VERONIQUE DE RUGY: Big Gambling is trying to rig the sports betting market

It’s been shown time and time again that businesses are no friends of free marketers. Upstart businesspeople might mouth the rhetoric of competition when they’re the ones trying to kick down the doors of an industry, but as soon as they become established, they seek to exploit government regulation to limit competition.

Consider the examples of DraftKings and FanDuel. Over a decade ago, they were fighting entrenched casinos and regulations that insulated their brick-and-mortar casinos from competition. They built their brands, despite significant political and regulatory resistance, in the relatively new product space of daily fantasy sports (DFS), a market today valued at $24 billion.

The sports betting market is even larger at $83 billion today. So, in 2src18 when the Supreme Court overturned a restrictive law called PASPA that prohibited sports betting across the nation except in a handful of grandfathered states, DraftKings and FanDuel jumped in and five years later are among the biggest sportsbooks in the country.

They fought entrenched interests and won. But that was then, and this is now.

In the past, the two sportsbooks just wanted a chance to compete. Now, they have become what they fought and have joined with others within the gambling industry in turning to government to shield themselves from newer competitors.

The DFS space has continued to evolve even as the two companies that so popularized the market have expanded into the more lucrative sports betting, though while still offering their original DFS games. New entrants into the DFS market have innovated to capture market share from the big dogs, and they’re not happy about it.

The lobbying arm of these sports betting companies, the Sports Betting Alliance, want lawmakers to regulate their competitors out of existence. According to leaked e-mails, An SBA lobbyist contacted the Wyoming Gaming Commission early last year to get certain platforms barred from the state. A few months later, the state sent cease-and-desist letters to multiple betting companies that compete with the gambling giants.

Of course, DraftKings and FanDuel were not among those unlucky companies. They are conveniently arguing that their competitors’ (and only their competitors’) fantasy games are games of chance, not games of skill, and thus must cease and desist operations as they do not have the correct licensing requirements. In addition to Wyoming, similar restrictions were imposed last year in other states such as Michigan and New York.

The point of contention involves what types of games should be allowed under regulations for fantasy sports, and what blurs the lines or requires treatment as sports betting, where regulations are more extensive and compliance costs are higher, and thereby giving the big incumbents an upper hand.

But the details of the varying arguments are largely beside the point. It shouldn’t be necessary for lobbyists to spend millions in hopes of convincing various bureaucrats across the nation to categorize their products in a way that allows them to do business, nor incentives for others to fight to keep them out. Complexity is a subsidy to those with the deepest pockets.

Rolling back government restrictions and unleashing the market has allowed DraftKings and FanDuel to thrive. If they had any principles, they’d still push to open the markets yet further and reduce expensive compliance regimes. Instead, they’ve proven yet more fickle allies to the free market cause, and are now the crony capitalists they once fought seeking to exploit government regulation to protect their market positions.

Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.