Harry Reid opposes DFS; He Prefers NV's Monopoly on Sports Betting

Harry Reid (Photo/Wikimedia Commons)

Nevada Senator Harry Reid recently had an exit interview with the Las Vegas Review-Journal. As always, Reid was outspoken and he offered his thoughts on daily fantasy sports. He said, “(Daily) fantasy sports is the worst of the worst.”   

You may not be familiar with daily fantasy sports, but you likely know of the companies that dominate this industry, FanDuel and DraftKings. If not, you probably don’t watch much TV because those two companies have inundated the airwaves with their advertisements. Daily fantasy sports (DFS) differs from traditional sports gambling by betting on the players’ statistics, not the outcome of the game. To put it another way, DFS is another form of sports gambling. These DFS companies took advantage of a loophole that exempted fantasy sports from the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA).

Harry Reid supported the UIGEA because the Nevada casino industry wanted to suppress competition from offshore gambling websites. However, the UIGEA didn’t dramatically affect the demand for online gambling. Hence, the darling of the Nevada casino industry, Harry Reid switched his stance on Internet gambling. Reid tried unsuccessfully in 2010 to add a bill legalizing online poker to an extension of the Bush-era tax cuts. The regulations in Reid’s bill would have created an enormous competitive advantage for major Nevada and New Jersey casinos to the exclusion of nearly every other state.

Why would Harry Reid criticize daily fantasy sports (DFS) when his largest corporate donors offer full-scale legalized sports gambling? Once again, the answer is competition. Nevada benefits from a bill, the Professional and Amateur Sports Protection Act of 1992 (PASPA), that essentially provided a monopoly on sports gambling for their state. Only Oregon, Montana, and Delaware were allowed to continue offering sports gambling, albeit in extremely limited formats. (The sordid history behind this bill is detailed more fully in my upcoming book series, Rackets.)

The state of Nevada requires daily fantasy sports companies to apply for a gambling license, and that’s the way it should be in every state. However, the DFS companies have asserted that DFS is a “game of skill” to avoid gambling laws and regulations. The truth of the matter is that DFS is “skill-based gambling,” just like traditional sports betting. After all, some professionals make a living from DFS and traditional sports gambling.

Daily fantasy sports now exists within a gray area of the law. Five states have formally outlawed DFS; ten more are drafting similar laws. On the other hand, twelve states have officially legalized DFS and thirteen more have proposals in place to do the same. These states obviously want the tax revenues. Also, it is now much easier for politicians to support legalized gambling because the stigma has decreased. Case in point, Fairleigh Dickinson University conducted a national poll in 2010 in which only 39% of Americans supported legalized sports gambling. Nonetheless, the residents of New Jersey passed a ballot to legalize sports gambling in 2011 with 64% of the vote. And, in the following year, Fairleigh Dickinson University conducted that same national poll but with far different results. They found that 51% of Americans supported legalized sports betting. In other words, the stigma faded in a way similar to what happened with legalized marijuana. Polls show that support for legalized marijuana surged after Colorado and Washington passed their state referendums in 2012.

Unfortunately, the federal government has blocked the state of New Jersey from offering sports gambling because it violates the Professional and Amateur Sports Protection Act of 1992 (PASPA). However, New Jersey is contesting the constitutionality of this decision through the court system. Indeed, PASPA certainly seems to violate their state’s rights under the 10^th Amendment. In fact, five state attorney generals (West Virginia, Louisiana, Arizona, Mississippi, and Wisconsin) recently filed an amicus petition for the U.S. Supreme Court to review New Jersey’s sports gambling case.

Regardless of the outcome of that case, Congress has been pressured to review PASPA. One of the central forces behind this lobbying effort is the fact that 42 states now offer casino gambling. Hence, overturning PASPA has become the primary issue for the American Gaming Association (AGA). “The next (U.S.) president is going to have that issue of legalizing sports betting on their desk,” insists Geoff Freeman, the CEO and president of the AGA. To say it another way, several states want to end Nevada’s monopoly on sports gambling.