Morain: Fantasy sports industry takes aim and shoots itself in foot

For all their fancy lawyers and consultants, the unwise guys running the daily fantasy sports racket are showing themselves to be a sketchy bunch playing at the far edge of legality, if not illegality.

To dress themselves up as legit, the East Coast-based FanDuel and DraftKings hired renowned constitutional lawyer David Boies and former Massachusetts Attorney General Martha Coakley.

To separate sports fans from their money, they are receiving investments and endorsements from the National Basketball Association, Major League Baseball, National Football League team owners, Comcast, ESPN and Google. As the Super Bowl approaches, huge sums will be wagered and lost at DraftKings' and FanDuel's sites.

And yet the industry appears to be running scared.

The Fantasy Sports Trade Association, which includes the main fantasy sports players, is spending tens of thousands of dollars airing radio ads attacking the one California legislator who has had the temerity to state the obvious, that the rapidly expanding billion-dollar business is a gambling operation.

'If Assemblyman Marc Levine wants to vote no on fantasy football, maybe we should be voting no on Marc Levine,' says the ad airing on San Francisco radio stations including sports talk KNBR 680.

The question is, why bother? Levine is a lone voice. On Wednesday, the Assembly approved legislation sought by the fantasy sports businesses on a 62-1 vote, the one being Levine.

The bill, AB 1437 by Assemblyman Adam Gray, D-Merced, seeks to tax the operators and provide some consumer protection for bettors who believe they're going to outsmart the sharks. FanDuel and DraftKings have hired some of the top lobby firms in Sacramento to win passage of the bill, recognizing that there is protection in regulation, even if they must pay taxes.

Gray's bill was such a slam dunk that Republicans, who almost never vote for tax increases, set aside their ideology and embraced the bill.

'The industry has clearly said they want this bill. For that reason alone, we should be embracing this bill,' Assemblyman Frank Bigelow, R-O'Neals, said.

Whatever industry wants, in other words, industry should get.

Speaking of ham-handed, DraftKings gave Gray a $5,000 campaign donation on Jan. 22, the day after the Assembly Appropriations Committee approved Gray's bill on a 15-0 vote, and five days before the full Assembly voted to send the bill to the Senate. There's no connection whatsoever between the $5,000 and the votes, I'm sure.

Back to Levine. The second-term Democrat from San Rafael doesn't have a problem with fantasy sports or betting on games of chance. But he believes daily fantasy sports companies are running an illegal gambling business, and sent a letter to Attorney General Kamala Harris on Nov. 2 urging that she order them to cease operations.

Levine contends that to legalize daily fantasy sports, California voters would need to approve a state constitutional amendment, as they did when they authorized card rooms, the lottery and Indian casinos.

Attorneys general in New York, Illinois and Texas have concluded that daily fantasy sports is illegal gambling. The Nevada gambling control commission reached the same conclusion. Harris, who is running for U.S. Senate, has not said what she thinks.

Whether Levine is right or not, he is doing his job by raising a reasonable question. That's hardly cause for the daily fantasy sports industry to call for his defeat at the polls.

'Voters expect legislators to do their homework and vote their conscience,' Levine said in an interview. 'That is the last thing special interests want to have happen in the Capitol. They want to write our talking points and dictate how we vote. When a legislator votes their conscience, it is a direct threat.'

Using ads to sway legislators isn't new. The oil industry spent almost $11 million on ads last year as lawmakers considered a bill that would have forced reductions in petroleum use.

Public school teachers have used the airwaves to attack legislators and governors who sought to limit public school spending. But the assault on Levine is odd. It's not as if he can block the bill. His theory: Though the ads seemingly target him, the fantasy sports companies in reality are sending a 'warning shot to the attorney general,' telling her to go easy on them, or risk getting whacked as she runs for Barbara Boxer's Senate seat.

It's a reasonable theory, though the daily fantasy sports people wouldn't get on the phone to explain themselves. Another plausible theory is that slick consultants found a way to sting the less-than-wise guys running daily fantasy sports by persuading them to pay for the ads. I like that one. It's always nice when sharks get skinned.

Dan Morain is a columnist for the Sacramento Bee.