A congressional hearing to examine the daily fantasy sports industry will take place next month before the House Subcommittee on Commerce, Manufacturing, and Trade.
The report was first made by ESPN citing an unnamed source, but a House Energy and Commerce Committee spokeswoman quickly confirmed that the hearing will be held May 11.
The hearing was requested in September by Representative Frank Pallone, D-N.J., after the industry launched a massive advertising blitz at the start of the NFL season.
Lawmakers will consider the legal status of the games, which have gained popularity in recent years, as well as other types of online betting. That will include examining the need for consumer protections, according to the spokeswoman.
They will also consider the federal government’s role in regulating daily fantasy sports, and the actions that states have taken regarding daily fantasy sites.
The DFS industry has been fighting a state-by-state battle for legitimacy in more than 30 states.
Several states are considering bills to legalize and regulate the industry, but at least nine state attorneys general have also ruled that DFS sites are illegal in their respective states.
Two states—Virginia and Indiana—have passed bills legalizing and regulating the industry.
While gaming regulators in Nevada and other states continue wrangling with legalizing daily fantasy sports, MGM Resorts International CEO Jim Murren says it’s a reality in need of regulation.
“To permit DFS enthusiasts to participate in this exciting pastime, we would like to see it be clearly legal in all jurisdictions in the United States,” Murren recently wrote in a letter to the Nevada Gaming Policy Commission.
Murren says it’s counter-productive to debate whether or not daily fantasy sports is gambling.
“What is important is that there be clarity regarding the legality of this issue and that there be appropriate consumer protections and regulation,” Murren wrote.
Murren said daily fantasy sports is not a threat to MGM Resorts International, and all major professional sports organizations have embraced it as a good way of promoting their sports and generating greater fan interest.
Murren addressed the gaming commission during its recent meeting in Las Vegas, which was attended by Nevada Governor Brian Sandoval, who is a Gaming Policy Committee member.
While MGM would like to see daily fantasy sports legalized, Murren says different groups of people see varying obstacles, as well as opportunities, which is slowing down the regulatory process.
And in another development, Las Vegas-based CG Technology has sued DFS giants FanDuel and DraftKings saying the two sites have violated at least seven of their technology patents.
CG Technology, formerly known as Cantor Gaming claim the companies have ignored cease and desist letters and efforts to negotiate a settlement.
According to Nevada Courthouse News, the patents at issue transmit identification code and game control signals to a processor, enabling firms to identify players and approve them; allow the fantasy sites to monitor games, track results, generate user pay records, and provide other information.
The company is seeking an injunction, damages for patent violations and increased damages for willful infringement.
In Other States
In Maryland, the state’s House failed to vote on two different DFS bills passed by its Senate before its legislative session ended for the year, casting into doubt the industry’s status in the state.
That led to state Senate President Mike Miller to call on the state’s attorney general to take legal action against the fantasy sports industry.
One of the bills would have set a public referendum on DFS sites in the state. The second bill would have banned them if voters voted against legalizing the games.
The DFS industry had lobbied against the bills, but now the issue is on hold until at least 2017.
The industry presumably felt DFS was legal in Maryland under a 2012 law, but Maryland Attorney General Brian Frosh issued an advisory opinion that the law “should have been subject to voter referendum because it is an expansion of commercial gaming in Maryland.”
Miller told the Washington Post that he believes Frosh can move to ban the sites in the state. Frosh, however, is under no obligation to move and the issue, at least in Maryland, is unclear.
In Tennessee, a state House of Representatives committee advanced a bill to regulate the DFS industry. The bill would tax DFs companies and formally legalize the games in the state.
Tennessee’s Attorney General Herbert Slatery has issued a non-binding opinion that fantasy sports are “illegal gambling,” in the state as the state Legislature considers the bill.
In Iowa, a bill to regulate DFS sites was approved by a state Senate committee. The bill, and a companion bill in the state’s House, would legalize fantasy sports and provide state regulation, fee structures and consumer protections. The games would be overseen by the Iowa Racing and Gaming Commission.
In Alabama, a group of Birmingham lawyers sued DFS websites, stating they constituted illegal gambling. A few months later, state Attorney General Luther Strange issued cease-and-desist letters to DraftKings and FanDuel ordering them to stop “offering paid daily fantasy sports contests in Alabama” by May 1, 2016. “The results of paid daily fantasy sports contests depend to a large degree on chance. This is the very definition of gambling under Alabama law,” Strange stated.
Lew Garrison, one of the attorneys involved in the lawsuit, said, “We’re happy to see Attorney General Strange has come along some six months later and agreed with us. When the DraftKings and FanDuel were starting to get popular, and I would see it on ESPN every Sunday, it would just make me sick because it was just so much about gambling and just picking fantasy leagues as opposed to watching the games on TV. And then we studied it a little bit more and then we realized, this is just plain old gambling.” Garrison added, “There is a remedy for people who have unwittingly paid to play this game and lost money as a result. And that’s what we said back in November in this lawsuit, and now the attorney general has agreed.”
The lawyers’ case has been moved to Boston, where a judge will hear 20-plus other similar lawsuits. If the Alabama class action succeeds, every person in Alabama who paid to play daily fantasy sports in the state could be recompensated.
In Colorado, a House committee has begun reviewing a bill that would create a new Office of Fantasy Sports that would charge DFS sites a yet-to-be-determined fee and require them to install safeguards including making sure players are at least age 18 and banning employees and their relatives from competing in the games. In addition, fantasy jackpot companies also would have to be audited and required to keep fantasy contest player money and operational funds in separate accounts.
Bill sponsor state Rep. Crisanta Duran said, “This is an effort to make sure that we have regulations in place that show Coloradans they have a fair shot to win in some of those games.” Supporters said the bill would indicate Colorado considers fantasy sports games of skill, not chance, meaning they are not illegal gambling.
Co-sponsor state Rep. Cole Wist said, “Contestants in these games essentially play the role of a general manager. A lot of time and effort and skill goes into selecting these rosters.” DraftKings Manager of Government Affairs Derek Hein said, “What it’s doing is allowing fantasy-sports contests that are predominantly skill.” The Denver Broncos, with the support of DraftKings, sent a letter in support of the new regulation.
Governor John Hickenlooper, who’s ambivalent about DFS, stated, “I am generally a smaller-government person. I don’t think we need to continually look at more bureaucracy.”
But state Rep. Alec Garnett questioned the legislation, stating, “If a player has a complaint about whether or not the play was fair, what would be the process for them to bring forth that complaint, and how would the state of Colorado move forward with enforcement?”
The 2006 Unlawful Internet Gambling Enforcement Act did not include DFS, but at least six states have declared it a form of illegal gambling. Some others, including Maryland and Kansas, have allowed DFS betting. Currently about 27 states are considering some sort of regulations or taxes on fantasy sports jackpots, Wist said. He noted about 800,000 Coloradans participate in the games, which mostly are free, according to a nonpartisan analysis prepared for state lawmakers, which did not estimate how many people pay to play. Wist told lawmakers to act fast because “in a sports-crazy place like Colorado, the demand is only going to be going up.”
