A Minute With...

John Kindt, legal policy expert and gambling critic

7/29/2013  8:00 am

With tens of millions of players per season, fantasy football is a billion-dollar industry that borders on an American obsession. The Unlawful Internet Gambling Enforcement Act of 2006 prohibits online sports gambling, but has an exception for skill-based competitions such as fantasy football and fantasy baseball, where winners aren’t determined by the outcome of a single game or the performance of a single player.

The latest trend in fantasy sports is daily games, where a season’s worth of fantasy games are compressed into a single day. But critics argue that turning fantasy sports into a daily competition edges it closer to being a game of chance that’s essentially equivalent to online gambling – or an Internet-age analog to placing a bet with a bookmaker.

John Kindt, an emeritus professor of business and legal policy at Illinois, is a leading national gambling critic who has testified before Congress about the societal, business and economic impacts of decriminalizing gambling. The author of a forthcoming book on sports gambling, Kindt spoke with News Bureau business and law editor Phil Ciciora about the legality of daily fantasy sports.

(Watch a video of Kindt discussing the effect of Internet gambling on the economy.)

Some critics maintain that daily fantasy sports leagues fall into a legal gray area – the games are skill-based, but also have elements of luck and pure chance. If that’s the case, should daily fantasy sports still be considered legal?

image of professor john kindtMy take on that is, if it involves substantial sums of money, then it’s probably pushing the limits of the law. There is an exception carved out in the Unlawful Internet Gambling Enforcement Act for fantasy sports, but that’s because it’s a game, just like online chess is a game. A game is about bragging rights; gambling is about the exchange of money. So once you’ve crossed the line from being a game to a transaction that involves money, you’re gambling on sports, which is illegal. In the case of playing daily fantasy sports for money, it’s often really just Internet gambling, which also is illegal.

Societal goals should be directed toward protecting the integrity of sports and the next generation. When you’re talking about people who think they can actually make a living off of fantasy sports, that’s also when it veers into problematic gambling. Playing fantasy sports shouldn’t be a year-round occupation, but when it is, that makes it more like bookmaking. And gambling on sports is definitely illegal, with a few notable exceptions like Las Vegas and a couple of other jurisdictions. Congress has repeatedly tried to close this so-called “Las Vegas Loophole,” but as long as Nevada Sen. Harry Reid leads the Senate’s Democratic majority, that loophole is unlikely to be closed.

What is the attitude of the major sports leagues toward sports gambling?

History suggests that all of the professional sports leagues, as well as all of the collegiate sports leagues and the Olympics, seek to protect the integrity of sports by suppressing and keeping sports gambling illegal. The prime examples in Major League Baseball are the 1919 Black Sox scandal and, more recently, Pete Rose, who received a lifetime ban from baseball for gambling on games. Professional and amateur sports leagues should be very concerned about fantasy sports being manipulated or leveraged into widespread, all-out sports gambling.

The sports leagues need to recognize that it’s a matter of not only protecting the integrity of the sport itself, but also protecting future fans, because sports gambling is particularly enticing to young people. Young people like sports, and they like to take risks. If you combine the two, that leads sports enthusiasts into some problematic areas. The younger generation – the generation that has always had access to the Internet – is showing nearly double the gambling addiction rate of the next oldest generation. That is, about 6 to 8 percent of the youth population – including teens, the college-age and young adults – could be considered addicted or problem gamblers. Certain demographic groups within that youth segment are showing even higher rates of gambling addiction.

In fact, something like fantasy sports may be the ultimate gateway drug to gambling.

Fantasy sports are dominated by some of the most powerful media companies in the U.S., including ESPN, CBS Sports and Yahoo! How culpable are the big media companies in edging fantasy sports closer to sports gambling?

The big media companies who sponsor these fantasy sports leagues are on a slippery slope. They should really get back to their core business of making money through advertising. Their strategic theme should be toward protecting the integrity of sports and the next generation.

Certain states have more stringent laws regarding fantasy sports being played for money, but others allow it under the guise of it being a “contest.” In the states that allow it, these so-called contests are essentially unregulated by any sort of oversight board or gaming watchdog. How problematic is that?

Although states can have parallel anti-gambling statutes, this is really a federal issue. The controlling piece of federal legislation is the Unlawful Internet Gambling Enforcement Act. So if a certain state were to say outright that gambling via fantasy sports is legal, that would conflict with the federal statute.

Companies don’t need to be offering monetary awards through fantasy sports contests. If we’re talking nominal amounts, to the tune of $50, that seems pretty benign at first. But the problem is once you open the door to monetary rewards, it becomes “I’ll see your $50 and raise you $1,000.” When that happens, the pendulum swings toward problematic gambling. Maybe fantasy sports should just have fantasy rewards – if it is truly just entertainment.

What is the true social cost of playing fantasy sports?

It’s a multibillion dollar industry, and all of that money is disposable income that could otherwise have been diverted to constructive contributions to our economy, like education and health care, as well as consumer goods like cars and appliances.

However, gambling is both a fiscal and a philosophical problem, because it attacks the underlying rationale for an education. Why get an education if you can just gamble your way to a living? Congress realized this after over 10 years of congressional hearings with experts, who uniformly said, “Whatever you do, keep the door closed between young people and sports gambling.”

The bottom line is, do you want jobs or do you want games? We ought to choose the former.

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