Daily fantasy sports companies seek 'gambling' approval abroad

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Sunday, November 15, 2015

BOSTON -- Top daily fantasy sports companies are fiercely rejecting the idea that their rapidly growing industry should be considered gambling in the United States.

But FanDuel and DraftKings are OK with that label in the United Kingdom. They're embracing it as a step toward global expansion.

U.K. gambling regulators granted a gambling license to DraftKings in August, while FanDuel applied earlier this month for a license as a "gambling software" company.

Jeffrey Haas, chief international officer for DraftKings, maintains there's no contradiction. DraftKings is simply approaching each jurisdiction case by case, he said.

"Our product is a game of skill. In order to be successful, you need to apply your skill in order to have the best lineups to go into our contests to win," Haas said. "Nevertheless, our games of skill are looked at differently by regulators in different jurisdictions around the world."

But with the gambling debate heating up at home, some in the fantasy sports industry say the international moves put the two companies in an increasingly untenable position.

"It's pretty naive to go get gambling licenses in the U.K. and expect people to believe you're not gambling," said Shergul Arshad, founder of Mondogoal, a U.K.-based daily fantasy sports startup focused on professional soccer that would likely compete with DraftKings and FanDuel.

"You can't come to a state that bans you and say it's not gambling and then have a U.K. gaming license," he said. "It's hypocrisy."

Haas said DraftKings plans to offer its familiar range of NFL, NBA, Major League Baseball and NHL contests in the U.K. but with a special emphasis on professional soccer, including the English Premier League, North America's Major League Soccer and Europe's Champions League.

DraftKings and FanDuel say they support developing U.S. regulations for their industry, which grew out of traditional, season-long fantasy sports games played by millions of Americans. They just don't want regulations as restrictive as those imposed on casino gambling.

Many U.S. states use a chance versus skill argument to help define gambling. In daily fantasy sports, players compete for cash prizes online by assembling teams of individual athletes to rack up "fantasy" points based on how those athletes perform in real-world games.

New York Attorney General Eric Schneiderman is the latest to challenge daily fantasy, declaring the contests amount to illegal sports betting in his state. He ordered DraftKings and FanDuel to stop accepting in-state bets. DraftKings and FanDuel promptly asked the state Supreme Court to nullify the order and declare the games legal.

The international push for daily fantasy sports has been in the cards long before the latest scrutiny in the United States.

Haas said DraftKings will have all the required gambling protections called for in U.K. law, including age verification of gamblers and "self-exclusion" technology that allows those who are addicted to gambling to voluntarily block themselves from contests.

"We're on track," said Haas, who is based in London. "We want to be the biggest and best daily fantasy sports operator in the world."

The expansion is a risk for the companies, which still aren't profitable despite millions in investor funds.

Unlike in the United States, where sports betting is legal only in a handful of states, daily fantasy sports will have to compete with a well-established, lucrative sports betting industry internationally, industry watchers note.

And the furor at home is already forcing a financial retrenchment of sorts by the companies, which may siphon energy and resources from global expansion efforts, they say.

FanDuel declined to discuss the company's international plans, stressing its U.K. application is the first step in a lengthy review. But Haas argues the increased scrutiny at home makes international expansion all the more critical to DraftKings' outlook.

"In the U.K., we have an opportunity to work in a perfectly clear regulatory environment where we understand what the rules are, the tax rates are and the sustainability of the business will be," he said. "And as we look to expand internationally, it's an opportunity to expand the footprint of the business in a very different way."

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