Daily Fantasy Sports Regulation? NBA Commissioner Adam Silver Calls For Federal Oversight Of Industry

NBA Commissioner Adam Silver expressed support Wednesday for federal regulation of the daily fantasy-sports industry, becoming the first top executive of one of the four major sports leagues in the U.S. to take a definitive stance on the issue. Silver’s comments came as federal and state officials mull over whether companies such as DraftKings and FanDuel can legally operate under current federal guidelines for online gambling.

The daily fantasy-sports industry has operated mostly free of oversight since 2006, when a federal statute excluded fantasy sports from national limits on other forms of online gambling. Companies such as DraftKings and FanDuel argue their contests are legal because they are games of skill, not games of chance.

But the industry has dealt with an unprecedented level of scrutiny since Oct. 5, when the New York Times reported Ethan Haskell, a midlevel employee of DraftKings, accidentally leaked inside information about the composition of fantasy lineups. Days later, Haskell won $350,000 in a FanDuel NFL contest. Although there’s no evidence that Haskell made illegal use of the inside information, the scandal sparked an FBI investigation, a U.S. Justice Department inquiry and multiple state probes into the internal practices and protections against consumer fraud at leading daily fantasy operators.

“There should be a regulatory framework; there should be increased transparency for consumers,” Silver told ESPN’s “Outside The Line” in an interview. “I think it would ultimately aid the industry. In fact, I think we’re seeing that marketplace impacted, because there’s not a clear regulatory framework right now.”

Both privately owned, DraftKings and FanDuel are each valued at more than $1 billion. The NHL and Major League Baseball (MLB) are among the daily fantasy-sports industry’s top supporters, despite the leagues’ public stance against traditional sports gambling. MLB has twice invested in DraftKings and owns an equity stake in the company, with MLB, Major League Soccer and the NHL all contributed money to the firm’s $300 million investment round in July. Meanwhile, the NBA has a four-year partnership deal with FanDuel that includes an equity stake.

Silver said the NBA’s equity stake in FanDuel is smaller than 10 percent and denied that an NBA official sits on the company’s board of directors, ESPN reported. Despite his support of regulating the daily fantasy-sports industry, Silver said he does not consider the contests to constitute a form of gambling.

The NBA is “not considering withdrawing or backing off our relationship with the industry,” Silver said. “It’s something that we’re monitoring very closely. And it’s something that we’re deeply engaged in on the broader subject of daily fantasy-slash-sports betting.”

Last November, Silver became the first commissioner of a major sports league to express public support for the legalization of traditional sports betting, provided the industry would be subject to heavy federal regulation and oversight. Silver’s stance was seen as a major departure from the league’s previous zero-tolerance policy toward gambling.