For-profit fantasy sports have taken a huge leap forward in the last year or so, with ads for daily/weekly fantasy competitions blanketing the airwaves. Earlier this month, a scandal erupted over employees of two of the sites using insider information to get an advantage over other players. Although largely not regulated as gambling (based on the skill/luck distinction), Nevada has stepped in to characterize these fantasy competitions as gambling and thereby require the websites to get a gambling license (or shut down). Other states seem likely to follow with additional regulation.
In the wake of this legal and media scrutiny, the industry has created a new Fantasy Sports Control Agency to begin a system of self-regulation. The press release lists four parts to the system. They are (quoting the release):
- Standards: Develop a system of standards for the fantasy sports industry founded on transparency, integrity and ethical behavior.
- Company Controls, Processes, and Leadership: Every FSTA member company will be expected to respond to the FSCA’s standards by establishing a system of controls and processes to ensure compliance. In addition, every member company will be expected to appoint a senior leader reporting to top executives and overseeing compliance efforts.
- Auditing Policies and Procedures: Implementation of a sound, regular auditing process to measure and report on company compliance.
- Enforcement: Establishment of a system that provides incentives and public recognition for compliance with FSCA guidelines and penalties for failure to comply.
Heading up the FSCA will be Seth Harris, former Acting Secretary of Labor and Deputy Secretary of Labor in the Obama Administration. Prior to his service to DoL, Harris was a professor at New York Law School and a beloved member of the labor & employment law academy. On his new position, he said that "[t]he reason that the FSTA established an independent authority and asked me to lead this organization is to ensure that it’s not a sham, that it’s not a fake, that it’s not just a publicity stunt." You can hear Seth being interviewed by his brother (KTRS host Paul Harris) about his new position here.
The creation of the FSCA and the hiring of Seth are smart moves by the nascent industry. Regulations will be coming at the state and possibly federal level, and the industry should get out in front of them and hope to blunt their force with a credible effort to self-police. For new industries, especially those along the "vice" spectrum, regulation can actually help prevent a market for lemons and can facilitate greater consumer participation. But prohibition can't! They key is finding the regulatory sweet spot that prevents attention-grabbing abuses but allows the industry to grow. The creation of this new agency demonstrates a recognition by the fantasy sports industry that there is likely "no freedom without regulation."
Another college football scandal, another round of calls for the NCAA to get tough on schools.
Why can’t we just admit that the NCAA is doomed to perpetual failure? Enforcing amateurism in big revenue sports is just a price control on the labor of college-age athletes. Price controls succeed mainly in creating black markets. Although, if they are effectively enforced, price controls can reduce supply.
But does the NCAA really want to reduce supply? Does it really want to enforce its rules? Miami won’t be treated like SMU and have its football program shut down because that would hurt television revenue.
There are really three explanations for why the NCAA seeks to enforce price controls:
1. It sincerely believes that doing so will encourage schools to provide the students who are generating the billions of dollars in revenue to NCAA schools with an education. (This focuses only on the supply side of education and ignores the demand side. It also is only lightly tethered to reality.).
2. It wants to prevent rising labor prices for student athletes from eating into the revenue to schools.
3. It needs to protect the “amateur” brand that it thinks creates such strong demand for its product.
If this last assumption is true, it leads to a perverse result: demand for amateurism threatens to undermine that amateurism. As a result, the NCAA would have to do just enough enforcement to maintain a perception of amateurism.
Likely some combination of all three of the above explanations accounts for the continuing NCAA game: being “shocked, shocked” to find that college athletes are getting paid under the table and then imposing some penalties on schools, but not enough to actually hurt the egg-laying goose.
So let’s be frank. Division 1 football and basketball is about gobs and gobs of money. If universities would like to engage in a little less hypocrisy and actually serve the interests of its money-generating athletes, isn’t it time to actually test the premise of reason number three above? Is amateurism really essential to rabid demand for college football and basketball? Let’s pay college athletes a market rate for bringing in revenue to their schools. Better yet, let’s have schools sponsor professional athletic teams.
It's been a productive and fun first week here in Berlin. I've never seen such sports mania as the World Cup fever here. Good luck trying to buy milk for a two-year old when Germany is playing -- all the grocery stores shutter. The only places open are those serving food and drink. Indeed, almost every street side cafe and restaurant has a television and a gathered crowd outside for practically every game. Even the auto parts store beneath our apartment has transformed itself into a temporary World Cup cafe, attempting to realize synergies among the German passions for autos, bier, kaffee/kuchen, and fussball.
There are, however, a few bones to pick:
1. Vuvuzelas: I hate those damn things. How can a country with as rich as musical culture as South Africa have invented something that blends the worst tonal aspects of a traffic jam and a mosquito colony? Please let this not become a social contagion. But, based on the number of these infernal devices here in Berlin, I fear the worst. Can't fans just bang drums?
2. Honking car horns after a victory: It was charming when the Slovenians and Ghanaians in the neighborhood did it, but memo to Germans honking their horns last night: Ok, so your team looked really good, but a) you beat up a nation whose principal sport is surfing, and b) it's only the first round.
I know every list should have three items, but that is all I can think of to complain about right now. Which is saying something for me.
A consortium of scientists from across the nation released a study shortly after midnight last night that seems to answer once and for all whether men and women are genetically slanted toward science or the arts. The lead author of the study, Dr. Unum Aprilis, explained that scientists tracked students at 1200 high schools for ten years to determine what caused women to go into sciences at lower rates than men. The culprit: lab tables.
The study effectively isolated a chemical substance released in female brains when female subjects attempted to process information while seated with three other classmates at a rectangular table. This chemical substance then slowed down brain wave activity for the entire time that the subject was seated at the table. The study showed that women who thrived in science classes and went on to claim that discipline as their own attended high schools that did not have lab table arrangements. These schools had hybrid rooms with desks and individual lab stations.
As the scientists became intrigued, they expanded their probe. Amazingly, they found that when male students are asked to "put our desks in a circle," the same chemical substance is released, slowing down male brain waves. Correspondingly, male students who were asked in English classes to sit in a circle formation showed frustration with the subject and switched their attention to other classes.
Interestingly, this study was held up because of strong lobbying from the dominant maker of lab tables in the U.S.