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Dear Mr. Fantasy

Everyone bets on fantasy sports, but how can casinos profit?

Dear Mr. Fantasy

Despite years of avoidance, the worlds of fantasy sports and casino gambling are on a crash course. The burgeoning fantasy sports industry—projected to reach .7 billion in annual revenues by 2017—has thrived in the good graces of American professional sports leagues, a political distinction that ultimately resulted in an exemption under the Unlawful Internet Gambling Enforcement Act of 2006. The pastime walks like a duck but does not legally fall under the definition of gambling, and the fence erected between gambling and fantasy sports has enabled the latter to survive as a legal form of internet-based entertainment.

Consequently, a marriage that could be lucrative for both industries has until recently been out of the question. For casinos, a mostly internet-based product serving a different consumer base had not been a terribly attractive supplement to land-based gambling. For fantasy sports operations, partnering with casinos—particularly those with sports books—would have been counterproductive to their efforts to avoid at all costs being associated with gambling.

The fence is finally coming down, however, largely due to the gradual arrival of legal, licensed internet gambling in the United States. And if any moment were to signify the materialization of a long-anticipated courtship, it would be the New Jersey Division of Gaming Enforcement’s recently announced seal of approval. The agency on April 22 published regulations establishing standards for casinos to offer fantasy sports tournaments for money. With the implementation of N.J.A.C. 13:69P, New Jersey casino licenses have been expanded to include fantasy sports tournaments to patrons, and the activity “shall not be considered ‘gaming’ or ‘gambling’ as defined by existing state gambling law.” The new regulation also allows New Jersey casinos to contract with third-party entities to offer the tournaments.

More intriguing is the simultaneous momentum for the movement to legalize sports betting outside Nevada. That the door for fantasy sports opened in New Jersey, where the governor is trying to break down federal barriers preventing casinos from operating sports books, is no coincidence.

Bringing fantasy sports to New Jersey bettors, after all, could provide a stepping stone to regulating traditional sports betting in that state. So, ironically, given the bright line always drawn between fantasy sports and traditional sports betting, the legalization and proliferation of the former could stimulate the cultural shift necessary to bring about legalization of the latter.

The progression from adopting fantasy sports to launching traditional sports books would not be unlike legalized internet poker cracking open the door for internet casino gambling. Could the acceptance of fantasy sports be to the legalization of traditional sports betting what the acceptance of internet poker has been to the legalization of other forms of online casino gambling?

The parallels are undeniable. Both activities—poker and fantasy sports—have managed to avoid the gambling classification; both are embraced by the masses as legitimate mainstream entertainment; and both are played with great enthusiasm by those who make the policies.

Poker and fantasy sports also share another trait that led to prolific growth: innovation of product. In the early ’00s the poker industry came to force with the invention of the hole-card camera, enabling TV viewers to better follow Texas hold ‘em, almost instantaneously turning poker into one of America’s most captivating forms of online entertainment.

For fantasy sports—albeit less dramatically—it was the arrival of daily games. Long gone are the days when players who missed drafts had to sit the season out or wait for a mid-season league to open up, and no longer do players need to organize groups of friends and coworkers into leagues.

Customers can come and go as they please without making a long-term commitment or adhering to a schedule, and the variety of games available is virtually limitless. The quick-hit approach is much more suitable to today’s consumer. It is not a new concept, but its successful deployment by the likes of Fanduel and DraftDay in recent years has forever changed the product.

Similarities aside, however, the jump from poker to other casino games has no barrier comparable to the challenge professional and college sports leagues present to sports betting. The leagues’ anti-sports betting lobby played a key role in keeping efforts to prohibit internet gambling in the United States on track, prompting the anti-prohibition movement to abandon its support of regulated online sports betting long before the passage of UIGEA and subsequent state-level initiatives for legalization.

But culture and consumer demand ultimately brought the regulation of internet gambling, and the proliferation of fantasy sports could nudge American consumers in the direction of embracing traditional sports betting. It prompts one to consider, then, whether the arrival of fantasy sports in the gambling community is an end or a means.

This column is written by the producers of iGaming North America, the most comprehensive conference and trade show about the online gaming industry in the region. Mark Balestra is the founder and director of BolaVerde Media Group as well as co-producer of the iGaming North America conference scheduled for March19-21, 2014 at Planet Hollywood in Las Vegas. For more information on iGNA, visit www.igamingnorthamerica.com.

Mark Balestra is the director of publishing for Clarion Gaming. A veteran of 11 years in the online gambling business, Balestra is the editor and co-creator of Interactive Gaming News (www.iGamingNews.com) as well as the editor and co-author of Internet Gambling Report, a legal guide to interactive gambling.

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