Idaho is latest state to crack down on daily fantasy sports

Companies like DraftKings and FanDuel will still be able to offer free leagues in the state

Editor's Note: Our annual Vator Splash Spring 2016 conference is around the corner on May 12, 2016 at the historic Scottish Rite Center in Oakland. Speakers include Tom Griffiths (CPO & Co-founder, FanDuel), Andy Dunn (Founder & CEO, Bonobos), Nirav Tolia (Founder & CEO, NextDoor), Mitch Kapor (Founder, Kapor Center for Social Impact); Founders of Handy, TubeMogul, VSCO, Vinted; Investors from Khosla Ventures, Javelin Venture Partners, Kapor Capital, Greylock, DFJ, IDG, IVP and more. Join us! REGISTER HERE.

It's been a rough time for the daily fantasy sports space, and especially for its two biggest companies, FanDuel and DraftKings. Ever since a major betting scandal emerged in October, numerous states, most notably New York, have launched investigations into the companies and a number have outright banned them.

The latest state to decide it doesn't want any part of fantasy sports betting is Idaho. The State's Attorney General, Lawrence Wasden, announced on Monday that it has entered into an agreement with both FanDuel and DraftKings to stop offering any paid online fantasy sports leagues, starting at the beginning of this month.

The agreement came after three months of negotiations, and does not ban the companies outright in the state. They are still allowed to offer leagues, as long as users are able to join for free. 

Both companies also agreed to process requests by their users in Idaho to withdraw their account balances "in a timely manner." The companies will also monitor Idaho players based on geoblocking technology or through IP addresses.

To Wasden, what the companies were offering via their paid leagues was the equivalent of gambling.

“Idaho defines gambling, in part, as risking money or other thing of value for gain that is contingent in whole or part upon chance or the outcome of an event, including a sporting event,” he said in a statement.

“My concern is that the daily fantasy sports offerings my office reviewed require participants to risk money for a cash prize contingent upon individual athletes’ collective performances in various future sporting events. As I see it, this falls within Idaho’s definition of gambling.”

When I reached out to FanDuel for comment, the company provided me with a copy of the e-mail that it sent to its users in Idaho, in which it explained the situation, but also vowed to try to reverse the situation, even calling on the users themselves to assist in the fight. 

Here it is in full:

To our Idaho users:

We have some important news to share regarding FanDuel contests for players in Idaho. 

 We believe FanDuel has always operated within the law in Idaho, however, as we continue to evaluate the legal framework, we have decided to suspend our paid operations in the state. As has always been the case, users in Idaho can withdraw their funds at any time. 

We are continually working to clarify the law and look forward to working with legislators to enact consumer protections so that we can bring our paid contests back to Idaho sports fans once again. In the meantime, please show your support by going to www.fantasysportsforall.com/connect/idaho and let your elected officials know how much you enjoy playing fantasy sports. 

 Thank you for your support, 

 FanDuel

“While we disagree with the Attorney General’s conclusions and know that daily fantasy sports players join in our disappointment that we are ceasing operations in Idaho, we look forward to continued and constructive engagement with state legislators," DraftKings said in a statement provided to VatorNews. 

"DraftKings is working with lawmakers across the country to enact fantasy sports legislation, so that our loyal fans can continue to enjoy the games they love."

Fantasy sports around the country

The fallout for the fantasy sports space started late last year, when New York Attorney General Eric Schneiderman launched an investigation into whether the companies committed fraud after a DraftKings employee named Ethan Haskell inadvertently admitted that he had bet on FanDuel using insider information on NFL lineups before they had been publicly posted. He won $350,000 on the site.

He sent letters to both companies, asking both of them for internal data, as well as details, on how they prevent fraud. He also asked for details on any internal investigations that the companies have done into their employees.

Both companies responded by banning their employees from playing in daily fantasy leagues, along with creating advisory boards to help them sort through legal matters.

That was not enough, however, and in his press release announcing that he was seeking an injunction to stop the two website from operating in the state altogether, Schneiderman said that both FanDuel and DraftKings were “plainly illegal” and “nothing more than a rebranding of sports betting." 

A judge banned them in December, but that decision was suspended the same day. Both companies ceased operating in the state in March.

Other states have followed suit, and 15 of them currently some type of legislation to regulate, or ban, fantasy sports, including California, Florida, Michigan, New Jersey, Pennsylvania and South Carolina. 

Fantasy sports has been challenged, most notably in New York, in 11 states, and there are also five states that have banned it completely: Arizona, Iowa, Louisiana, Montana and Washington. 

There are only six states that allow fantasy sports: Indiana, Kansas, Maryland, Massachusetts (where it is heavily regulated), Rhode Island and Virginia. There are also five states that have banned it: Arizona, Iowa, Louisiana, Montana and Washington. 

The fantasy sports space is in a very precarious place right now, and these issues are sure to come up when Tom Griffiths, CPO & Co-founder of FanDuel, sits down with Paul Martino, Partner at Bullpen Capital at Vator Splash Spring on May 12. 

(Image source: huffingtonpost.com)