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Fantasy sports scandal exposes threat to integrity of sport

October 22, 2015 By Jodi Balsam, Brooklyn Law School Professor For Brooklyn Daily Eagle
Brooklyn Law School Professor Jodi Balsam. Photo courtesy of Brooklyn Law School
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The sports and business worlds have been scandalized by recent allegations of “insider trading” in daily fantasy sports. Employees of DraftKings and FanDuel, competitors in the daily fantasy industry, reportedly were allowed to play for money at their competitor’s website and profited by exploiting inside information. One DraftKings employee won $350,000 playing a FanDuel contest allegedly using his company’s data to inform his lineup choices. To date, the few dozen DraftKings employees that its CEO admits have been playing on FanDuel have won more than $6 million in prizes.

The scandal invites closer scrutiny of the daily fantasy sports juggernaut and its threat to the integrity of professional sports. By erasing the distinction between gambling and fantasy — with many major sports entities profiting, these companies undermine the principles and values of athletic competition in the same way sports wagering does. Consider the list of investors in fantasy sports sites, including most of the pro leagues (NBA, NHL, MLB, MLS and individual NFL owners Bob Kraft and Jerry Jones) and the biggest sports networks (ESPN, NBC Sports, Fox Sports).  More ominous is that the NFL Players Association just struck a deal with DraftKings to earn fees from the company’s use of player images in its ads. On the other hand, the NCAA has explicitly denounced fantasy sports as a form of gambling and bans college players from participating at the risk of losing a year of athletic eligibility. 

As the fantasy sports market has exploded, the professional leagues have made some clumsy efforts to insulate themselves from ethical and legal risks. The NBA and MLB prohibit their players and other employees from participating in any fantasy games in their sport that offer cash prizes. The NFL allows fantasy football participation as long as the prize doesn’t exceed $250. But this type of self-regulation invites accusations of hypocrisy: it’s difficult to stake out a position against an enterprise you invest in, profit from and encourage your fans to engage with. In countries with legalized sports gambling, bribery and corruption are a blight. The International Centre for Sport Security counts 37 match-fixing scandals in gambling-permissive Europe in the last three years and calls these cases “the tip of the iceberg.” The big business of online fantasy sports poses the same risk in the U.S. The millions of dollars at stake and the increasingly sophisticated algorithms informing player line-ups invite creativity in attempts to influence the underlying sports contests. Peter King of Sports Illustrated has reported on “the undue pressure some players and coaches feel from big-money fantasy-football players.” 

Former NFL Commissioner Paul Tagliabue has warned of the risk of allowing sports contests to represent a “fast buck” or “quick fix.” The continued overwhelming popularity of professional sports has been rooted in enduring values such as the capacity for extraordinary individual athletic performances, teamwork, self-discipline, sportsmanship and respect for common rules and fair play. Sports leagues squander this legacy when they pursue short-term profit from ancillary businesses that threaten the legitimacy of the game. It is time for the leagues to step back and re-evaluate their participation in daily fantasy sports and to self-regulate — or risk that Congress will do that for them.

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Jodi S. Balsam is associate professor of clinical law and director of Civil Externship Programs. Her scholarly and teaching interests include sports law, professional responsibility, civil procedure and judicial administration. She was previously a faculty member at New York Law School, where she taught legal practice, sports law, and the Judicial Externship Seminar, and at New York University School of Law, where she taught in the Lawyering Program.

Professor Balsam also designed and taught an innovative class in sports contracts and negotiation at NYU’s Sports Business Graduate Degree Program. Before joining academia, Professor Balsam was the National Football League’s Counsel for Operations and Litigation, where she managed litigation in all areas of law, oversaw a variety of policy and operational matters, negotiated contracts for League special events and administered the League’s internal dispute resolution processes and compliance program. She began her practice career as a litigation attorney with Simpson Thacher & Bartlett LLP, representing a wide range of clients in antitrust matters and complex litigation.


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