The latest in a long list of tech companies to face challenges from the legal system are DraftKings and FanDuel, both online fantasy sports sites. Both are the target of a combined 40 class action suits, as well as cease and desist orders filed by New York State Attorney General Eric Schneiderman which charges that the sites are gambling. Both companies claim their games are skill based and therefore aren’t gambling.
If, as the AG contends, these companies facilitate gambling, regardless of whether it’s in person or online, then federal laws are applicable. Both companies have been around for a while – DraftKings started in 2011, FanDuel in 2009 – but they’ve recently had large ad campaigns that have brought them to a larger audience and more legal attention.
Some in the tech industry think this is less a legal matter and more about innovators versus established companies, disrupters against embedded interests. And the digital economy’s disruption of regulations that were written before the Web ruled our lives has meant some legal tussles – think of Uber – that have yet to be concluded. Can tech disrupters and legislation just be…friends?
“Legislative cycles around the world are clearly out of sync with the rapid pace of digital innovation and related business model disruptions,” writes World Economic Forum founder Klaus Schwab.
Part of the answer to that problem could come from a new program from Cornell University. Charles K. Whitehead is the director of Cornell University’s new Law, Technology, and Entrepreneurship program, a joint venture between Cornell Law School and Cornell Tech. The program, which was just announced and will begin in 2016, is a one-year program for practicing lawyers and recently graduated JDs and will focus on the interception of law and entrepreneurship. The idea is to give lawyers practicing in the area of innovation the tools to bridge the regulatory divide.
Whitehead says he divides today’s business world into businesses that are tech-focused and work within the gray areas of the law, and those that have created new business models that are innovative and often fall outside the ambiguities of regulation (an example of the latter being Airbnb) and which couldn’t exist without technology.
But how to work with existing regulations without impeding innovation? By having an understanding of both the business and innovator’s intent, along with the regulatory environment, he says, and helping to shape the business so that it can operate within at least the spirit of the law.
“The idea is to enhance the creative process rather than worry about moving forward quickly and then have a legislator slow everything down.”
There’s a gap between regulators and innovators because regulators often don’t understand the technology or the industry. Innovators, having experienced or witnessed regulators and legislators negatively react to new technology, are hesitant to engage at all. Not great long-term thinking, says Whitehead.
“The view is sometimes it’s better for me to not interact with them. Better for me to do what I’m doing and wait for them to catch up. That works well in short term, but I don’t think it’s a great medium- or longer-term strategy. If you understand what’s behind the regulation and you understand how your business model might at least fit within the underlying concerns of regulation, I think you end up with an innovative model that’s going to be more sustainable in the medium to long term.”
The tech lawyer demand
The new Cornell program is the first of its kind, says Whitehead. It will cover relevant areas of law, such as patent, intellectual property, employment law, and investment. The program will also include elective classes focusing on specialized areas, studio work, and the students’ own startup ideas.
There has been plenty of interest from potential students, lawyers, and prospective clients who want lawyers who already know how to work with innovators and entrepreneurs.
“They’ve all told us there’s a need for this,” says Whitehead. “There’s a real demand for lawyers who can span this gap, who can act as part of a team with technologists and business people but also carry the law side of things.”