FANDUEL AND DRAFTKINGS 125

to prohibit internet gambling in any form when Congress first passed the

UIGEA.

Under UIGEA, no one can receive funds or credit transfers related to

internet gambling.

However, the law did not have the intended effect, as

shutting down internet gambling has proven to be impractical.

The gaming industry did not willingly accept UIGEA’s provisions, and

instead challenged its constitutionality.

The Third Circuit ruled that the

legality of the transactions covered by the act, “turns on how the law of the

state from which the bettor initiates the bet would treat that bet.”

Therefore, UIGEA has no power/effect unless the activity is punishable

under state law.

Only six states at the time had outlawed internet

gambling.

However, the gamblers’ victory was short-lived, because the

federal government turned to the IWA to deter internet gambling.

On April 15, 2011, known as “Black Friday,” the Department of Justice

(DOJ), using UIGEA, shut down five of the world’s largest poker

websites, indicted their executives and owners, seized their domain names,

and froze their assets in American banks.

A year later, however, the

Department of Justice issued a statement indicating they would only

prosecute sports betting under the IWA.

. Id.

. 31 U.S.C. § 5363 (2012). The UIGEA reads, “No person engaged in the business of betting

or wagering may knowingly accept, in connection with the participation of another person in unlawful

internet gambling—

(1) Credit, or the proceeds of credit, extended to or on behalf of such other person (including

credit extended through the use of a credit card);

(2) An electronic fund transfer, or funds transmitted by or through a money transmitting

business, or the proceeds of an electronic fund transfer or money transmitting service, from or

on behalf of such other person;

(3) Any check, draft, or similar instrument, which is drawn by or on behalf of such other

person and is drawn on or payable at or through any financial institution.”

. Joe Falchetti, UIGEA, 6 Years Later, CalvinAyre.com (Oct. 15, 2012), http://calvinayre.com/

2012/10/15/business/unlawful-internet-gambling-enforcement-act-2006/.

. Interactive Media Entm’t & Gaming Ass’n v. Att’y Gen. of U.S., 580 F.3d 113, 114 (3d Cir.

2009).

. Id. at 117.

. Id.

. The six states at the time were Washington, Montana, Oregon, South Dakota, Illinois and

Indiana. Since then, Nevada, Louisiana, New Jersey, Maryland, and Wisconsin have joined the

original six to ban internet gambling in their states. FanDuel and Draftkings no longer operate in these

states.

. Falchetti, supra note 70.

. Id.

. Id. This day is also known as “White Friday” in gambling circles.

126 WASHINGTON UNIVERSITY JURISPRUDENCE REVIEW [VOL. 9:115

While owners of casinos and poker websites may hate UIGEA, DFS

owes its existence to the law.

Without the specific carve-out exemption

for fantasy sports in UIGEA, Eccles and Robins would not have formed

FanDuel and DraftKings, respectively. In fact, in their pitches to investors,

the two companies relied heavily on and promoted the exemption in the

law.

VI. HOW DOES THE FEDERAL GOVERNMENT CLASSIFY BETTING?

A. The Predominant Factor Test

UIGEA defines a bet as: “The staking or risking by any person of

something of value upon the outcome of a contest of others, a sporting

event, or a game subject to chance, upon an agreement or understanding

that the person or another person will receive something of value in the

event of a certain outcome.”

To determine whether an activity is

considered a wager under UIGEA, the court looks to whether the bet is

placed on a game of skill or a game of chance.

The majority of states use the predominance (dominant factor) test to

determine whether a game is skill or chance.

If the winner of the game is

determined by “skill,” then it is not gambling. If the game is determined

by “chance,” it is gambling.

To determine whether an activity is gambling under the predominant

elements test, courts ask two questions: (1) “Is the result of an activity

separable from the element of chance, so that skill can be determinative, at

least in some cases, and (2) is the result always sufficiently affected by the

operation of chance that chance could always account for the result?”

Skill is defined as the exercise of “sagacity upon known rules and fixed

probabilities where sagacity includes keenness of discernment or

penetration with soundness of judgment; shrewdness; or the ability to see

what is relevant and significant.”

. See Redford, supra note 1.

. LIVING THE FANTASY, supra note 4.

. 31 U.S.C. § 5363 (2012).

. Trippiedi supra note 9, at 213.

. Ehrman, supra note 28, at 96–97.

. Id.

. M. Christine Holleman, Note, Fantasy Football: Illegal Gambling or Legal Game of Skill?, 8

N.C. J.L. & TECH. 59, 68 (2006).

. 38 Am. Jur. 2d Gambling § 4 (2015).

2016] GO TO YOUR ROOM, FANDUEL AND DRAFTKINGS 127

Naturally, courts disagree about the various degrees of skill in games.

The courts’ disagreements lead to inconsistent results for those states that

do not outlaw all gambling.

When courts apply the predominant test,

they use a sliding scale. On one side of the scale is a game of pure

“chance,” an example of which is a slot machine. There is no real strategy

to slot machines. The player simply pulls the lever and hopes the

algorithm works in their favor. On the other side of the scale is a game of

pure “skill,” an example of which is chess.

When it comes to chess, both

players have an ability to see the other’s moves and develop a strategy that

they believe will win the game. The courts generally agree chance is a

determining factor in sports betting.

One of the first issues with the predominant factor test is that most

games, at some level, involve a mix of skill and chance. For instance, it

takes skill to play poker. Players develop and utilize strategies on some

level.

There are numerous books in the hobby section of major

bookstores on how to be a better card player, suggesting that one can

develop skills to be “better” than others.

However, players cannot choose their own cards, rather they are dealt

at random, thereby introducing an element of chance.

Unlike other

games, poker is a game of imperfect information. Players typically do not

know all of the cards held by their opponents. Judgment calls are

necessary in determining whether an opponent is bluffing or whether the

player’s cards are strong enough to be the winning hand. This is the exact

opposite from a game like chess. Chess is a game of perfect information.

Players see every piece on the board, including the opponent’s. Players

design a strategy of play and then react to the opponent’s moves.

. Ehrman, supra note 28 at 103.

. Aaron Levy, Note, A Risky Bet: The Future of Pay-To-Play Online Fantasy Sports, 39 CONN.

L. REV. 325, 332 (2006).

. LIVING THE FANTASY, supra note 4.

. Trippiedi, supra note 9, at 219–20.

. How To Play Texas Holdem Strategy, WSOP.COM, http://www.wsop.com/poker-games/

texas-holdem/strategy/. Using a “Texas Hold Em” example, once a player has cards, that player has to

make calculations about whether to see the “flop” or fold immediately. Then, during the hand, the

player has to make calculations about what he or she thinks his or her opponent has in his or her hand.

Furthermore, it takes great skill to know how and when to “bluff” or keep the opponent opponent in

the hand long enough to win a bigger “pot.”

. I encourage anyone to go to Amazon.com or Barnes and Noble and look at the plethora of

“how to play poker for a living” type materials in “poker books.” There were up to 20 pages of results

on Amazon.

. Poker 101, DANNYSHERIDAN.COM, http://www.dannysheridan.com/poker/basicsofpoker.php.

. LIVING THE FANTASY, supra note 4, Chess Ratings—How They Work, CHESS.COM (Aug. 23

2007), http://www.chess.com/article/view/chess-ratings---how-they-work. DFS advocates claim chess

includes an element of chance because a coin flip determines which player will be white and which

128 WASHINGTON UNIVERSITY JURISPRUDENCE REVIEW [VOL. 9:115

VII. DFF COMPARED TO TFF AND SPORTS BETTING

A. TFF

While each state defines and treats games of skill differently, it is

worth again mentioning that TFF is considered a game of skill under

federal law.

Indeed, it is. Serious players prepare for weeks, if not

months, before their drafts. Players only get one shot at building a team

through the draft. They then have to manage the team through trades and

waiver wire transactions. They have to follow the matchups and make sure

to consider injuries and other potential differentiators.

While some

players go with their “gut feeling,” many more complete various analyses

to determine their roster each week. If a team starts with a bad draft, their

season could be virtually doomed before it starts. In contrast, a good draft

will position a team to be highly competitive for the season and the

championship.

DFF shares many of the same techniques. DFF’s best players use

regressions and other analyses to select their one-day lineups. Some say it

takes more skill to play DFF than traditional fantasy football.

DFF, with

its salary cap, introduces economic theory to fantasy football by

encouraging players to use a “high-low” theory. Players may load up on

expensive “studs,” but out of necessity then try to find value in cheap

“sleeper” picks to fill the roster.

While different in execution and theory, auction drafts in TFF

generally operate in the same fashion as DFF games. Players are allocated

will be black. While it is true white has a fifty-four percent chance of winning a chess match, chess

employs a ratings system that ensures players of similar skill level play one another. Chess rankings

use an extremely complicated mathematical formula to try to understand the “true” ranking. A

Grandmaster may only have a 60% chance of beating another grandmaster, but has a 100% chance of

defeating a neophyte regardless of whether the neophyte plays as white.

. Redford, supra note 1.

. Trippiedi supra note 9, at 208, 220.

. See Bales, supra note 12; see also Ehrman, supra note 28, at 105–06. The snake draft in

traditional fantasy football should provide some parity among the players in the league. Each team will

have “studs,” middle-tier players and “sleepers.” In this way, snake drafts mimic the NFL draft.

. LIVING THE FANTASY, supra note 4. See also Bales, supra note 12. The strategy in DFF is

extremely varied and many players will choose to buy high priced studs and find value in players they

think will “go off” in that particular week. DraftKings plays in to this theory in their commercials

when they encourage players to find the “sleeper,” because “he is out there.” Winners on the sites

usually have most of the high-priced studs and enough of the sleepers they find using regressions and

statistical analysis (tools professional gamblers utilize) to beat their opponents by only a few points.

Those few points represent thousands of dollars (in some cases).

2016] GO TO YOUR ROOM, FANDUEL AND DRAFTKINGS 129

an amount, say $200, to spend purchasing a team, and can acquire “studs”

anywhere from $45-$75 dollars, nearly a third of the budget.

B. Why Regulators See Little Difference Between DFS and Sports Betting

Ultimately, DFS cannot escape the many similarities it shares with

sports betting. Sports betting involves predicting the outcome of the game

and covering spreads. Meanwhile, DFF involves the outcome of individual

player performances on the field.

Sports betting is considered illegal

under several federal laws,

100

yet there is a great deal of skill involved in

placing winning bets on sports.

101

There are similar skills necessary to

successfully complete in both DFF and sports betting.

102

DFS Executives like Jason Robins have a bad habit of describing their

websites like previously-legal online poker websites such as,

. Jason Lisk, Fantasy Football: Auction Draft Strategies, Including, Yes, Actually Nominating

a Player You Want Early, THEBIGLEAD.COM (Aug. 25 2015), http://thebiglead.com/2015/08/25/

fantasy-football-auction-draft-strategies-including-yes-actually-nominating-a-player-you-want-early-

2/. A player who buys two or three studs will be left with only a few dollars to fill the roster. Another

player in the same league could choose to spend less money on studs and build a team of solid, mid-

level, players.

. Easterbrook, supra note 21.

100

. Ehrman, supra note 28, at 91–93. It should be noted that Adam Silver, the commissioner of

the National Basketball Association, has called for the legalization of sports betting. See, James

Herbert, Silver: Gambling ‘Good for Business, I Don’t Want to Hide From That’, CBSSPORTS.COM

(Apr. 20 2015, 10:58 AM), http://www.cbssports.com/nba/eye-on-basketball/25155791/adam-silver-

on-gambling-its-good-for-business-i-dont-want-to-hide-from-that.

101

. Ryan Rodenberg, Documents Show DOJ, NFL have Argued that Sports Betting is Skill-

Based, ESPN (July 21, 2015), http://espn.go.com/chalk/story/_/id/13268458/documents-show-justice-

department-nfl-argued-skill-sports-betting. United States Attorney General Loretta Lynch argued in

2013 that, “Sports betting . . . involves ‘substantial [not slight] skill.’ Sports bettors can employ

superior knowledge of the games, teams, and players in order to exploit odds that do not reflect the

true likelihoods of the possible outcomes.”

102

. Similar elements of chance exist between sports betting and DFS. For example, assume Las

Vegas sets a line for the number of points collectively scored in a game between the Green Bay

Packers and the Chicago Bears at fifty-seven. After studying statistics, weather conditions, and

matchups, a sports bettor may decide to wager the “over” or that the two teams will score more than

fifty-seven points combined. If Aaron Rodgers throws a touchdown pass to Jordy Nelson, a Packers’

wide receiver, on the last play of the game and the Packers win 30–28, the sports bettor wins the wager

because the two teams combined to score fifty-eight points. The wager, however, is currently illegal,

outside of Las Vegas and a few other jurisdictions. Despite the amount of effort and skill it took to

wager the over in the above example, there was a still an element of chance; Nelson fails to score on

the final play or the teams combine to score fifty-seven or fewer points.

Now assume a DFS player researched the same statistics and data as the sports bettor and

determined it was more likely than not Jordy Nelson would have a receiving touchdown and over 100

yards receiving for the game. Using this data, the player put Jordy Nelson in his lineup. Before the

game-winning touchdown, assume the DFS player needed nine more points to win the million-dollar

prize in a DraftKings contest. If the final touchdown were a ten-point play for Nelson, the DFS player

would win the million-dollar prize. The result is perfectly legal. See http://www.vegasinsider.com/

nfl/odds/las-vegas/. See also 31 U.S.C. § 5363, supra note 69.

130 WASHINGTON UNIVERSITY JURISPRUDENCE REVIEW [VOL. 9:115

pokerstars.net.

103

Finally, it may prove damning that FanDuel and

DraftKings each has a gambling license in the United Kingdom (gambling

is legal in the U.K.).

104

In the United States, the two websites spend

millions of dollars on lawyers and advertisements to convince regulators

and average Americans they are hosting games of skill, and not illegal

gambling, in the United States.

105

VIII. RATIONALE FOR GAMBLING LAWS IN THE UNITED STATES

A. Paternalism

The majority of gambling laws in the United States contain elements of

paternalism.

106

Paternalism, as defined in the dictionary is, “the attitude or

actions of a person, organization, etc., that protects people and gives them

what they need, but does not give them any responsibility or freedom of

choice.”

107

This cuts against John Stuart Mill’s principles and the United

States’ founding principles. As President Ronald Reagan said, “[t]his is

the issue of this election: whether we believe in our capacity for self-

government or whether we abandon the American revolution and confess

that a little intellectual elite in a far-distant capitol can plan our lives for us

better than we can plan them ourselves.”

108

While not arguing for a hard-

core, purist libertarian ideal, it seems disingenuous for a society based on

freedom (not to harm others) to allow for certain vices, but not for others.

In fact, John Stuart Mill, in his seminal essay, On Liberty, agreed that

there were certain times when paternalism was effective and necessary:

It is, perhaps, hardly necessary to say that this doctrine is meant to

apply only to human beings in the maturity of their faculties. We are

not speaking of children, or of young persons below the age which

the law may fix as that of manhood or womanhood. Those who are

103

. LIVING THE FANTASY, supra note 4.

104

. Ben Walsh, If Daily Fantasy Isn’t Gambling, Why Did DraftKings and FanDuel Apply for

Gambling Licenses?, HUFFINGTON POST (Nov. 24 2015, 1:49 PM), http://www.huffingtonpost.com/

entry/daily-fantasy-.

105

. Id.

106

. The Gambling Instinct Test, which is used by about ten states, outlaws any game that appeals

to the “gambling instinct.” For strong paternalistic language see Dandy Products, Inc. v. FTC, 332

F.2d 985 (1964).

107

. Merriam-Webster, http://www.merriam-webster.com/dictionary/paternalism (last visited

Sept. 6, 2016).

108

. Audio/Video: A Time For Choosing, PRESIDENT RONALD REAGAN (Oct. 27, 1964),

http://www.presidency.ucsb.edu/youtubeclip.php?clipid=76121&admin=40”.

2016] GO TO YOUR ROOM, FANDUEL AND DRAFTKINGS 131

still in a state to require being taken care of by others, must be

protected against their own actions as well against external injury.

109

B. Negative Externalities

Gambling can also create negative externalities. Organized crime was

heavily involved in casino and other gambling operations throughout the

twentieth century, and in particular by the 1960s. Reports indicate

organized crime is still heavily involved in the gambling industry.

110

mentioned above, the IWA was then Attorney General Robert F.

Kennedy’s plan to prosecute the mafia at the source of its money.

111

addition, areas around casinos and other gambling operations often

experience higher crime rates.

112

Gambling has been linked to anxiety, suicide and inappropriate uses of

welfare funds.

113

In addition, gambling can be an addictive activity, and a

compulsive gambler can risk an entire life’s fortune and destroy a family

in a matter of hours.

114

Gambling, especially compulsive gambling, has

also been linked to increased domestic violence.

115

Gambling can even

have a negative impact on the economy.

116

109

. MILL, supra note 8. Mill argues paternalism is acceptable in certain circumstances. Dealing

with children, the mentally disabled or handicapped, or others unable to care for themselves, or make

decisions in their own best interests, creates a need for paternalistic action. However, citizens of age

(adults) who are mentally capable of making decisions for themselves should be left alone to make

their own decisions so long as those decisions do not violate the rights or safety of others.

110

. Jay S. Albanese, Illegal Gambling & Organized Crime An Analysis of Federal Convictions in

2014, American Gaming Association (2015).

111

. Larry Josephson, Betting History 101: The Story Behind the 1961 Wire Act, COVERS (Jan. 3,

2012), http://www.covers.com/articles/articles.aspx?theArt=260073.

112

. Melissa S. Kearney, The Economic Winners and Losers of Legalized Gambling, 8 NAT’L

BUREAU ECON. RES. (Mar. 2005), http://www.nber.org/papers/w11234.pdf. In her paper, Kearney cites

four ways in which crime is increased in areas near casinos: (1) harming economic development by

draining the local economy and increasing illegal gambling and prostitution, (2) creating more

opportunities for criminals to act, (3) increasing compulsive gamblers’ opportunities to commit crimes

to fund their addiction and (4) attracting the type of people who commit and are victimized by crime

more so than others.

113

. Id. at 5. Gamblers are more likely than non-gamblers to have been on welfare, declared

bankruptcy and committed crimes. However, it should be noted that such data collected regarding

suicide and crime cannot be directly linked to gambling, because the causes are not researched, just the

numbers. Economists and social scientists have made arguments linking the two.

114

. Trippiedi, supra note 9, at 217.

115

. Ehrman, supra note 28 at 112; See also Trippiedi, supra note 9, at 220.

116

. See generally Douglas M. Walker, Overview of the Economic and Social Impact of Gambling

in the United States, http://walkerd.people.cofc.edu/pubs/2012/OxfordCh_dist.pdf (2011). Walker’s

research shows that casino gambling has a neutral effect on State revenues. In addition, his research

finds legal gambling has a net positive effect on tax revenues in the short-term, but a long-term neutral

or negative impact on tax revenues.

132 WASHINGTON UNIVERSITY JURISPRUDENCE REVIEW [VOL. 9:115

Roughly one percent of the population is comprised of pathological

gamblers.

117

A 2005 study claims, the average social cost is $19,711.00

per gambling addict/year.

118

Those social costs include productivity losses,

bankruptcy related costs, social service costs, and crime/criminal justice

system costs.

119

Some economists question the veracity of that $19,711.00

number because it is unclear whether such costs can be directly

attributable to gambling.

120

For instance, forty percent of compulsive

gambling addicts have a drug problem while seventy-five percent have a

drinking problem.

121

There is little doubt gambling has achieved a stigma

in our society, and known gamblers may experience shame and other

anxieties associated with their actions.

122

The intentions of those who desire to outlaw gambling often sound

good in theory.

123

However, Mill argues it is highly unlikely that others

can make better decisions for people than they make for themselves. After

all, individuals are in the best position to know their own interests.

124

It is

more likely than not that those who wish to dictate will misapply their

good intentions, resulting in harm for others.

125

C. DFS—Positive Externalities

Traditional and Daily Fantasy Football may have positive externalities

not normally attributed to gambling. Fantasy sports bring friends and

family together. While sports betting is considered illicit gambling by

professional sports leagues, those same leagues actively promote fantasy

sports.

126

While most fans have a favorite team, they watch more games

and take a more active interest in other teams because of fantasy

117

. Id.

118

. Id. Walker believes this number is most likely inaccurate. The data used to create that

number was highly selective. It is unclear what the true social or economic costs of gambling are.

119

. Id.

120

. Walker, supra note 116.

121

. Id.

122

. Ehrman, supra note 28, at 111–12.

123

. Gambling is not the most productive use of one’s money. It is a vice with potentially serious

negative externalities and outcomes for those who cannot control themselves.

124

. See generally MILL, supra note 8.

125

. MILL, supra note 8, at 64. “The interference of society to overrule his judgment and purposes

in what only regards himself, must be grounded on general presumptions; which may be altogether

wrong, and even if right, are as likely as not to be misapplied to individual cases, by persons no better

acquainted with the circumstances of such cases than those are who look at them merely from

without.”

126

. See Heitner, supra note 24.

2016] GO TO YOUR ROOM, FANDUEL AND DRAFTKINGS 133

implications.

127

The NFL already is the leader in terms of television

ratings and viewership and the American sports world in general. The

League’s popularity has seen an increase in popularity with the rise of

fantasy football.

128

The NFL’s profits have never been higher.

129

FanDuel and DraftKings are estimated to be worth more than a billion

dollars each.

130

The two companies’ ads are largely responsible for

enhancing local television networks and raising the average price per

commercial during football season.

131

People who take fantasy football

seriously learn invaluable skills. They look at trends, analyze data, and

look for statistical patterns and anomalies.

132

They look for the “right”

matchups and take calculated risks when setting their teams.

133

These are

skills people can use to enhance critical thinking and leverage to achieve

greater success in the business world. Above all, DFF and TFF bring joy

to people. Fantasy football can be extremely frustrating and heartbreaking,

but at the same time, it can help facilitate friendships and give people a

common interest over which they can bond.

134

D. New York And Paternalism

New York’s attorney general, Eric T. Schneiderman, declared FanDuel

and DraftKings to be illegal gambling websites and claimed that playing

DFS was not a victimless activity.

135

Schneiderman went on to use other

127

. Andrew Garda, How Fantasy Football has Transformed the NFL, BLEACHER REP. (June 12,

2013), http://bleacherreport.com/articles/1670145-how-fantasy-football-has-transformed-the-nfl. See

also Shehan Peiris, Fantasy Football: The Good and Bad Aspects, BLEACHER REP. (Nov. 20, 2012),

http://bleacherreport.com/articles/1408486-fantasy-football-the-good-and-bad-aspects/page/5.

128

. Garda, supra note 127. The popularity of the NFL rose twelve percentage points from 2003

(47%) to 2013 (59%). Many attribute this to fantasy football’s increased popularity.

129

. Chris Isidore, NFL Revenue: Here Comes Another Record Season, CNN MONEY (Sept. 10,

2015), http://money.cnn.com/2015/09/10/news/companies/nfl-revenue-profits/. The NFL made $13

billion in revenue in 2014 and had a record $1 billion in profits. While 31 of the 32 NFL teams are

privately owned, the Green Bay Packers, the league’s only publicly owned franchise (of which I am

one of the many proud owners), reported revenues of $226.4 million from the league’s revenue sharing

scheme.

130

. Needleman, supra note 41. FanDuel has an estimated worth of $1.3 billion, while DraftKings

has an estimated worth of $1.2 billion.

131

. Peter Kafka, Those DraftKings and FanDuel Ads You’re Already Sick of Are Keeping the TV

Business Afloat, RE/CODE (Sept. 18, 2015, 9:38 AM), http://recode.net/2015/09/18/those-draftkings-

and-fanduel-ads-youre-already-sick-of-are-keeping-the-tv-business-afloat/.

132

. Steve Cooper, 8 Ways Fantasy Football Can Boost Your Business Acumen, FORBES (Aug.

22, 2012, 5:01 AM), http://www.forbes.com/sites/stevecooper/2012/08/22/8-ways-fantasy-football-

can-boost-your-business-acumen/#587126e71dc5.

133

. Id.

134

. Trippiedi, supra note 9, at 221.

135

. Schneiderman, supra note 6.

134 WASHINGTON UNIVERSITY JURISPRUDENCE REVIEW [VOL. 9:115

paternalistic language and arguments as further described below.

136

The

challenge facing DFS is a naked power grab by New York under the guise

of paternalism. If FanDuel and DraftKings are allowed to operate again in

New York, will all DFS players still be victims? It appears more likely

that New York is more interested in getting a portion of the revenue in the

form of a tax, rather than protecting its residents.

137

Mill argues society

(politicians and leaders) use paternalism as an excuse to tax something or

limit people’s choices.

138

Mill writes, “[s]ociety has expended fully as

much effort in the attempt (according to its lights) to compel people to

conform to its notions of personal, as of social excellence.”

139

Mill claims there might have been a time in the history where such

control over an individual’s life was necessary and justifiable.

140

However,

those societies were not as free as modern-day America or nineteenth

century England (Mill’s time). Even with greater freedom than the

“ancient commonwealths,” society has still moved to restrict people’s

ability to make private choices for themselves. Mill blamed religious

puritanism for the increased control over their lives

141

when he wrote:

The engines of moral repression have been wielded more

strenuously against divergence from the reigning opinion in self-

regarding, than even in social matters; religion, the most powerful

elements which have entered into the formation of moral feeling,

having almost always been governed either by the ambition of the

136

. Id.

137

. MILL, supra note 8, at 5. “Men’s opinions, accordingly, on what is laudable or blamable, are

affected by all the multifarious causes which influence their wishes in regard to the conduct of others,

and which are as numerous as those which determine their wishes on any other subject . . . most

commonly, their desires or fears for themselves—their legitimate or illegitimate self-interest.”

138

. Id.

139

. MILL, supra note 8, at 9. This type of behavior is exemplified in the tax code in the United

States. There is a “sin” tax placed on alcohol tobacco, and in some cities (New York), on “junk” food.

The tax code is not just a revenue generating set of rules. It is also a tool used to regulate society’s

decisions regarding what is acceptable and what is not.

140

. Id. That time in history was the ancient commonwealths. “The ancient commonwealths

thought themselves entitled to practise (sic) . . . the regulation of private conduct by public authority

on the ground that the State had a deep interest in the whole bodily of mental discipline of every one of

its citizens, a mode of thinking which may have been admissible in small republics surrounded by

powerful enemies, in constant peril of being subverted by foreign attack or internal

commotion . . . they could not afford to wait for the salutary permanent effects of freedom.” Our

society, on the other hand is not a small republic that cannot afford to wait for the permanent effects of

freedom. That is not to suggest our society should be completely free. Some vices are worthy of

regulation and criminalization. For example, laws against drunk driving and drug use protect other

citizens from the poor decisions of others.

141

. Id.

2016] GO TO YOUR ROOM, FANDUEL AND DRAFTKINGS 135

hierarchy, seeking control of every department of human conduct,

or by the spirit of Puritanism.

142

Society’s lawmakers/leaders use morality when it is convenient and apply

it inconsistently in our lives.

143

Justifications for gambling laws in the

United States have, for the most part, been grounded in what some would

consider the puritanical morality Mill was describing. Look no further than

the test mentioned above and the negative externalities linked to gambling.

Regarding democracies such as ours, Mill refers to society’s leaders on

this issue as the “tyranny of the majority.”

144

However, as Mill points out,

“[t]here is a limit to legitimate interference of collective opinion with

individual independence.”

145

Mill advocates for the libertarian ideal that if

an individual’s conduct does not inhibit or interfere with another’s

liberty/rights, then the government, or tyrannical majority, has no business

interfering with that conduct.

146

Expounding on that idea, Mill wrote,

But there is no room for entertaining any such question when a

person’s conduct affects the interest of no person besides himself, or

needs not affect them unless they like (all persons concerned being

of full age and the ordinary amount of understanding). In all such

cases there should be perfect freedom, legal and social, to do the

action and stand the consequence.

147

142

. Id.

143

. Some vices may be even more addictive than gambling, yet society has a higher tolerance for

some than for others. The United States’ treatment of tobacco and alcohol come to mind.

144

. MILL, supra note 8, at 4. “The ‘tyranny of the majority’ is now generally included among the

evils against which society requires to be on its guard . . . Protection, therefore, against the tyranny of

the magistrate is not enough; there needs protection also against the tyranny of the prevailing opinion

and feeling; against the tendency of society to impose, by other means than civil penalties, its own

ideas and practices as rules of conduct from those who dissent from them.” We see other examples of

the tyranny of the majority recently in the cases of Democrat Attorneys General targeting energy

companies for their stances on climate change or gun manufacturers and the Second Amendment. See

Jim Copland, Rafael A. Mangual, Left-Wing AGs Are Playing Politics with the Law, NAT’L REV., Sept.

29, 2016 (last accessed Oct. 12, 2016).

145

. Id.

146

. Id. at 63–64. ON LIBERTY argues, generally, that individuality is more important than

conformity to social norms. Specifically, Mill writes, “Everyone who receives the protection of society

owes a return for the benefit, and the fact that living in society renders it indispensible that each should

be bound to observe a certain line of conduct towards the rest. This conduct consists, first in not

injuring the interests of one another, or rather certain interests, which, either by express legal provision

or by tacit understanding, ought to be considered as rights; secondly, in each person’s bearing his share

(to be fixed on some equitable principle) of the labors and sacrifices incurred for defending society or

its members from injury and molestation.”

147

. Id. at 64.

136 WASHINGTON UNIVERSITY JURISPRUDENCE REVIEW [VOL. 9:115

However, Mill acknowledges society’s need to control the behavior of its

citizens to a certain extent, “[i]t would be a great misunderstanding of this

doctrine to suppose that it is one of selfish indifference which pretends

that human beings have no business in each other’s conduct in life, and

that they should not concern themselves about the well-being of one

another, unless their own interest is involved.”

148

In addition, it is

important for human beings to encourage each other to do what is “right”

and dissuade them from making improper decisions.

149

For the purpose of

argument, it is important to describe the merits of the Attorney General of

New York’s decision as it relates to his letter to FanDuel and DraftKings

and whether the State has an argument a free society can accept.

IX. CURRENT CONTROVERSIES

A. “Insider Trading” Scandal

The “insider trading” scandal, mentioned in the introduction, which

rocked DFS will be analyzed first under Mill’s lens. Ethan Haskell, a

DraftKings’ employee, had access to and made public, proprietary

information that would have given any competitor a distinct advantage

when playing DraftKings’ “Millionaire Maker” contest.

150

While Haskell

apparently did not have access to the data before setting his winning

lineup,

151

the fact Haskell ever had access to such information indicates a

potential for impropriety, because with the information, Haskell would not

have needed statistical algorithms or guesswork to set his winning lineup.

Haskell entered a similar contest on FanDuel’s website the day he released

the information.

152

He placed a $25 bet in the game, finished in second

place, and won $350,000.

153

After a firestorm of criticism and a lawsuit

alleging fraud, DraftKings and FanDuel decided to ban their employees

from playing fantasy sports for money on either website.

154

FanDuel even

148

. MILL, supra note 8, at 64. Mill goes on to write that there are other ways to enforce and

promote the good behavior in people than “whips and scourges.”

149

. Id. Acceptable tactics, according to Mill would be taxing things we deem inappropriate and

using moral punishments such as public humiliation and shame to convince others to not behave in

such a fashion.

150

. Redford, supra note 1.

151

. Id.

152

. Id. Even though they are competitors, FanDuel and DraftKings offer nearly identical contests

on their websites.

153

. Id.

154

. Kevin Draper, FanDuel Told Employees Not To Win Too Much Money on DraftKings Or

People Would Get Suspicious, DEADSPIN.COM (Nov. 20, 2015, 3:58 PM), http://deadspin.com/fanduel-

2016] GO TO YOUR ROOM, FANDUEL AND DRAFTKINGS 137

told its employees to be careful about playing for money, because this

would cause people to get “suspicious,” and would draw complaints from

users, if their employees won too much money.

155

DFS websites are generally self-regulated, thanks to the exemption

provided within UIGEA. However, the Fantasy Sports Trade Association

(FSTA), the governing body of fantasy sports, has a conflict of interest

when policing DraftKings and FanDuel since the CEOs of both companies

sit on FSTA’s board of directors.

156

Insider trading and the use of insider

information would be an example of conduct Mill thought society had a

legitimate interest in policing. It infringes on the rights of others because

the use of non-public inside information gives the holder of the

information a clear opportunity to take advantage of those without it to

harm them for personal gain. Because these employees have a

responsibility to uphold the integrity of their employer, Mill believes they

should be held to a higher standard.

157

Under Mill’s theory, it is possible to conclude nearly every action

people take, in some tenuous way, has an effect on another or many

member(s) of society.

158

With this logic in mind, governments have

historically tried to increase their power and control over individual’s

behavior:

There is also in the world at large an increasing inclination to

stretch unduly the powers of society over the individual, both by

force of opinion and even by that of legislation”, and as the

tendency of all the changes taking place in the world is to

strengthen society, and diminish the power of the individual, this

encroachment is not one of the evils which tend to spontaneously

told-employees-not-to-win-too-much-money-on-dra-1743814536. DraftKings employees have won an

estimated six million dollars over the course of its operating history.

155

. Id. FanDuel’s management essentially told their employees that they understood the

employees would have access to proprietary data, but that they should not use it to draw negative

attention to the company.

156

. Redford, supra note 1. It should be noted that DraftKings employees won an estimated $6

million on FanDuel.

157

. MILL, supra note 8, at 69. “No person ought to be punished simply for being drunk; but a

soldier or a policeman should be punished for being drunk on duty. Whenever, in short, there is a

definite damage or a definite risk of damage, either to an individual or to the public, the case is taken

out of the province of liberty, and placed in that of morality or law.”

158

. Id. at 67. “How (it may be asked) can any part of the conduct of a member of society be a

matter of indifference to the other members? No person is an entirely isolated being; it is impossible

for a person to do anything seriously or permanently hurtful to himself, without mischief reaching to

his near connections, and often far beyond them.”

138 WASHINGTON UNIVERSITY JURISPRUDENCE REVIEW [VOL. 9:115

disappear, but on the contrary, to grow more and more

formidable.

159

In recent years, there have been many high profile examples at all levels of

government proving Mill’s belief. New technology and entrepreneurial

trends are changing the way our economy operates in many sectors and

has caused disruption of the status quo. Government has responded with

an attempt to either overregulate or use economic protection to maintain

the status quo. One example is the high-profile fight between taxi unions,

municipalities and the ride-sharing services, Uber and Lyft.

160

Another is

the occupational licenses mandates for services for which there is very

little established educational requirement (such as eyebrow threading).

161

Safety concerns and the well being of people are often used to justify

overregulation.

162

With these familiar and convenient arguments at hand, New York

declared DraftKings and FanDuel to be illegal gambling, charging the

activity to not be victimless.

163

Attorney General Schneiderman’s cease

and desist letter raises two important questions. The first is, who are the

victims in DFS games? The second question is, if there are victims and the

games are rigged, is it within the purview of the legislature or courts to

declare the activity illegal?

159

. Id. at 11–12. Mill continues, “ The disposition of mankind, whether as rulers or as fellow-

citizens, to impose their own opinions and inclinations as a rule of conduct on others is so

energetically supported by some of the best and by some of the worst feelings incident to human

nature, that it is hardly ever kept under restraint by anything but want of power; and as the power is

declining, but growing, unless a strong barrier of moral conviction can be raised against the mischief,

we must expect, in the present circumstances of the world, to see it increase.”

160

. Olivia Becker, Taxi Drivers Are Trying To Take Down Uber, VICE.COM (June 6, 2014, 3:20

PM), https://news.vice.com/article/taxi-drivers-are-trying-to-take-down-uber. The response from the

government should not be to regulate Uber and Lyft to crush their entrepreneurial endeavors, rather it

is time to loosen the regulations on the burdened taxi industry. Most governments have not chosen this

path, instead they use economic protection to promote a service model that does not have the market

popularity Uber enjoys.

161

. George F. Will, The 110 Year-Old Case That Still Inspires Supreme Court Debates, WASH.

POST (July 10, 2015), https://www.washingtonpost.com/opinions/110-years-and-still-going-strong/

2015/07/10/f30bfe10-2662-11e5-aae2-6c4f59b050aa_story.html?utm_term=. I encourage those

interested to also read Supreme Court of Texas Justice Don Willet’s concurrence in Patel v. Texas

Dep’t of Licensing & Regulation, 469 S.W.3d 69, 77 (Tex. 2015) (Willet, J., concurring) for an

excellent example of the type jurisprudence of which Mill would have approved.

162

. Becker, supra note 159. It is worth noting that every year the number of participants in DFS

games increases.

163

. Schneiderman, supra note 6.

2016] GO TO YOUR ROOM, FANDUEL AND DRAFTKINGS 139

B. Are There Victims in DFS Games?

Some evidence suggests DFS is nothing more than a scheme to take

people’s money with the false promise that all a person needs to do is play

to win. FanDuel and DraftKings had more losers in 2015 than ever

before.

164

As mentioned above, FanDuel and DraftKings’ business model

is based on the shark and fish theory.

165

There are substantially more fish

than sharks: 1.3% of FanDuel’s and DraftKings’ fantasy baseball players

won ninety-one percent of the prizes.

166

FanDuel and DraftKings allow

players to make “unlimited” numbers of entries in a particular

game/pool.

167

Therefore, “sharks,” with their greater understanding of the

game and more money to risk/play, will create thousands of entries per

day to maximize their odds of winning money and generating a positive

return on their investment.

168

Many of these sharks are successful

professional gamblers or former successful professional online poker

players who migrated to DFS after “Black Friday” in 2011.

169

164

. Joshua Brustein, You Aren’t Good Enough To Win Money Playing Daily Fantasy Football,

BLOOMBERG BUSINESSWEEK (Sept. 10, 2015, 7:00 AM), http://www.bloomberg.com/news/

articles/2015-09-10/you-aren-t-good-enough-to-win-money-playing-daily-fantasy-football. Between

2013 and 2014, a Bloomberg Business report showed that 89.3% of users had a negative return on

investment when playing these games.

165

. Baer, supra note 57.

166

. Jay Caspian Kang, How the Daily Fantasy Sports Industry Turns Fans Into Suckers, N.Y.

TIMES MAGAZINE (Jan. 6, 2016), http://www.nytimes.com/2016/01/06/magazine/how-the-daily-

fantasy-sports-industry-turns-fans-into-suckers.html?_r=0. I was not able to find data specifically

related to fantasy football; however, it has been suggested that the numbers would be similar to those

of fantasy baseball.

167

. Id. Fan Duel and DraftKings used to allow an unlimited number of entries until this recent

crisis. Recently, the two companies have put a cap on the number of entries players create. The caps

vary based on contest, but the maximum number of entries per player in a contest of 5,000+ players is

150 entries. Contest Entry Limits, FANDUEL (Nov. 7, 2016, 3:18 PM), https://www.fanduel.com/entry-

limits.

168

. Kang, supra note 166. Some may ask why FanDuel and DraftKings would allow this kind of

activity. The reason is simple. In order to offer prize pools of $1 million to the winner of the contests,

the pot needs to be several million dollars in order to pay second place, third place and fourth place,

etc. If every user were allowed to enter only one team, it would mean FanDuel and DraftKings would

have to recruits tens if not hundreds of thousands of players. Since that is not feasible to attain, it

makes sense to allow players to have multiple entries to solve the dual problem of increasing the pot

while not having to attract an impossible number of players. Therefore, FanDuel and DraftKings’ goal

is to attract enough new players to enter into a pot with a number of sharks who have hundreds of

entries.

169

. LIVING THE FANTASY, supra note 4.

140 WASHINGTON UNIVERSITY JURISPRUDENCE REVIEW [VOL. 9:115

C. The Use of “Scripts”

High rolling sharks do not generate thousands of entries a day by

guessing or picking their lineups manually. Rather, they use algorithms,

forecasts, regressions and other automated processes, known as “scripts”

in the industry, to select and edit their entries.

170

There is no doubt players

with access to scripts have a significant advantage over players who do not

have similar access, in part because scripts dramatically cut down on the

time it takes to change lineups.

171

In a way, sharks, armed with technology

and valuable data, take full advantage of new and inexperienced players

because scripts are also able to target the “weakest players” based on their

entries.

172

DraftKings and FanDuel use this information to defend their

websites as games of skill.

173

Nigel Eccles told a reporter from Bloomberg

news, “We don’t make any apologies that it’s a game of skill, and you

might go up against the best in the industry . . . Some of the people are

really good.”

174

The websites are correct in that it takes a great deal of skill

to create the scripts to use for their advantage.

175

However, due to the uproar from the DFS community, DraftKings and

FanDuel updated their terms of use policy to require players to submit

their scripts for approval by the websites before using them.

176

When

questioned why FanDuel did not completely ban scripts from competition,

Justine Sacco, FanDuel’s Communications Director, admitted the

company could not stop or detect every kind of sophisticated script.

177

170

. Kang, supra note 166.These scripts allow the top players as ranked by the website

RotoGrinders.com (a website that ranks FanDuel and DraftKings players based on their winning

percentages in the games they enter) to compare instantly, those players likely to be successful on a

given day in relation to those players who are less likely to be owned (worth the bargain). This

increases their odds to win money.

171

. Id. Kang outlines a story where the most successful DFS player in the world Saahil Sud a.k.a.

“maxdalury” adjusted hundreds of lineups an hour before games were scheduled to tip-off after

learning a star player for the Orlando Magic would not be playing in the game. Maxdalury used his

script to change his lineups to reflect this breaking news. Maxdalury went on to win hundreds of

thousands of dollars that night.

172

. Barry Petchesky, Actually, Daily Fantasy is Good, Because I Won a Bunch Of Money On it,

DEADSPIN.COM (Jan. 7, 2016, 2:48 PM), http://deadspin.com/actually-daily-fantasy-is-good-because-i-

won-a-bunch-1751364903.

173

. Id. Many of these players acquired their large bankrolls from professional sports

betting/gambling as well as having high-paying jobs outside of their gambling hobby before it became

a profession for them.

174

. Brustein, supra note 163.

175

. Kang, supra note 165.

176

. Petchesky, supra note 171. According to a representative from DraftKings, “anticompetitive”

scripts will be banned. Before this update, DraftKings and FanDuel had policies banning scripts.

177

. Kang, supra note 165. FanDuel says it has detected and removed anticompetitive scripts in

the past.

2016] GO TO YOUR ROOM, FANDUEL AND DRAFTKINGS 141

Further, there is no incentive for FanDuel and DraftKings to stop players

from using scripts.

178

As described above, FanDuel’s and DraftKings’

main source of revenue comes from the ten percent they take or “rake”

from entry fees. Therefore, it is good business to allow players to create

hundreds, if not thousands, of entries in each contest to increase the entry

fees generated by the companies.

179

Furthermore, Sacco defended her

company’s new policy: “You want to allow people on the site to make

their experience meaningfully better. So the idea that big players can’t

bring in features to improve their time, honestly—it feels a bit

Orwellian.”

180

D. DFS Advertising

Every person who watches professional sporting events or listens to

sports talk radio has seen/heard ads for FanDuel and DraftKings: the ads

are almost impossible to miss.

181

Attracting new players every day is

essential for FanDuel’s and DraftKings’ business models to sustain large

prize pots.

182

New York, in addition to filing cease and desist letters to

DraftKings and FanDuel, included language charging the websites’

advertising as false, misleading and fraudulent.

183

New York is not the first

entity to sue DraftKings and FanDuel over their ads.

184

FanDuel’s questionable ads depict “average Joes” usually sitting in

front of the camera describing their experiences on the site. The

commercials describe how FanDuel games work and the relative ease of

picking a team.

185

The men and women in the commercials talk about how

much fun it is to play, the adrenaline rush they receive from playing, how

much more fun they have watching football since playing, and the money

178

. Id.

179

. Petchesky, supra note 171.

180

. Id. This comment is reference to allowing players to use scripts.

181

. Kafka, supra note 131. See also Davey Alba, DraftKings and FanDuel Scandal is a

Cautionary Startup Tale, WIRED.COM (Oct. 9 2015, 7:01 AM), http://www.wired.com/2015/10/daily-

fantasy-sports-scandal-fanduel-draftkings/. At one point in August and September of 2015, DraftKings

or FanDuel had a national commercial airing every ninety seconds.

182

. Brustein, supra note 164.

183

. Schneiderman, supra note 6.

184

. Darren Rovell, Class Action Lawsuit Filed Against DraftKings And FanDuel, ESPN (Oct. 9,

2015), http://espn.go.com/chalk/story/_/id/13840184/class-action-lawsuit-accuses-draftkings-fanduel-

negligence-fraud-false-advertising. This suit, which is still pending, is a class action lawsuit.

185

. Television Commercial: FanDuel, “Win Big”, ISPOT.TV (Nov. 23, 2015), http://www.ispot.tv/

ad/A7E9/fanduel-one-week-fantasy-football-leagues-win-big. A voiceover lays out all of the features,

such as no season-long commitments, cash payouts the next day, and even a controversial $200

advancement when you sign up.

142 WASHINGTON UNIVERSITY JURISPRUDENCE REVIEW [VOL. 9:115

they have won.

186

One player, Scott H., a personal trainer, says he lost “a

little” at first, but turned a thirty-five dollar deposit into more than two

million dollars.

187

While these ads are fairly misleading, ads are

specifically designed to encourage the purchase of whatever the advertiser

is selling. They attract people to put their money down on a promise of a

chance to win money. The ads appear to be effective because FanDuel and

DraftKings are paying out record amounts of prize money every year.

188

DraftKings’ commercials utilize a different style with a very similar

message. Their commercials do not involve testimonials, but instead focus

on the skill it takes to play fantasy football and how players should trust

their numbers, their guts, or their “uncle Vito” to find the sleeper no one

else has identified.

189

Their ads are seemingly less misleading, because the

viewer feels less of a connection to a story of an average person

proclaiming his newfound success from a $5 entry fee.

190

E. Are DFS Players Victims?

In short, DFS players are not victims of theft or fraud. There is nothing

stopping individuals from acquiring or building their own scripts for use

on the websites. These scripts are available to everyone who has the skill

and time to make them or the finances to acquire them. Players who

choose not to use scripts are normally making a conscious choice to play

without them. Many players with the financial ability to create hundreds of

entries already have adequate disposable income before joining the DFS

community.

191

Even though the companies cannot stop all forms of

“cheating,” the companies have taken steps to try to curb such behavior

186

. Id. The players do their best to sell how much fun they have had and how they will continue

to play in the big tournaments and the small games. Some of the players have won a few hundred

dollars all the way up to millions of dollars. One player says he turned $125 dollars into over $62,000,

just from playing.

187

. Id. Scott then looks in to the camera and says, “after I lost a few times, I won a tournament

for $15,000 on a $5 entry fee.”

188

. Casey, supra note 24.

189

. Television Commercial: DraftKings, “The Sleeper”, ISPOT.TV (last aired: Jan. 10, 2016, 7:49

PM), http://www.ispot.tv/ad/AVmZ/draftkings-the-sleeper. Most likely, DraftKings does this

intentionally to signal to government regulators that their games are games of skill and not illegal

gambling.

190

. DraftKings has a few commercials where they show live footage of a million dollar

tournament with the competing players cheering and going wild after winning, but there are no

testimonials from actual players.

191

. LIVING THE FANTASY, supra note 4.

2016] GO TO YOUR ROOM, FANDUEL AND DRAFTKINGS 143

with their new script approval process.

192

Frankly, it might be considered

“Orwellian” not to allow someone who has the means and skill to create a

script to enhance the opportunity for winning these games. Sharks and

others committed to playing DFS for significant money also spend a great

amount of time watching and studying sports, with some players leaving

their primary jobs to spend up to fifteen hours a day studying statistics and

watching games.

193

In addition, FanDuel and DraftKings have created

“Rookie/Beginner Leagues” for new players to acquaint themselves with

the website and to learn how to play in a “safer” environment.

194

Advertisers design ads to expand interest in their product and DFS ads

are no different. Commercials normally highlight only the positive product

aspects and tend to downplay or even hide any negative aspects. It is

misleading when FanDuel’s ads say everyone can play and “anyone” can

win at DFS, given only 1.3% of the players win ninety percent of the prize

money. Think of DFS commercials like acne product commercials. The

people in the “before” pictures usually aren’t smiling and have poor

lighting in their photos drawing our eyes to their blemishes. In the “after”

pictures the lighting is much better and the person is smiling. At the same

time, this statistic provides FanDuel and DraftKings with evidence that

they offer a game of skill. It is up to consumers to choose whether to buy/

invest in the product. Even though many “fish” will lose money by playing

DFS, the games are entertaining and exciting. Even many of those who

rail against DFS and its business practices admit as much, saying they will

continue to play.

195

Many DFS players understand they will not win

money by playing DFS.

196

DFS players do not have to continue playing if

they lose; they can walk away at any time. However, they often continue

to play, because it is a source of entertainment.

Most people know it is generally not a good investment to play slot

machines or gamble in a casino, yet people continue to do so because it is

entertaining and exciting.

197

State lotteries advertise and encourage people

to buy tickets. Lottery advertisements are not so different from DFS

commercials as they attempt to convince people to play a game where they

192

. Brustein, supra note 163. The websites have even taken steps to outlaw “fish finders,” or

tools that help sharks find weak players in games. Jason Robins, CEO of DraftKings called this type of

script, “cancerous” to the long-term health of the industry.

193

. Id.

194

. Id. Some of these new players are “whales” (new players with big bankrolls) looking to

become sharks in the future.

195

. See Petchesky, supra note 172; See also Kang, supra note 166.

196

. Petchesky, supra note 172.

197

. Brustein, supra note 164.

144 WASHINGTON UNIVERSITY JURISPRUDENCE REVIEW [VOL. 9:115

have an extremely low chance of winning, while suggesting the possibility

of life-changing riches.

198

Some Missouri lottery advertisements highlight

the portion of the proceeds from each ticket directed to fund education,

and ask Missouri citizens to “play it forward” to help their students in

public schools.

199

The chances of winning a lottery are even lower than

playing DFS.

200

The lottery is a game of chance and a form a gambling.

Some call it a tax on the “poor” and “stupid.”

201

Yet, forty-four states have

legalized the lottery and use it as a source of revenue to fund the state

budgets.

202

If states or the federal government received some sort of

tax/revenue stream from FanDuel or DraftKings, these companies may not

be under attack as illegal gambling websites preying on the poor and

stupid. In short, the winners of FanDuel’s and DraftKings’ contests are the

websites and the sharks, while government is the real winner of the

lottery.

203

198

. See generally lottery commercials.

199

. Hint, Missouri Lottery—Play it Forward, YOUTUBE (Oct. 23, 2013), https://www.youtubel.

com/watch?v=aCHvzlzdZIU. Missouri lottery claims to have raised $4 billion for Missouri public

schools. See also Missouri Lottery, Where The Money Goes (last accessed Jan. 21, 2016),

http://www.molottery.com/where_the_money_goes/where_the_money_goes.shtm. Hunter Schwarz,

Money From the Missouri Lottery is Used to Pay for Schools. What Happens When it Doesn’t Deliver,

WASH. POST: GOVBEAT (Oct. 8 2014), https://www.washingtonpost.com/blogs/govbeat/wp/2014/

10/08/money-from-the-missouri-lottery-is-used-to-pay-for-schools-what-happens-when-it-doesnt-

deliver/. In 2014, Missouri took in record revenues of $1.15 billion, but the amount of state money

used to fund education dropped from $288.8 million in 2013 to $267.3 million in 2014.

200

. See Ana Becker, One In 292 Million, WALL ST. J. (Jan. 13 2016, 9:00 AM), http://graphics.

wsj.com/lottery-odds/. The record Powerball jackpot odds were one in 292 million. If someone bought

146 million lottery tickets, they would only have a fifty percent chance of winning.

201

. Dina Spector, Gus Lubin and Michael B. Kelly, 18 Signs That the Lottery Is Preying on

America’s Poor, BUS. INSIDER: YOUR MONEY (Apr. 6 2012, 9:58 AM), http://www.businessinsider.

com/lottery-is-a-tax-on-the-poor-2012-4. Poorer and less educated people tend to play the lottery more

than the wealthy and educated play.

202

. Id. They encourage people to continue to play, despite it being what some would call a

predatory game designed to take money from those who need it most.

203

. Jackie Wattles, You Won the $1.5 Billion Powerball! Here’s Your Tax Bill, CNN (Jan. 12,

2016, 12:39 PM), http://money.cnn.com/2016/01/08/pf/taxes/powerball-jackpot-tax-bill/. See also

Cullen Roche, I Already Know the Winner of the Next Powerball Drawing, MKT. WATCH (Jan. 11

2016, 10:12 AM), http://www.marketwatch.com/story/i-already-know-the-winner-of-the-next-powerball-

drawing-2016-01-10. The federal government takes twenty-five percent off-of-the-top of any lottery

winnings. In addition, lottery winners will be placed in the highest possible federal income tax bracket

(39.6%). They also still have to pay state and local income taxes, which vary. At the end of the day,

the government (state, local and federal) could take in as much as two-thirds of any prize money won.

2016] GO TO YOUR ROOM, FANDUEL AND DRAFTKINGS 145

F. Should The Legislature (State) Or Judicial System Step In?

If there are genuine victims adversely affected from an insider-trading

scheme, fraud or involuntary theft, the state and the judicial system should

intervene and remedy the situation. Mill agrees, “Whenever, in short, there

is a definite damage, or a definite risk of damage, either to an individual,

or to the public, the case is taken out of the province of liberty and placed

in that of morality or law.”

204

Theft, fraud and insider trading are crimes

and there are laws at the federal and state levels protecting victims and

punishing those responsible for committing such acts.

DraftKings and FanDuel have not committed any such crimes. People

willingly participate in contests on their sites and effectively pay an

entertainment fee. They do this of their free will; no one forces them to

play. New York and several other states have called DFS illicit gambling.

Gambling may be linked to negative externalities and give overzealous

governments and courts a chance to use paternalistic “public health” and

“safety” arguments to justify their position, but that does not mean their

positions are justified.

Mill describes this type of state action as a “social right” theory;

meaning if a person decides to engage in less than desirable behavior, it

leads to social disorder and destroys the offended person’s primary right to

security, because it creates unwanted temptations.

205

Mill fully explains

the Social Right Theory in this way, “[I]t is the absolute social right of

every individual, that every other individual shall act in every respect

exactly as he ought; that whoever fails thereof in the smallest particular,

violates my social right, and entitles me to demand from the legislature the

removal of the grievance.”

206

Gambling is a less than desirable social

behavior. It tempts people to give away their money on games of chance

with little likelihood of winning. When the Powerball jackpot hit $1.5

billion, people across the United States were inclined to give away a

minimum of two dollars (generating an average of twenty-eight million

dollars an hour) for a one-in-292.2 million chance to strike it rich.

207

204

. MILL, supra note 8, at 69.

205

. Id. at 75–76. Politicians in Mill’s time used this argument to legislate morality, arguing that it

offends a person’s, “[F]ree moral and intellectual development, by surrounding [his] path with

dangers, and by weakening and demoralizing society, from which [he] [has] a right to claim mutual aid

and intercourse.”

206

. Id. at 76.

207

. Rick Rojas & Nate Schweber, With No Winners in Powerball Drawing, Jackpot is Expected

to Surpass $1 Billion, N.Y. TIMES (Jan. 9, 2016), http://www.nytimes.com/2016/01/10/nyregion/new-

yorkers-join-the-crush-for-tickets-as-powerball-jackpot-nears-dollar1-billion.html?_r=0.

146 WASHINGTON UNIVERSITY JURISPRUDENCE REVIEW [VOL. 9:115

Rather than use that money to help pay the mortgage, buy groceries or

gasoline (more productive uses), adults chose to give that money away

through the lottery. Nevertheless, forty-four states agree with, support and

promote this decision.

Lotteries are games of pure chance, whereas winning a contest in DFS

requires skill, time and effort. However, New York declared DFS a

grievance and the State has to remove the grievance because, “[DFS] are

creating the same public health and economic concerns as other forms of

gambling, including addiction.”

208

Gambling addiction is a serious

problem and has consequences for the addict and his or her loved ones as

described above. Mill recognizes this issue when he writes, “I fully admit

that the mischief which a person does to himself, may seriously affect,

both through their sympathies and their interests, those nearly connected

with him, and in a minor degree, society at large.”

209

That does not mean

society should punish the grievance (DraftKings and FanDuel) as Mill

says,

If, for example, a man, debts, or having undertaken the moral

responsibility of a family, becomes unable to pay his debts, or

having undertaken the moral responsibility of a family, becomes

from the same cause incapable of supporting or educating them, he

is deservedly reprobate, and might be justly punished; but it is for

breach of duty to his family or creditors, not for the

extravagance.

210

People make negative life decisions every day. Investors make bad

investments (not exclusively in ponzi schemes, but also pursuing

legitimate investments) and lose their money in the market; alcoholics

drink away their wages, and gamblers of all sorts give away their incomes.

Yet, our society does not criminalize the stock market or brokerage

houses, bars or liquor stores or casinos (in most states). Compulsive

behavior often leads to poor decisions. If a compulsive gambler fails to

take care of his children, defaults on loans, or does not take care of his

responsibilities, the law should punish him.

211

208

. Schneiderman, supra note 6.

209

. MILL, supra note 8, at 68.

210

. Id. meaning the individual should be punished for failing to live up to his obligations to his

family, not for excess gambling or excess drinking.

211

. MILL, supra note 8, at 82–83. Mill writes, “[A] man fails to perform his legal duties to

others, as for instance to support his children, it is no tyranny to force him to fulfill that obligation, by

compulsory labor, if no other means are available.”

2016] GO TO YOUR ROOM, FANDUEL AND DRAFTKINGS 147

Gambling is a vice. However, it can be very difficult to isolate the vice

because states like New York, and their court systems, conveniently allow

some games of chance to exist (the lottery, video poker machines), while

challenging others such as DFS. With regard to moral vices, Mill suggests

that society should punish those misbehaving members socially, rather

than legally, “A person . . . [sic] who cannot . . . restrain from hurtful

indulgences . . . [sic] must expect to be lowered in the opinion of others,

and to have less share of their favorable sentiments, but of this he has no

right to complain[.]”

212

Society already has a low opinion of addicts. The

State may criminalize the act of gambling, but may have more tolerance

for the gambler himself.

Not everyone who plays DFS will become an addict or a “victim,”

even though eighty-five percent of players lose money. Mill’s solution to

this perceived problem is to caution these fully capable adults of the risk

they are taking, rather than being “forcibly prevented from exposing

himself to it.”

213

Rather than legislate moral vices inconsistently based on

an arbitrary predominant elements test, our society should do exactly what

Mill would do and warn players their likelihood of winning contests on

FanDuel or DraftKings is poor, and let the players make the decision of

whether to play. Some players will continue to play, because they think it

is entertaining.

214

Other players will leave the sites and use their money for

other purposes.

However, if New York finds DFS morally reprehensible and chooses to

discourage people from playing, it has another option, taxation. “Sin”

taxes, or taxes on vices like alcohol and tobacco are not only a revenue

stream for state governments, but also a way to discourage people from

purchasing undesirable products.

215

212

. Id. at 66.

213

. Id. at 81. The full quote reads, “[W]hen there is not a certainty, but only a danger of mischief,

no one but the person himself can judge of the sufficiency of the motive which may prompt him to

incur the risk: in this case, therefore, (unless he is a child, or delirious or in some state of excitement or

absorption incompatible with the full use of the reflecting faculty,) he ought, I conceive, to be only

warned of the danger; not forcibly prevented from exposing himself to it.”

214

. Petchesky, supra note 172. Many people enjoy gambling and view their losses as the price of

admission for entertainment.

215

. MILL, supra note 8, at 85. “Taxation, therefore, of stimulants, up to the point which produces

the largest amount of revenue (supposing the State needs all the revenue which it yields) is not only

admissible, but to be approved of.”

148 WASHINGTON UNIVERSITY JURISPRUDENCE REVIEW [VOL. 9:115

X. MISSOURI’S RESPONSE

NY led the charge against DFS and a mob of states followed their lead.

The mob could not persuade Missouri. On June 10, 2016, Jay Nixon,

Governor of Missouri, signed HB 1941 into law.

216

HB 1941 places DFS

under Missouri Gaming Commission’s regulatory authority, exempting

DFS from gambling regulations.

217

HB 1941 imposes a, “$10,000 annual

license application fee or ten percent tax on applicant’s net revenue from

the previous year (whichever is less).”

218

HB 1941 also imposes an eleven-

and-a-half percent annual operating fee based on the “licensed operator’s

net revenue from the previous year.”

219

Mill would approve of Missouri’s

actions.

220

Inevitably, DraftKings and FanDuel will pass the cost of these

new taxes and regulations onto consumers through raised entry fees. This

may discourage some consumers from entering DFS contests; others will

continue playing.

CONCLUSION

The government’s role in our society is not to be the citizenry’s

parents. People should be allowed to exercise their own will to avoid

temptation and do what is best for them: “[People’s] choice of pleasures

and their mode of expending their income, after satisfying their legal and

moral obligations to the State and to individuals, are their own concern,

and must rest with their own judgment.” New York can warn its citizens

about DFS and possibly even tax it, but the state should not be allowed to

ban DFS outright using inconsistent, subjective and arbitrary laws to

increase its power. The people of New York are not “victims” when they

enter contests on DraftKings and FanDuel. Players before, and especially

after the Haskell “scandal”, were aware that their odds of winning were

slim. They play for the utility value of the entertainment. The state of New

216

. Missouri joined eight other states in allowing DFS to operate legally in their states through

legislation. For the sake of brevity and repetitiveness, this Note will only highlight Missouri’s

approach. The Bill’s official name is the “Missouri Fantasy Sports Consumer Protection Act.”

217

. John B. Greenberg, Carleen B. Griffith, Krista C. McCormick, Daily Fantasy Sports Now

Permitted in Missouri, LEWIS RICE (June 2016), http://www.lewisrice.com/publications/daily-fantasy-

sports-now-permitted-in-missouri/.

218

. Id.

219

. Id.

220

. See Greenberg, supra note 217. Missouri’s solution is superior to New York’s. Missouri

recognizes people enjoy playing these games and saw an opportunity to regulate the vice. Missouri’s

plan does not pretend to understand what is best for its citizenry. Instead, it recognizes its citizens are

informed about the unlikely odds of success and the sharks waiting to take their money in DFS. HB

1941 includes an age restriction requiring players to be eighteen years or older.

2016] GO TO YOUR ROOM, FANDUEL AND DRAFTKINGS 149

York, asking for $200 million in damages and restitution, seems more

attention getting than grounded in the law.

221

Attorney General

Schneiderman may be going after the websites to make a name or to

facilitate his future political aspirations, which coincide with his

paternalistic views.

222

It would behoove him to not waste precious tax

dollars going after DFS with a paternalistic bend and instead investigate

and prosecute real criminals.

221

. Luke Kerr-Dineen, New York’s Attorney General is Going Too Far in His Fight Against

Daily Fantasy Sports, USA TODAY: FOR THE WIN (Jan. 4 2016, 12:38 PM), http://ftw.usatoday.com/

2016/01/new-yorks-attorney-general-is-going-too-far-in-his-fight-against-daily-fantasy-sports.

222

. Michael Craig, The Politics and Power of A.G. Schneiderman, OBSERVER (Feb. 25, 2014,

4:13 P.M), http://observer.com/2014/02/the-politics-and-power-of-a-g-schneiderman/.