September 21, 2005
Information Markets, Fantasy Sports, and Gambling
Posted by Christine Hurt

Tyler Cowen reports that a new information market, ProTrade, is appearing that allows participants to buy shares in individual sports players, not just teams.  Initially, participants will be given play money, but the site plans to eventually charge a fee, keep fees in escrow, and distribute 97-98% in prizes.  I would suggest charging an "administration fee" and offering stated, non-fluctuating prize amounts, similar to other fantasy sports sites.  Or, get a no-action letter from the SEC like the Iowa Electronic Markets.  In time, the distinction between illegal sports gambling and recreational fantasy sports and information markets is going to get blurrier and blurrier.  I hope so -- then the federal government may have to make a decision as to what is legal and what is not, and back that up with a consistent policy statement.

Another interesting, but related question, is whether professional athletes will be able to participate.  Although professional athletes in most sports are not allowed to bet on their sport, leagues have turned a blind eye to fantasy sports.

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ยป ProTrade update from The Electric Commentary ...
"I figured that they had probably copied a futures market model and that they would be OK under US la ..." [more] (Tracked on September 21, 2005 @ 11:06)
Comments (4)

1. Posted by Mike Madison on September 21, 2005 @ 9:15 | Permalink

Are the relevant players' associations on board with this? The sports leagues themselves? The intellectual property complications here are impressive, if rights haven't been cleared.


2. Posted by Christine on September 21, 2005 @ 9:28 | Permalink

Well, I can't get the site to work now (I guess our millions of readers swamped their server), but note on the home page there are no NFL logos, no team logos, no nothing. When I clicked on "players" this morning, there were just typed names of athletes with no logos or colors. Can the site be in trouble for mere listing of names, stats, without those kinds of marks? Interesting note -- good thing we have an IP person this week!


3. Posted by Joshua Wright on September 21, 2005 @ 12:06 | Permalink

Christine: I would also very much like to see the government make a consistent policy stand with respect to the legality of information markets, gambling, fantasy sports, etc.

Mike: I remember watching something on ESPN's "Outside the Lines" on the NFL and MLB wanting to assert their respective IP rights in terms of collecting licensing fees for the use of the statistics and names themselves. I would love to hear more about the legal consequences of this. I do think FF would lose *some* of its allure if participants in these operations had to draft "Falcons QB #7" instead of Mike Vick.


4. Posted by Mike Madison on September 21, 2005 @ 19:05 | Permalink

I don't follow IP-in-sports as such, but here are some issues that would have to get untangled -- setting aside trademark questions, which seem not to be in play here.

Professor athletes, like other celebrities, have rights of publicity in their likenesses (voice, appearance, etc.). If they're part of a league (NFL, MLB, NBA, among others), the standard player contract will speak to rights the player assigns to the league, and rights the player reserves. Also, if there is a collective bargaining agreement in place, the players may have assigned or licensed at least some of their reserved rights to the players' association. Finally, the leagues themselves have common law rights to prevent unfair competition, including (but not limited to) narrow rights to prevent "misappropriation" of their investments in running the leagues. Distinct but related contractual issues would apply to tournament sports, like golf, tennis, and bowling.

Ah, but what about the fact that here, "mere" data is involved, rather than sound or image? Now we're on unsettled ground. A handful of cases recognize forms of state law IP protection in data about athletic performances, though not, to my knowledge, in circumstances like these. It's not clear whether the statistics would derive from player performances and therefore emanate from the publicity right, or whether they would derive from the competition organized by the league, and therefore emanate from the league's right to prevent unfair competition. In either case, there is an obvious potential conflict with copyright law ("no federal IP in facts"), which has generally been resolved, so far, in favor of the vitality of at least narrow state law claims.

The niceties of the law aside, however, I'm pretty confident that both the leagues and the players' associations would *think* that they have entitlements here, and that both would move to protect them fairly aggressively, if they haven't already.

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