Law Tech Uncategorized

Ticketing industry, daily fantasy sites prove lack of regulation leads to government intervention

Politicians are focusing on sports to make a splash by condemning unregulated markets.

Well, almost exactly like when daily fantasy sites were warned they could have an issue on their hands, the ticketing industry didn’t listen or think it had obvious problems. Now, much like the DFS companies that kept chugging along with little regard to public sentiment, the ticketing world could be facing its biggest challenge yet — government intervention.

New York Attorney General Eric Schneiderman, the same person who led the charge against DraftKings and FanDuel, has the ticketing industry in his sites. As he put it, trying to buy tickets for any big event is a “fixed game” in which normal consumers can’t win. There are myriad reasons, which Fields of Green expert contributor Tony Knopp covered here and here. The Fields of Green even warned of oncoming government intervention in a piece on the StubHub/Kobe Bryant’s last game fiasco earlier this month. The options were clear: self-regulate and provide stronger protections for consumers or face government intervention, lawsuits and regulations that can grind innovation to halt. The entire sports world needs to take notice, especially as new venture capital companies focusing on sports seem to be popping up left and right.

No one needs to be told that sports matter in this country — a lot. Outside of politics and religion, nothing galvanizes large groups of Americans quite like professional sports. It is one of the most important things with which we identify ourselves. The entire region of New England went on a crusade for its quarterback this year. Seahawks fans are looking to ban Cam Newton from playing in their stadium. People spend an inordinate amount of time and money on sports. When something goes wrong there aren’t many places fans can complain. But if something goes wrong for enough people, that is when federal and state governments step in, and that is where the ticketing industry is now.

 Credit: Allan Henry-USA TODAY Sports
Credit: Allan Henry-USA TODAY Sports

The sports world has operated with little to no regulation from outside actors for a long time. Deals were done on handshakes. Some people still consider the world of sports business a little Wild West-like. Try something (shoot) first, ask questions later. That just isn’t possible anymore. Anything that affects the fan and generates enough controversy will come under scrutiny.

It also is a huge PR win for any politician who gets involved. Arlen Spector generated more publicity by calling for the Patriots and NFL to be investigated during Spygate than legislation he helped put through. Mayors lose their jobs if they refuse to budge on backing public stadiums and teams move out of town. The Attorney General of New York is no different. He probably didn’t get much national media coverage when discussing fake IRS scam phone calls, but he has been front page on DFS and ticketing. Sports are an easy target, and the lack of regulation they have enjoyed is coming closer to an end.

This is bad and good for the sports industry. The bad part is that regulation could limit innovation. New companies could be scared to enter the market and have their business practices constantly scrutinized. The good part is maybe those businesses take the extra steps to ensure that they protect the consumer. Maybe their business strategy involves working with fans instead of scraping up all the cash they possibly can without considering the customer. If the past few months are an example, the sports world may be victim of more government oversight, and that really only benefits the politicians involved.

Michael Colangelo is Managing Editor of The Fields of Green and Assistant Director at the USC Sports Business Institute.

Follow @MikeColange or @fog_sports on Twitter and like our Fields of Green Facebook page for updates

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