Texas Rejects Daily Fantasy Sports Bill by State Rep Richard Raymond
The Texas State Legislature this week rejected a bill which would have legalized daily fantasy sports. The bill was sponsored by State Rep. Richard Raymond, a Democrat from Laredo, who said he would file another DFS bill during the 2019 legislative session — the next time the bill can be considered.
According to the Dallas Morning News, the legislation would have legalized, regulated, licensed, and taxed daily fantasy sports companies like DraftKings and FanDuel. Christian Conservative groups opposed the bill, which would have reversed a unilateral 2016 decision by Texas Attorney General Ken Paxton to ban daily fantasy sports sites.
Ken Paxton Banned Daily Fantasy Sports in Texas
At the time he declared the bank, AG Paxton stated that fantasy sports companies would need to pass a constitutional amendment to legalize their business in Texas. That led Robert Kohler, a lobbyist for the Christian Life Commission of the Baptist General Convetion, to scoff at the idea such legislation might ever have passed.
Mr. Kohler said, “They tried to fly a bill straight into an attorney general’s opinion.”
In several other US states, including New York and Tennessee, the state attorney general banned daily fantasy sports, only to have the legislature pass regulations to legalize the activity. In those states, the attorney general’s opinion where not so much an impediment to the lawmakers, but a spur to action. Still, Mr. Kohler knows Texas well, because the odds of DFS bill passing were never very great.
How Traditional Fantasy Sports Works
Even Tom Landry said that football is like a religion in Texas. As a native Texan, this writer knows fantasy football owners in the state view their hobby with similar fervor. DFS gaming does not have the same tradition, but it does have a firm foundation to build upon.
Daily fantasy sports is an online game which is an outgrowth of traditional fantasy sports. Both allow for a person, called the fantasy team owner, to build a lineup of players from a real life sport. These individual players are chosen from all the franchises that sport’s league. For instance, fantasy football usually picks from the full range of NFL teams, while fantasy baseball picks from Major League Baseball teams.
As these individual football or baseball players accumulate statistics, a scoring system is used to convert those statistics into fantasy points. All the players in a team owner’s starting lineup are tallied for a total score, which is pitted against one or more opponent’s teams.
In traditional fantasy sports, the competition last a full year or season. A fantasy sports league is made up of a group of friends, family, neighbors, or coworkers who gather for a fantasy draft. The players drafted remain on a roster for a full year, or sometimes (in dynasty leagues) for multiple seasons.
A schedule of head-to-head battles occur, culminating in a playoff bracket and title game. Money is pooled to start the season and the top team or teams receive prize money. It is gambling, but considered time-consuming and relatively harmless, so legal authorities seldom punish seasonal fantasy sports gambling.
How Daily Fantasy Sports Works
Daily fantasy sports works in a different way. Instead of setting up a team for a season-long competion, players engage in one-day fantasy contests. The same process is done, though all teams in the same contest can draft the same players. A salary cap is used, so team owners have to use resource allocation to pick the best combination of players.
Once again, the owner’s lineup is pitted against one or more other competitors. Contestants can join head-to-head, small group, or big tournament competitions. Players pay a fee to enter, then receive payouts if they have the best lineup that day. DFS sites like DraftKings and FanDuel organize, schedule, and tally such contests, then take a 10% fee for doing so. Using the player-versus-player model, DFS sites became billion-dollar companies (barely).
Why DFS Exists and Is Legal
While the federal government bans sports betting in most US states, a carveout in the 2006 Unlawful Internet Gambling Enforcement Act (UIGEA) allowed for fantasy sports to be played. At the time, between 30 million and 50 million Americans played fantasy sports each year, so the US Congress decided such small-time gambling was not only harmless, but popular. Daily fantasy sports did not exist. Instead, the exemption in the UIGEA is what spawned the DFS companies, who used the loophole to build a business model.
Those against sports betting openly wonder why daily fantasy sports is legal at the federal level, because it has similar dynamics to sports betting. Unlike seasonal fantasy sports, the contests play out quickly and money changes hands in a day’s time, allowing for problem gaming habits to form. DFS sites and their lobbyists argue that fantasy sports is a game of skill between two players and not a bet weighted against the house (which always has the advantage), and thus it is not really gambling.
Texas Rejects Daily Fantasy Sports
The Texas Attorney General and the Texas State Legislature do not see it that way. Texas’s leaders are against most forms of gambling, except the state lottery which swells the coffers of the Austin government and horse racing, which supports the equestrian and horse training culture of Texas’s elite citizens.
Ironically, Ken Paxton, the Attorney General who unilaterally banned DFS in the state, is himself charged with crimes that would have driven him out of office in most states. Every state-level position in the Texas government is held by a Republican — and has for most of the century — so the Texas GOP has no reason to fear ethics backlash. Thus, Ken Paxton was free to ban the hobbies of Texas residents.
