A Few Good Men: Telling The Truth About FSTA
Can you handle the TRUTH? I don’t post this as President, Fantasy Alarm or founding board member of FSTA, but as a veteran of almost three decades working on fantasy sports since PRODIGY in 1989. So, today’s truth is about the role that the FSTA plays in the legislative process.
“I want the truth” said Lieutenant Kaffee. The angry Colonel yelled, “You can’t handle the truth!”
Yep. Classic, iconic lines from a great movie.
A Few Good Men is not the story of the angry Colonel or a lawyer trying to get out of his father’s shadow. It is the story of Private Santiago who is given a “Code Red”, a term for a hazing designed to get soldiers "in line." Unfortunately, the hazing goes bad and the Private dies.
The two Marines who were ordered to perform the code red had no intention of killing the lowly Private. Lieutenant Kaffee (Tom Cruise) takes the case and challenges the system, a powerful Colonel (Jack Nicholson) and the United States government attorney (Kevin Bacon) to try and save the two Marines.
So why use this movie for this subject matter? Well, we are currently in a situation where many believe that a “code red” was called by the big DFS companies and that two brave marines are carrying out their orders using the government (FSTA) as cover.
"I strenuously object?" Is that how it works? Hm? "Objection." "Overruled." "Oh, no, no, no. No, I STRENUOUSLY object." "Oh. Well, if you strenuously object then I should take some time to reconsider." - Lt. Weinberg
I “strenuously object”. I know that only the truly paranoid survive, but the notion that the FSTA is simply working for FanDuel and DraftKings is simply not true. The optics are difficult to get past, but the big DFS companies want nothing more than to save their companies that run skill-based contests from being wrongly criminalized as gambling.
UGH, I promised the TRUTH. To get to it, we have to understand the FSTA better.
For those who do not know, the FSTA is a non-profit, all volunteer organization to raise awareness for fantasy sports. I am a current board member including being Chairman of the Membership committee. Membership dues are currently $750 per year and $400 to renew. They have 310 member companies, so you can do the math. The FSTA has attempted to raise money from its membership to fund self-regulation and was unsuccessful. So understandably, the FSTA is not funding the entire lobbying effort. The FSTA is using the funds it has and volunteering its time to work around the clock with legislators, as well as FanDuel and DraftKings to educate and make a difference in the state legislatures around the country. Specifically, Peter Schoenke & Stacie Stern volunteer a ton of their time for no pay to push the agenda of the FSTA side-by-side with FanDuel and DraftKings.
On March 7, a law was passed in Virginia that did one thing that was good and one that was VERY bad. First, it clarified the legality of fantasy sports. Second, it included a $50,000 fee for each operator to do business in the state.
Obviously, this will cause almost EVERY fantasy company to have to exit Virginia, hurting small business, small operators and even big operators as even ESPN exited the paid fantasy sports space not long after the bill passed the house.
FanDuel and Draft Kings responded fairly similarly. Here is the FanDuel quote from Cory Fox:
“Governor McAuliffe and members of the Virginia legislature took a thoughtful, deliberative approach to establishing a law that safeguards fantasy sports while installing consumer protections. Virginia showed real leadership in being the first state to pass smart regulations this year and we hope to see more states follow Virginia’s lead in the months ahead.”
Many in the industry were obviously upset and believed that this signified that the two big DFS companies only wanted to create a Duopoly. Again, I strenuously object. I have heard the public hearings. I have seen them in action. It is simply not true.
Many also believed that the FSTA should have stood strong against the bill when it passed and asked for a line item veto to remove the flat fee and have one that was based on the number of users. To this, I couldn’t agree more. The FSTA having its own voice is critical at this time.
Now to the harsh truth. Fantasy Sports and the FSTA have become very political. There are a lot of voices on the board who represent a lot of companies instead of representing the industry as they were elected to do. The board is made up of many different interests and simply does not always agree which, in turn, makes them decide to be silent.
Blasting a bill or a law is a double-edged sword. On the one hand, support for the law and future bills will continue the incredible momentum that the industry has in clarifying the skill-based contests as legal in many states. On the other hand, what good is that if EVERY fantasy company will be forced to exit states with onerous fees like Virginia while we can educate them on how to ammend the laws to create an environment of safety, competition and innovation.
An example, I spoke to a daily fantasy sports operator with tens of thousands of paying players. They told me that they have less than 500 players in Virginia who have generated an average of $3300 per year for the company. So no flat fee would work and they are a top 10 daily fantasy sports company.
So let me be 100% clear about my opinion. The FSTA should NEVER support any law that kills small business, small operators, spurns innovation and halts investment into the space even if it pushes forward the agenda of legal clarity in a state. As a policy, it should adopt this with, of course, the caveat that if states have filing fees similar to the DMV of like $100-$500. Most companies can handle a small fee as the cost of doing business and the regulations that have been written into law, but onerous fees cannot be swallowed by any size operators and should be opposed on principle by the FSTA.
So, then this happens. An article hits my local paper. The article says that the New York State Senate has language in the budget for state regulation of daily fantasy sports. The language in the budget sending the message that they plan to clarify the legality of daily fantasy sports. This bill (S 6793) is only in committee but has an onerous $500,000 regulatory fee for each operator in it. Here is a visual status of the bill so you can see how far it has to go before it is a law.
"I'm gonna rip the eyes out of your head and puke into your dead skull, you messed with the wrong marine!" - Colonel Nathan R. Jessup
Well, maybe the reaction from members wasn’t that sharp, but that was the quote from the movie. We all need to educate lawmakers on the skill-based games we love so that they can make sure that they are not wrongly criminalized plus small businesses, innovation and investment are kept intact.
The FSTA has always listened and a board of 18 people decide what actions are taken. Those board members were elected by the membership for that purpose. When this organization was founded, no one represented their companies, they represented the industry. Part of growing up is recognizing that the organization and fantasy sports in general is political. When money comes in, politics come in. It happened the first time in 1999 when Yahoo! came in and then all the leagues and networks wanted a piece of fantasy sports. We had to fight for it. We had to educate, discuss and compromise. We had to be about the industry first. People and companies have agendas and they will do what they have to so that they can meet them. As long as we recognize that and act accordingly, we can handle the changes and the politics. The members of the association need to elect people who will be “industry first”. It is incredibly difficult to get consensus with 18 board members with different views of a fast changing industry.
“A house divided amongst itself can never stand” - Lincoln
The one thing that I am 100% sure of is that we all need to stay together. A decade ago, the FSTA made that mistake and the CBC vs MLBAM lawsuit caused the Player’s Associations, Leagues, their broadcast partners and their licensees to have to leave the FSTA and start a sister organization called the FSA (Fantasy Sports Association). The two organizations shared some members like NBC Sports/Rotoworld that I represented at the time. When the dispute was resolved, both organizations had done well for the industry. So, we need to stay together. Don’t be afraid to have different agendas, wants or needs and fight for them, but stay together as a whole as we will all be much better off.
"We use words like honor, code, loyalty. We use these words as the backbone of a life spent defending something. You use them as a punchline." - Colonel Nathan R. Jessup
The words I use as a backbone of a life spent defending something are truth, courage, dignity, respect and hard work. Let’s continue the fight together.
Next Friday, I will discuss the truth concerning companies and people taking advantage of the explosion in fantasy by labelling fantasy sports as gambling or disguising gambling and calling it fantasy sports.