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Tuesday, November 17, 2015

Fantasy Sports Regulation Unlawful Internet Gambling Act Of 2006 (UIGEA) All Over Again?

It feels like 2006 all over again when online poker became all the rage and it was just toooo successful and popular in the US for land based gambling businesses to accept. The success of online poker in the US   ultimately led to the federal enactment of gaming legislation called  the Unlawful Internet Gambling Act (UIGEA), which by the way, specifically identified skill gaming and fantasy sports as "legal" exempting fantasy sports from federal restrictions. UIGEA forced poker back to the  physical gaming tables in the land based casinos and all was well again.

We now have   fantasy sports surging in popularity and it has become all the rage  with 56 million players in North America. The original federal UIGEA legislation,  that specifically  stated  fantasy sports would be allowed on the federal level, has ignited state legislators to either circumvent the federal law by establishing state law prohibiting this form of online gaming or has resulted in a request for the Federal Trace Commission  (FTC) to reconsider their position on fantasy sports. 

Nevada Fantasy Sports Legal Position - Nevada has proposed that fantasy sports is not a game of skill because you can wager on an athlete's performance in a  single sports event and not in aggregate over a number of events. This proposed legislation certainly pays respect to UIGEA excluding fantasy sports from the "skill" category. However, it would appear that this could easily be challenged by the fantasy sports operators. The operators could also change their offering and continue single event wagering. 

New Jersey Proposed Legislation - New Jersey is even more interesting as the governor of the state has openly stated that he does not want fantasy sports regulated. The proposal for regulation of fantasy sports in New Jersey is coming from a only couple of lawmakers.  Essentially, the likelihood of fantasy sports being banned in New Jersey is unlikely.

Federal Position - The FTC has publicly stated that they can investigate if fantasy sports is allowed under federal law. However, it is unclear if they will investigate and if so what the goal of the investigation will be. It is most likely that they will use UIGEA as a benchmark for their investigation. However, as stated previously UIGEA clearly states that fantasy sports is allowed under the legislation making for a very difficult situation for FTC regulators. 

Fantasy Sports has once again challenged US federal and state lawmakers on the broader issue of "online" gaming/gambling activity.  In many ways US online gaming/gambling law is arcane in an attempt to "protect" land based gambling operations and possibly to protect consumers. However, a number of land based operations want to engage in online gambling and have used "social casino" as a legal  proxy to do so. They have also launched "real" online gambling operations in Europe.  Europe has also proven that "responsible" online gaming/gambling can be regulated.  Essentially, even land based gambling operators are frustrated by current federal and state online gaming law. A ban on, or a highly restricted form of fantasy sports is most likely a futile effort and could led to the emergence of illegal online fantasy operators.  For all of UIGEA's flaws its clear language that allows fantasy sports should be respected. 

Kevin Flood is the CEO of Gameinlane, Inc. Gameinlane  has developed, launched and operated Internet gambling sites in Europe.   The company engages with land based casino  operators, online gambling operators, social casino operator and game developers to assist them in determining their strategy and implementation  of game content.  Gameinlane   develops "social and real money" casino games for third parties. Kevin has worked for and with US land based casino operators helping them evaluate social casino and iGaming platforms for the purpose of joint ventures and acquisitions. Kevin can be reached at kflood@gameinlane.com.

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