End Run to Paydirt

drinkdraft_crop_exactWe ran into the president of the New Jersey State Senate, Steve Sweeney, at a local event a couple of years ago and asked him if NJ had a plan to revive the collapsing fortunes of its rapidly imploding gambling mecca in Atlantic City. Sweeney had a two-word reply for us (no, it wasn’t a Jersey-style epithet):

“Sports gambling.”

The NJ Senate president told us the Garden State intended to put down a high-stakes bet that legalized wagering on professional sports could revive the AC casino industry, big-time. Sweeney estimated that sports betting could bring in at least $2 billion annually in new revenue to Atlantic City.

Unfortunately, a 2-1 ruling by a federal appeals court last month told NJ that its dream of a tsunami of sports wagering revenue will have to remain a fantasy. The court ruled that NJ’s plan for sports betting is a violation of the federal Professional and Amateur Sports Protection Act (PASPA). PASPA, enacted in 1992 and ironically authored by a U.S. senator from New Jersey (Sen. Bill Bradley, the former NBA great), prohibits sports betting outside of Las Vegas. Horse racing is the only exception to this ironclad rule.

But that’s not where the irony ends in this story, because there’s another profound reality unfolding—one that’s based entirely on “fantasy”—that appears poised to turn the judges’ literal reading of Bradley’s explicit law into a work of fiction in the real world. Thanks to a cyberspace-sized loophole in federal laws governing gambling on the Internet, online betting on sports now is an exploding growth sector from coast to coast, generating millions of dollars for a variety of powerful business interests—including the owners of some of the most successful professional sports franchises.

That’s right, we’re talking about so-called fantasy leagues, those online pools that let you “draft” real professional athletes onto your fantasy teams. The real statistics generated by these real athletes in real games are then applied to fantasy league teams to generate fantasy league standings and determine which fantasy participants (read bettors) win real money. We’re not talking about the goofy stuff you hand out in Monopoly games; these are real pieces of paper from the U.S. Treasury with pictures of real dead presidents printed on them, which may be deposited into real bank accounts and need to be reported to the real Internal Revenue Service in order to avoid spending a few years in a real prison cell in a real federal prison.

When Congress banned most of the online poker parlors a few years ago, an exception was made for fantasy sports leagues, which at the time seemed to be nothing more than a juvenile hobby embraced by socially inept twenty-something males still living in their parents’ basement.

Remember that hopeless geek you grew up with who showed up at your 25th high-school reunion in an S-Class Mercedes wearing a $3,000 Rolex watch? According to a report in today’s The New York Times, the two most successful fantasy leagues—DraftKings.com and FanDuel.com—currently are each valued at more than $1 billion. These two premier fantasy leagues spent more than $27 million for at least 8,000 TV commercials airing during the first week of the NFL season. DraftKings has wide-ranging sponsorship deals with 12 NFL teams; FanDuel has similar deals with 16 franchises.

The “official” position of the NFL is that the league makes no exceptions to its staunch opposition to all forms of sports gambling. For example, Commissioner Roger Goodell reportedly prohibited Dallas Cowboys quarterback Tony Romo from appearing at a fantasy sports convention in Las Vegas because the gathering was held in a casino.

But, like everything else associated with this subject, the reality behind the NFL’s interaction with fantasy leagues makes the football league’s tough posturing on sports gambling seem like, well, a fantasy. According to the Times report, two of the most powerful owners of NFL franchises—Robert Kraft of the reigning champion New England Patriots and Jerry Jones of the Dallas Cowboys—both have ownership stakes in DraftKings.

Need some more irony? The lone voice in Congress calling for a federal investigation into whether the major fantasy league websites are violating PASPA is a guy from New Jersey, Rep. Frank Pallone, Jr.

Earth to Frank: we’re shocked, shocked that you think gambling is going on via these fantasy league websites that are paying out millions in winnings every week. By all means, investigate. And after you get to the bottom of this, perhaps you can find out whether the moon landings really were staged in a parking lot in L.A.

Frankly (okay, pun intended), we’re a bit surprised to hear this kind of sour-grapes gesture emanating from NJ. If he gives it a bit more thought, perhaps it will occur to Rep. Pallone that the overwhelming success and proliferation of online fantasy league gambling may offer New Jersey the best chance it will ever have to realize its dream of sports betting in Atlantic City. Prohibition on something so inherently popular has never worked. Don’t believe us? Just ask the bootleggers of the Roaring Twenties (including President Kennedy’s dad) or the marijuana growers of present-day Colorado.

It says here that at this point there’s about as much of a chance of Congress closing the loophole that opened the floodgates to online sports betting as there is of Tom Brady showing up in Roger Goodell’s office with an air pump and an apology. Much more likely, the Feds eventually will bow to the inevitable and join the party, expanding the floodgates to access a tidal wave of tax revenue from legalized sports betting; not just online, but everywhere, from sea to shining sea. Our cousins in Great Britain have been able to legally bet on just about anything for decades; the last time we checked, the monarchy was still intact.

Memo to Rep. Pallone: that hole card the fantasy websites have put in front of you is an ace, turning the weak hand NJ was holding into a royal flush—legalized sports betting is coming soon to a casino near you.

Bet on it.