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Volume 26 No. 5
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Florida Grand Jury Convened To Investigate Daily Fantasy Sports' Legality

Ft. Lauderdale-based gaming and sports law attorney Daniel Wallach said that a federal grand jury "has been convened in Florida to investigate whether daily fantasy sports operators have violated criminal law," according to Michael McCann of SI.com. The grand jury is "supposedly" looking into whether DFS operators violated the Illegal Gambling Business Act. For an industry that is "already under intense fire, a grand jury proceeding would be a most unwanted development." For DFS companies, there "is the worrisome possibility of a self-fulfilling prophecy." Consumers "might become less interested in playing DFS games if they fear the industry is in peril." In turn, consumers "would spend less money on DFS games, thereby putting the industry in peril" (SI.com, 10/9). In Connecticut, Alexander Soule notes U.S. Sen. Richard Blumenthal (D-Conn.) today "formally called for a federal investigation into any deceptive or fraudulent practices" at DFS companies (STAMFORDADVOCATE.com, 10/12).

CALL TO ACTION: In Tampa, Jeremy Wallace reported fantasy sports companies and their national trade association "have begun ramping up a political profile in Florida, hiring big-name lobbyists and handing out large campaign donations to key state legislators as they aim to protect their lucrative industry from regulatory scrutiny." Lawmakers "are examining all forms of gaming in light of the state's expiring gambling compact with the Seminole Tribe of Florida." FanDuel and DraftKings in August "combined to hire 10 lobbyists to advocate on their behalf in Tallahassee." Among the hires "are well-known veteran lobbyists Brian Ballard and J.M. 'Mac' Stipanovich" (TAMPA BAY TIMES, 10/10).

FANTASY WHIRL: The WALL STREET JOURNAL's Beilfuss & Terlep reported Yahoo and the NHL "have barred employees from playing in paid fantasy-sports contests, moves that come amid questions over whether workers at big fantasy-sports companies have access to inside data." Yahoo on Friday said that employees "are no longer permitted to play paid, daily contests on any site." Yahoo workers "already were banned from playing on the company’s site." The NHL, which is an investor in DraftKings as well as an exclusive partner, on Friday said that employees "are banned from playing this season" (WALL STREET JOURNAL, 10/10). Meanwhile NBA Exec VP/Communications Michael Bass in a letter responding to a N.Y. Times editorial last week wrote, "Bringing sports betting into the mainstream would not undermine the integrity of sports." U.S. Rep. Frank Pallone Jr. (D-N.J.), who last month expressed a desire to look into the relationship between sports leagues and the DFS industry, also wrote to the Times, adding, "The legal ambiguity, lack of oversight and systematic hypocrisy make this issue ripe for congressional review" (N.Y. TIMES, 10/12).

ADS BY SUBTRACTION: In N.Y., Claire Atkinson cited iSpot.tv data as showing that last Thursday, two days after the scandal broke involving a DraftKings employee winning a significant sum of money on FanDuel, "the pair spent almost" $3M on national TV ads. That is "on par with the week before, when they ponied up" a combined $3.7M. The two "have yet to take an advertising timeout and are still throwing millions at a weak TV market that is desperate for the dollars." An anonymous ad-sales exec said, "The big challenge is they are very deep in the ad sales marketplace. They are covering up a lot of things wrong with the (TV) marketplace, with beer and auto categories off and a ton of money moving to digital, it’s a panacea for a lot of people." The companies "have been splashing around so much cash that scores of media outlets, ranging from Sports Illustrated to CNBC, had to place disclaimers on their online stories to highlight their investor/sponsor relationships." Still, the ads "aren’t succeeding in putting a good spin on the scandal." Social data firm Wayin said that there "has been a steep decline in positive sentiment on social media." Before the scandal, 82% of tweets about DraftKings "were positive." That figure fell to 55% "after the allegations surfaced on Oct. 5." Likewise, "positive tweets about FanDuel fell" to 46% from 75% (N.Y. POST, 10/10).

MONEY MIRAGE: In Boston, Ben Volin wrote fans need to "be honest -- the NFL has found a way to monetize daily fantasy football through major partnerships with DraftKings and FanDuel, while the sports books and casinos don’t provide any value to the league." Volin: "The NFL and the other major sports leagues should accept reality and embrace sports gambling, a movement that NBA commissioner Adam Silver is championing. It would also end the current charade in the NFL, which is bending over backward to pretend that daily fantasy sports isn’t gambling, even though it clearly is" (BOSTON GLOBE, 10/11). In N.Y., Bob Raissman wrote watching fantasy analysts "won't be the same on Sunday." Raissman: "Sorry, but until further notice, all fantasy-related experts, through no fault of their own, are tainted by this DraftKings/FanDuel scandal, which centers on the alleged use of inside information." When it comes to their fantasy gurus, networks "might want to clear the air by having them publicly answer questions like: How much direct contact do they have with employees or executives from DraftKings or FanDuel? Do they participate in the 'game,' investing their own money? Where do they get their information from?" (N.Y. DAILY NEWS, 10/11).

DRAFTKINGS FOR A DAY: A SACRAMENTO BEE editorial stated the newspaper "would prefer if DraftKings, FanDuel and their ilk didn’t exist at all," but it is "not going anywhere." So it "must be regulated." The editorial: "We'd also prefer national legislation" (SACRAMENTO BEE, 10/11). In N.Y., Drape & Williams write under the header, "In Fantasy Sports, Signs of Insiders' Edge." Some are raising doubts "about the clubby, cozy connections between the two companies at the head of the booming, unregulated, multibillion-dollar daily fantasy industry." Drape & Williams cite records and interviews as indicating that there is a "long-held pattern of overlapping interests and close relationships among employees at the companies -- many of whom regularly rank among the most consistent big winners -- and in some cases investors." DraftKings Analytics Manager Andre Bessette "is currently ranked No. 40 and won a $50,000 first prize in a FanDuel contest." RotoGrinders data shows that FanDuel employee Matthew Boccio "is among the highest-ranked of all fantasy players" (N.Y. TIMES, 10/12).