It’s become a state-by-state battle for daily fantasy sports as the industry last week scored a win in New York, got some good news in Florida and made its case against strict regulations in Massachusetts.
In New York, a state appeals court ruled that the two largest DFS operators—FanDuel and DraftKings—could continue to operate in the state while an attempt to have the sites shut down by the state Attorney General’s Office plays out in court.
New York Attorney General Eric Schneiderman has ruled that the sites violate New York’s gaming laws and is seeking to have them shut down and pay restitution to players who have lost money at the sites. So far the action only names DraftKings and FanDuel.
A New York Court ruled preliminarily in favor of Schneiderman’s action and that the sites should cease operating in the state, but the sites obtained a stay form the state appeals court and have been able to continue operating. That stay was extended by this latest appeals court ruling.
A hearing on Schneiderman’s case before Judge Manual Mendez in New York Supreme Court is scheduled for May, according to ESPN.
After the ruling, Schneiderman said he will continue to push for the sites being shut down as quickly as possible.
“Having already obtained a preliminary injunction against these companies, we look forward to demonstrating to the appellate division that the trial judge was correct,” the attorney general’s office said in a statement. “DraftKings and FanDuel are indeed operating illegal gambling operations in New York and should be permanently barred from doing business in New York.”
The two sites applauded the decision.
“We are grateful for the legions of New York fantasy sports players that the permanent stay entered today ensures they can continue to participate in our games here as the case progresses,” FanDuel said in a statement. “We are confident that fantasy sports have always operated lawfully in New York, but we do believe that new, common-sense regulations to protect consumers and reflect the evolution and growth of the game are needed. The New York legislature, like many states around the country, is working towards such regulation, and we will work with them to achieve it.”
The sites also continue to maintain that daily fantasy sports are not gambling.
“As our litigation continues, we expect an appellate court to see what we have known since the outset: DFS is a game of knowledge and skill, one that builds community and whose competitive spirit has become important to the lives of millions of people,” David Boies, counsel to DraftKings, said in a statement. “Our ongoing appeal will make clear that daily fantasy contests require just as much skill as season-long contests, which the Attorney General recognizes as perfectly legal under state law.”
Massachusetts Hearing
Meanwhile, lawyers for DraftKings and FanDuel made many of the same arguments at a public hearing in Boston on proposed consumer protections proposed by Massachusetts Attorney General Maura Healey.
Healey was one of the first state attorneys general to weigh in on daily fantasy sports saying they were legal in the state, but also said the state needed to impose consumer protection regulations on the sites.
However, attorneys for the two sites objected to some of her proposed regulations, including one that players under 21 be barred from playing.
“At 18 years old, you’re old enough to vote in this country and make adult decisions,” Peter Schoenke, chairman of the industry’s Fantasy Sports Trade Association, said at the public hearing according to the Boston Globe.
Most of Healey’s proposed regulations are designed to protect casual players of the sites, which are often dominated by expert players.
For example, fantasy sports companies would also have to disclose in advertisements they run in Massachusetts how much money the average player wins or loses and they could not run ads aimed at minors and on college campuses under the regulations according to the Globe.
industry representatives said several of Healey’s proposed regulations were too burdensome or restrictive, including a broad ban on software sophisticated players use to automatically generate and submit hundreds of lineups at one time in pursuit of bigger payoffs, the Globe reported. .
“These are tough regulations that will have a significant effect on the industry and will be costly and complicated to implement,” Griffin Finan, a lawyer for DraftKings said. “However, some of the proposed regulations are redundant and unnecessary.”
Finan, for example called a proposal limiting a user’s play in a daily fantasy sports league “unnecessarily low.”
“The fact that DraftKings has in place a deposit limit, and regulations that give consumers the ability to set their own deposit limits, should be sufficient,” he said. “Consumers are in the best position to set their own limits based on their financial position.”
Finan said as many as 50 DraftKings employees are already working to implement the changes proposed by Healey.
The company also objected to a ban on contests involving college sports and other provisions including a prohibition against multiple simultaneous logins by players under a single account.
There was also concerns raised that the regulations would unnecessarily apply to companies that offer “free” season-long fantasy contests. While some sites that offer traditional fantasy sports have begun offering daily fantasy sports as well, Schoenke said the definition of a daily fantasy operator is too broad under the regulations and could hurt the traditional games.
In traditional games, groups of friend form their own leagues. While they pay a fee for using the fantasy service and software, any betting is done among the players. In daily fantasy sports, players pay an entry fee to participate in a contest that awards cash prizes.
Still, opponents of daily fantasy sports said they felt the regulations did not go far enough to protect minors and problem gamblers. Some anti-gambling groups—such as the Stop Predatory Gambling—have criticized Healey for not seeking to shut down the sites, according to reports.
Healey is taking comments from the public and industry until Jan. 22. Her office plans to finalize its decision on the regulations within the next few months, according to the Globe.
“Our focus is on finalizing these strong regulations that will bring needed transparency to this industry and protect consumers, minors, and their families,” Healey said in a statement after the hearing.
Also, the Massachusetts Gaming Commission released a report last week recommending state lawmakers clarify the legal issues surrounding the industry. The commission also said it is ready to oversee the industry in the state.
“Our agency stands ready to accept that role, and stands equally ready to work with another or a new agency that the Legislature may consider appropriate,” commission Chairman Stephen Crosby said in a blog post.
Florida DFS Bill
A bill in the Florida Legislature that would legalize daily fantasy sports advanced through a Florida House committee, but reportedly picked up some strong opposition in the process.
The bill—introduced by state rep. Matt Gaetz–passed the House Business and Professions Subcommittee. The bill would requires companies that offer both season-long and daily fantasy sports games to 750 or more people per year to pay $500,000 to register with the Florida Department of Agriculture and Consumer Services. It would also require them to bar minors and employees of fantasy sports operators from participating in games they offer, according to the Florida Herald/Times.
Gaetz said his bill “creates a permissive and yet regulated environment to ensure Floridians can participate in fantasy contests.”
Other gambling operators in Florida, however, opposed the move.
“Let’s not kid ourselves,” said Marc Dunbar, a gambling lobbyist who testified against the bill. “This is gambling.”
Dunbar represents the Stronach Group, which runs Gulfstream Park a horse racing track in South Florida.
The bill was also amended to allow that 7.5 percent of fees paid to the state by fantasy sports companies would go to gambling addiction counseling services.
The bill still faces another House committee hearing and a companion bill in the Florida Senate has not yet gone to committee.
Nebraska Bill
In Nebraska, state Senator Tyson Larson has introduced a measure that would clarify the legal status of fantasy sports contests as games of skill and set up a regulatory framework to make sure the state’s estimated 300,000 players can continue to play. “With fantasy sports, there never is that element of chance because from the very beginning, you’re picking every one of your players and you’re picking them based on the knowledge and research you’ve done,” Larson said. He stated, as games of skill, daily fantasy sports companies DraftKings and FanDuel already are legal under the Nebraska constitution. Both companies have hired lobbyists in Nebraska.
Larson stated fantasy sports should not be “caught up in some anti-gambling rhetoric. It shouldn’t be up to a few, very few number of elected officials that want their morality imposed on everybody else to determine whether or not this is an acceptable form of entertainment.”
Taylor Gage, a spokesman for Governor Pete Ricketts, noted the governor served 10 years as a board member for the anti-gambling group Gambling With the Good Life and said he usually does not comment on proposals early in the legislative process. However, Gage commented, Ricketts opposes expanded gambling in Nebraska. State Senator Beau McCoy also opposes expanded gambling but said he doesn’t know whether fantasy sports would fall under Nebraska’s definition of gambling. “That’s an interesting issue,” McCoy said.
Pat Loontjer, director of Gambling With the Good Life, noted fantasy sports are not a game of skill because players cannot predict who will get injured or play well on a certain day. “Any expanded gambling is going to hurt families. There’s usually a few people who get rich, and a lot of people who get poor. We’re better than that in Nebraska. We’re the good life, not the gambling life.”
Nebraska attorney general’s office spokeswoman Suzanne Gage said they are following litigation in New York, where the attorney general sued DraftKings and FanDuel to retrieve profits the companies made there. DraftKings can no longer operate in six states, including Iowa, where a bill has been introduced to allow players to claim prizes. A spokesman for DraftKings said the company supports state legislatures that are committed to allowing players to “continue enjoying the games they love.”
Legislative Bill 619, also introduced by Larson, would define poker as a game of skill, allowing the state to sell poker permits to bars and nonprofit groups that want to host tournaments and cash games. The bill, a carry-over from last year, will be among the first considered on the floor.
Other Developments
In Wisconsin, state Representative Tyler Vorpagel said he will introduce legislation to legalize daily fantasy sports in the state. The bill is still in draft form and no details were released.
The Wisconsin constitution presently allows only raffles, bingo halls, the state lottery and tribal casinos.
Tribal parties in the state are also showing an interest in DFS according to a report on yogonet.com. The Forest County Potawatomi notified the Government Accountability Board of its interest in online fantasy sports, according to the website, but a spokesman for the tribe declined to comment.
