Fantasy sports embrace fantasy of self-regulation

October 29, 2015

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

Fantasy is as fantasy does. The embattled $4 billion U.S. industry of imaginary sports-team ownership is hastily assembling a governing authority to keep watch over itself just as its two biggest firms, DraftKings and FanDuel, find themselves in the crosshairs. It’s a belated effort to ward off outside oversight. Self-policing organizations, however, often have more bark than bite.

The Fantasy Sports Trade Association, founded in 1998, said on Wednesday it was setting up standards for its 300 member companies under the somewhat laughably bannered Fantasy Sports Control Agency. It tapped Seth Harris, who served briefly as the U.S. Labor Secretary under President Barack Obama, to lead the nascent watchdog. He has no ties to sports leagues, many of which are backers of the sites, or to fantasy sports organizations.

The industry is already under intense scrutiny because of the questionable actions of a DraftKings employee caught playing and winning on rival FanDuel using sensitive data. Fantasy sports even reached the race for the White House. Republican presidential candidate Jeb Bush, while boasting of his undefeated fantasy football record so far this season, called for greater regulation of the industry, comparing it to day trading, during Wednesday night’s debate.

Self-oversight is a tricky proposition and there are numerous examples of failure. The newspaper industry’s official watchdog, whose board consisted of publishers, missed a slew of dailies overstating their circulations. Food, mining and financial companies have failed to regulate themselves properly around the world. Even a seemingly independent agency can be captured, as happened with the U.S. Office of Thrift Supervision, which depended on funding from the member banks it was meant to oversee. Bernie Madoff, of all people, served as vice chairman of the predecessor agency to the self-governing Financial Industry Regulatory Authority.

Fantasy sports, which treads a fine line between gambling and game of skill, waited too long to take regulation seriously. FanDuel Chief Executive Nigel Eccles said on Thursday that the new agency is a good step but doesn’t go far enough. He told the Wall Street Journal he thinks states should keep watch over his business. Such local regulators, however, can be more susceptible to the influence of campaign donations than at the federal level. Even so, it’s telling that even Eccles can’t buy into the fantasy of self-regulation.

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Here’s an alternative position on these embattled small businesses . . . http://www.fantasygolfreport.com/2015/10  /defending-draftkings.html

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