Can the government really regulate Fantasy Football?

The most recent Republican presidential debate left CNBC moderators under quite a bit of scrutiny. But nothing seemed to be more powerful than New Jersey Gov. Chris Christie’s statement regarding fantasy sports. Christie interjected into the dialogue between former Florida Gov. Jeb Bush and CNBC host Carl Quintanilla’s about the government regulating fantasy football.

“Carl, are we really talking about getting government involved in fantasy football? We have — wait a second, we have $19 trillion in debt. We have people out of work. We have ISIS and al Qaeda attacking us, and we’re talking about fantasy football? Can we stop?” Christie said.

Touché.

What are the odds the NFL will step in?

While Bush bragged about his 7 and 0 fantasy league standings, he believes it is day trading without regulation – and instances have alleged that insider information is being taken advantage of, thus needing some sort of parameters.

“If they can’t regulate themselves, then the NFL needs to look at just, you know, moving away from them a little bit, and there should be some regulation. I have no clue whether the federal government is the proper place, my instinct is to say, hell no, just about everything about the federal government,” Bush said.

The National Football League (NFL) backs fantasy sports. NFL Commissioner Roger Goodell told reporters, “[I]t’s hard to see the influence that it could have on the outcome of a game because individual players are picking different players from different teams, mashing them up, you might call it… [I]t’s not based on the outcome of a game, which is what our biggest concern is with sports betting.”

Doesn’t look like the NFL will be regulating fantasy football anytime soon.

More states jumping on the Fantasy Sports regulation bandwagon

The billion dollar industry sporting millions of players, slim regulation, increased ad campaigns and political uproar over the issue have made fantasy sports a hot topic and one that is under a lot of fire.

State governments have already stepped in, with Iowa, Louisiana, Montana, Washington and Kansas prohibiting fantasy sports played for money under state law. But are the people actually abiding by the law? How are these prohibitions being enforced?

On Oct. 30, a bill was introduced into the New York State Assembly, merely adding in, “fantasy sports gaming,” to the state gambling code, then defining “fantasy sports.” This will give the gaming commission authority to regulate the industry as it sees fit. The memo states:

“In light of this exemption and the recent questions raised about the transparency, fairness and security of the fantasy sports companies’ data about their rosters, it is appropriate to put added consumer protections in place by giving the state’s gaming commission regulatory authority over this type of gaming. The gaming commission has authority over any form of legal gaming in the state, including pari-mutuel wagering, both on-track and off-track (betting), bingo and charitable games of chance and the state lottery for education. Adding fantasy sports to that list is both reasonable and justified given existing authority over similar types of gambling and it would help prevent unfair practices in this booming multimillion dollar industry.”

Pennsylvania, Illinois and California are also looking into daily fantasy sports regulation. Pennsylvania plans to hold a hearing next week regarding the issue, Illinois introduced a bill last week and California introduced a bill in September.

Big Issue: Insider Trading

The key issue here is insider trading. Employees working for popular companies like FanDuel and DraftKings may have access to insider information and can leverage it for their benefit. Ownership percentages can help Fantasy players predict how their roster might perform. Sometimes competing in both FanDuel and DraftKings leagues will give players an edge.

Many players believe that anyone who works in the industry shouldn’t be allowed to play on any other daily fantasy sports sites because of the potential for insider trading, and they don’t trust the sites to regulate it themselves.

Is it legal for government to regulate fantasy football?

If government were to step in and regulate daily fantasy sports, it may be deemed illegal in the courts because of the Professional and Amateur Sports Protection Act of 1992. Since fantasy sports are tied to the performance of individual athletes in a game, rather than the final score of a game itself, government control may impinge on the free market.

Interestingly enough, the fantasy sports industry already has a trade association that calls for higher ethical standards. If companies like FanDuel and DraftKings keep facing allegations of insider trading, customers will likely bow out, forcing these companies to correct themselves or deteriorate.

Future of Fantasy Football

Representatives from the industry itself believe regulation is likely and warranted.

An executive from FanDuel believes the industry “needs strong, commonsense, enforceable consumer protection requirements to ensure its continued growth and success.” If anything, it is believed that states will likely attempt to regulate fantasy sports by auditing fantasy sites’ employees to look for signs of insider trading at the very least.

However, for the general consumer, it does not appear fantasy sports are going anywhere anytime soon, being that points and outcomes are based on a combination of individual players and not teams themselves.

After all, the government isn’t missing a slice of the billion-dollar industry’s pie. Any funds earned through Fantasy Sports will be seen as income, and the Internal Revenue Service will take out taxes accordingly.