Gambling Innovation: Killing Something Before it Begins

Back in the 1860's a new invention was starting to be marketed to the UK public - the steam car. The steam car allowed for obvious benefits over the horse-drawn carriage, and was beginning to catch on. A shift was occurring in a mass market.

Stagecoach owners - powerful, big businesses with big businessmen - were none too pleased. Failing to see the market was innovating and shifting, they lobbied hard, and clung to what they knew - doing things the way they had always done them.

Friends in the media and in the government began writing dire stories and preaching warnings about these new machines: They scared the horses, they were dangerous, they were job killers. In response, the government began regulating these new machines out of existence. The "Red Flag Law" was passed in 1865 which mandated a top speed of four miles per hour, that two people had to be present to operate the vehicle, and that a third man or woman had to march forward to any intersection with a red flag to warn anyone the vehicle was coming.

Not surprisingly, the program that was noticed by Henry Ford and others - what would end up being a "car" - was ended. The US, in its infancy, had little use for such laws, and in the end, it flourished, spawning the combustion engine, engineering production line innovations, and massive economic growth.

Today I am reading headlines about innovation in the fantasy sports space. The industry, which upwards of 60 million people in North America enjoy, has been growing, and has a stout market. The daily fantasy sports space is new and vibrant and innovative. Fantasy sports is now being called "dark", authorities, from AG's to the FBI have intervened at the behest of the headlines and special interests. A few folks have their hand out, and the lawyers are doing what lawyers do.

All for a business that is not even making any money.

Now, we all want things to work smoothly, we all want games on the up and up; just like everyone should've wanted steam cars to work a little less loud, a little faster and little more reliably. But shutting them down before they are allowed to change - through penal regulation, added fees or worse - is no way to go about it. Think horse racing for a primer on what overzealous and tax hungry politicos can do to kill a business.

Daily Fantasy Sports is a US-led baby. It is currently being exported to other nations, like the UK, where gambling is met with little resistance. It's an American technology, fueled by American investors, with American sports, that are being exported world wide as an industry leader. It's changing the way the world consumes live sports. The barriers to entry have reached a point where some of the biggest gambling companies in the world can not compete with it, so this US innovation will likely be around for many years.

It's like a steam car. It's like an iPhone. Because it's gambling, I suppose, it's something that should not be encouraged; rather it needs to be shut down.

Business and politics is never uninteresting, whether it is 1865 or 2015.