THE SANTA CLARA
October 15, 2015
In the past several years, daily fantasy sports leagues have exploded into a multi-billion dollar industry. This emergence, however, may be close to an end as an insider trading scandal involving two such companies, DraftKings and FanDuel, has recently come to light. Employees of these companies have been raking in massive winnings and are accused of using insider information to take advantage of customers. The scandal provides yet another reason why all forms of sports gambling should be legalized. If the government could tax this activity, the need for private, corrupt money-handlers would end, and the government would see tremendous profits.
The current federal law on sports gambling is interpreted through the Professional and Amateur Sports Protection Act of 1992. Excluded from the Act is Pari-mutuel betting, which is used for horse racing like the Kentucky Derby. Due to the complicated formulation of odds based on previous ordered finishes, it can only be implement for races where competitors finish in a ranked order.
So why are websites like DraftKings and FanDuel legal while it is a federal offense to partake in almost all forms of sports gambling? According to DraftKings’ website, “Daily fantasy sports is a skill game and is not considered gambling.” If you think that this seems like a loophole, you are not alone.
Forbes estimates that the fantasy sports industry is worth $70 billion, and the NFL controls about 75 percent of it. This is a rough approximation, since many fantasy players handle money exchanges in person rather than online. If the NFL and other major sports leagues in the country were able to control all transactions with a federal tax, government profits would be astronomical.
In addition to traditional fantasy games, fans should be able to go through the NFL to bet on specific games like the Super Bowl. If the federal government placed a small tax on all kinds of sports gambling or betting, let’s say two percent, participants would hardly notice. However, based on this $70 billion figure, the government could collect around $1.5 billion. DraftKings keeps as much as 12.5 percent (compared to my proposed two percent tax) of the money that comes through it as its “service fee.”
I support entrepreneurship and I definitely respect these companies’ creators, but I don’t think a private company should be able to take that large of a cut. If these participation fees instead went to the federal level, the money could go towards something like financing public school sports.
Why is the federal government overlooking such a booming industry? Although gambling may not be especially moral, Americans love to do it. There is no reason why people shouldn’t be allowed to put money on the players of their choice, beating their friends’ favorite team and see their country profit as a result.
Bo Kendall is a first-year communication major.