How much skill does it take to play fantasy football or other fantasy sports? That is a question that has surfaced in Indian country recently. Fantasy sports, especially those following the NFL, have become a multi-billion dollar industry, led by companies like FanDuel and DraftKings. Many states across the U.S. are moving to pass legislation to legalize and regulate daily fantasy sports, although most tribes are opposed to these new bills. If states legalize daily fantasy sports, it may open the door for tribes to 1) argue that it violates the exclusivity clause in their state-tribal compacts, making them null and void; 2) expand their own online gaming operations, and/or 3) stop fulfilling their revenue-sharing obligations to the state.
“The most important definition to the states in their gaming compacts is how much money are we going to get paid?” said Joseph Valandra, former Chief of Staff for the National Indian Gaming Commission and a member of the Rosebud Sioux Tribe of South Dakota. “So the tribes are saying to the states, ‘If you pass any legislation that regulates daily fantasy sports as gambling, we view that as an expansion of gambling and a violation of the compacts and therefore we don’t have to pay you anymore.’ It comes down to a money argument.”
The Unlawful Internet Gambling Enforcement Act was passed by Congress back in 2006. It created an exemption for fantasy sports. However, the daily fantasy sports industry has evolved since that time from a season-long contest to daily wagering. Only two states, Virginia and Indiana, have passed laws to regulate DFS.
“In states where tribes have exclusivity for Class III games, like here in California and other places, we should be concerned about whether DFS is a Class III activity and therefore a breach of our exclusivity. That’s what we’re concerned about here in California,” said Jacob Coin, Executive Director of Public Affairs for the San Manuel Band of Mission Indians.
“What the tribes have a problem with is that (the bill) would allow anyone who is capable to run a DFS game to come into the state and be licensed. If gambling is indeed a Class III or Las Vegas-style activity, then tribes are the only ones who have the constitutional right to be able to offer those games,” remarked Coin, a member of the Hopi Tribe of Arizona.
“One of the principles here in California that we’re interested in is if DFS is going to be a legal gambling activity then it ought to be channeled through an established gaming facility,” said Coin, the former executive director of the California Indian Gaming Commission. “In other words, it should only go through the entities that are currently able to offer Las Vegas-style games. Tribes here in California should be authorized. So if FanDuel or DraftKings were to offer DSF play they should be required to facilitate those games through tribal gaming facilities.”
Most people in the U.S. can go online and find a place to make a bet or play a game, whether it’s legal or not, whether it’s regulated or not. The State of Washington has a complete prohibition of online gaming and they’ve threatened to go to people’s houses, but they haven’t. They shut down the operator if they can. If the operator is offshore they have a hard time shutting them down.
“The states receive so much economic benefit from the compacts that it’s difficult for them to make a decision that would disrupt the flow of funds. That’s what it boils down to. Now if a state defines DFS as a game of skill that might be an interesting argument because that’s not technically gambling. How would that impact the tribes’ exclusivity because it’s not actually gambling?” said Valandra, who graduated from the University of South Dakota Business School and the University of Minnesota Law School.
“The real leverage that a tribe or a group of tribes have over a state legislature is that ‘hey, we’re paying you X-millions of dollars and we’re going to stop if you do this.’ That’s the crux of the argument, but it doesn’t answer the fundamental questions of is it gaming or is it a game of skill, and who should regulate and who should benefit?” added Valandra. “It simply stalls the answer.”