The Whirlwind of Gambling Market Machinations

The whirlwind regarding gambling skill games, oh, I think we can call it gambling again, has been eye-opening of late. It certainly has been frustrating for those who wish to see pursuits like horse racing wagering, fantasy, or sports betting gain more of a foothold in the North American market.

In reality, it's an uphill battle and the Daily Fantasy discussion illustrates this perfectly.

In the beginning - and it would always get to this point - it was about "regulation". The activists in newspapers, the folks who do not lean libertarian in pursuits like this, and the well-meaning who want to see the environment improved for customers, pushed this narrative and wished it as a goal. There's really nothing wrong with that wish. Calling for ADW's, DFS, anything that does business on the web moving money or with a game involved (e.g. Ebay), to have some basic rules is not remotely radical.

Even for those of us who generally prescribe to Adam Smith's, "Virtue is more to be feared than vice, because its excesses are not subject to the regulation of conscience," you could still get behind sensible regulation.

This narrative, however, in my view, was naive. It was never about that.

In the previous few weeks we've seen rumblings of states pulling out of DFS - obviously at the behest of well-capitalized bricks and mortars who never met a competitor they can't lobby away. We've seen politicians in Pennsylvania say that DFS might be fine in the future, but only if their state-run casino's host games on the web. We've seen regulation talk, yes, along with 70% tax rates.

We've seen a state like Nevada call it "gambling" - which it is. But nuanced, there's much more to that word (and yes, the powers in government and casino lobbying know this). By taking the lead and calling it "gambling", other states can or will follow, and DFS moves from being something protected by the UIGEA, to be governed by the Professional Amateur Sports Protection Act of 1992. That act - another obsolete act like the one that protects Interstate Wagering in horse racing before the internet was invented - is the one that stops sports betting.

It's not hard to connect the dots. If you can get Nevada to move to call it gambling, other states always follow Nevada. When, or if, those states call DFS gambling, DFS could run afoul of the 45 states governed by PASPA. In an ideal world for the casino companies and state-run casinos, you have no more DFS in 45 states, and a watered down version in a few others.

The 50 plus million who enjoy fantasy in some form on the web? No one cares about them, don't kid yourself. Maybe they'll play slots instead.

I like Adam's Smith's quote above. But even he probably didn't foresee something like this because the world is different today. What on paper sounds good, and what sounds well meaning from well meaning people - 'regulation of DFS' - is gullible. This, to me, is about money, power and the quashing of competitors. It was never about anything else.

Horse racing has gone through this before - racing is allowed in fewer states than DFS is, despite being totally "legal" and accepted - and lives with it today. If you were an ADW, or someone who wants to see horse racing grow by expanding offerings like exchange wagering, fixed odds, or expanding reach through new advertising avenues, you are "sol" as the kidz say. The gambling market is moving forward from the demand side like it always has, yes, and the entrepreneurs willing to serve that market are doing just that, but those who want to control the market through the supply side are more powerful than ever.

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