The daily fantasy sports industry had a quiet week concerning calls for federal regulation of the sites, but several states—including New Jersey—continued to explore greater regulation of the industry.
In New Jersey, State senator James Whelan, who represents Atlantic City, says he plans to introduce legislation to fully regulate DFS sites and require them to receive state gaming licenses. That would bring the DFS sites under the jurisdiction of the state’s Division of Gaming Enforcement.
The state would join Nevada, where gaming regulators have already ruled that daily fantasy sports is sports betting and the sites must receive Nevada gaming licenses.
Whelan, a former Atlantic City mayor, said he plans to introduce a bill after he holds discussions with the state Division of Gaming Enforcement and the state Casino Control Commission, according to the Associated Press.
A draft version of the bill would have daily fantasy sports operators required to obtain a state gaming licenses and pay a “permit fee” to operate within the state. The sites would also have to maintain their computer servers in Atlantic City and the bill would require players to be 21.
The bill, however, would not define daily fantasy sports as gambling, but rather a game of skill. To avoid a conflict with federal sports betting laws, daily fantasy operators would have to ensure wagering not be based solely on the performance of one athlete or on the score, point spread or performance of one real team or combination of real teams, the AP reported.
It also would allow casinos to partner with fantasy sports providers, accepting entry fees and paying winners. But as part of licensing, DFS providers would have to submit to review of their operations and backgrounds and would be required to obtain permits from the state with fees covering the cost of investigating the companies.
“We have a model of internet gaming that has worked well from an integrity point of view in New Jersey and that piece of the business is slowly growing,” Whelan said in a press statement. “So that’s the starting point for looking at if we were to regulate that, it’s one approach that we would certainly consider. I am open to better other ideas here, and open to, of course, trying to reach a consensus.”
Whelan’s proposal came just a week after New Jersey Governor Chris Christie called regulating fantasy sports “ridiculous” at a Republican presidential debate.
Christie repeated that stance after Whelan’s bill was announced saying government has more important priorities given that terrorists are on the march overseas and financial woes abound in the United States and abroad. He said a fantasy team he manages with one of his sons has a 6-1 record and he doesn’t play for money, according to the AP.
Whelan said he doesn’t believe the government should “impede one’s enjoyment of fantasy sports.”
“However, we have an obligation to ensure that fantasy sports competition is fair, impartial, and transparent to everyone,” he wrote in a letter to David Rebuck, director of the state Division of Gaming Enforcement.
Whelan’s draft bill, however, drew opposition from the NCAA. The bill would allow collegiate players to be included in daily fantasy sports wagering.
“Sports wagering threatens both the integrity of the game and the well-being of student-athletes,” the association said in a press statement given to the AP. “NCAA members have defined sports wagering as putting something at risk—such as an entry fee—with the opportunity to win something in return, which includes fantasy league games.”
Other States Move on DFS
Daily Fantasy sports is also continuing to draw attention in several other states.
In New York, a bill sponsored by state representative Felix Ortiz in the state Assembly would add fantasy sports gaming to the state’s gambling code and would define fantasy sports within that code. The bill would give New York regulators jurisdiction over daily fantasy sports, which could then presumably lead to regulations.
“In light of this exemption and the recent questions raised about the transparency, fairness and security of the fantasy sports companies’ data about their rosters, it is appropriate to put added consumer protections in place by giving the state’s gaming commission regulatory authority over this type of gaming.” Ortiz said in a press statement. “The gaming commission has authority over any form of legal gaming in the state. Adding fantasy sports to that list is both reasonable and justified given existing authority over similar types of gambling and it would help prevent unfair practices in this booming multimillion dollar industry.”
The bill has been referred to the Assembly’s Racing and Wagering Committee.
Ortiz is referring to the recent “insider trading:” scandal that rocked the DFS industry and has led to a spate of investigations and calls for regulation. The scandal involved the two largest DFS sites, DraftKings and Fan Duel and broke after a DraftKings employee inadvertently released site information before week three NFL games were played. It was later disclosed the employee had won $350,000 playing on rival FanDuel that same weekend.
That led to allegations that the site’s employees were using inside information from their own sites to play and win money on competing sites. DraftKings has denied this and said an internal investigation found the employee did not have the information until after he set his roster at FanDuel.
Both sites have since barred their employees from playing on other sites. The industry also announced it will set up an independent board to protect ethics and integrity of the games through a trade association, but that has not cooled the attention the industry has been getting.
Also in New York, Gambling Compliance reported that the state gaming commission is preparing a report on DFS ahead of a meeting to be held later this month.
State Attorney General Eric Schneiderman has also been investigating daily fantasy sports and commented on the investigation to the New York Post.
“They make a lot of representations. They have very aggressive advertising campaigns,” he said. “We’re looking at the representations that were made to the customers. We want to see if all these deals that they’re promising—the odds they’re claiming and the special bonuses and discounts and things like that—are true.”
Legislative proposals to regulate daily fantasy sports have also been made in Illinois, California and Pennsylvania. In Massachusetts, the state gaming commission has also called for regulation of daily fantasy sports after holding public hearings on the industry.
Also in Massachusetts, Michael Sweeney, the executive director of the Massachusetts Lottery, said the lottery is exploring entering the DFS market.
“We believe the introduction of a fantasy sports platform to the Massachusetts Lottery would help embrace the emerging market,” Sweeney said in a press statement.
Sweeney said he looks at daily fantasy sports as competition for the lottery and called it the lottery’s current biggest challenge.
In Nevada, the Associated Press reports that after its ruling on daily fantasy sports, the state’s gaming board is now looking at more traditional season-long fantasy sports and whether providers of those games should also be subject to a state gaming license.
Yahoo, which has long offered the season-long format of fantasy sports, has already pulled out of the state, according to the AP report. While season-long games are usually played among a group of friends, the sites do charge entry fees and sometimes award prizes.
Other Developments
Meanwhile Nevada Senator Harry Reid called daily fantasy sports “unregulated, illegal gambling” in response to an open letter posted by FanDuel CEO Nigel Eccles.
In the letter, Eccles repeated that the DFS industry supports many forms of regulation being proposed.
“It has become apparent to me that our industry has grown to a size where a more formal, industrywide approach is needed,” Eccles said in his posted letter. “To be clear, our industry needs strong, common sense, enforceable consumer protection requirements to ensure its continued growth and success. A number of smart, but tough proposals in various state legislatures have begun to emerge, which I believe can serve as the basis for the sensible regulation of the fantasy sports industry.
“The proposals include requirements for age and location verification, segregation of user funds, protection of user information, safeguards against use of proprietary contest information and requiring third party audits,” he said. “These are steps I have always advocated for – and now is the time to memorialize them in law for FanDuel and the entire industry.”
Reid acknowledged those statements, but said any regulations need to be enforced in his own press statement.
“Without strong oversight, there is nothing stopping these terrible things from happening and we will continue to see more corruption from this unregulated, illegal gambling,” Reid said in his statement.
Eccles also gave an interview to Bloomberg News where he said his site may have overdone its advertising campaign at the start of the NFL season. FanDuel has spent more than $100 million on advertising since August.
“We definitely got creative burnout pretty darn quickly,” he said. “People, when they saw the ad for the 87th time, they thought, ‘I’m sick of this.’”
The industry still seems to be affected by all of the recent controversy as DraftKings and FanDuel saw entry fees fall another 5 percent, marking three straight weekends that play decreased at the site. The numbers come from data compiled by SuperLobby.com.
Total number of entries in the sites’ Week 8 marquee NFL contests fell by 30,000 at DraftKings and by 20,000 at FanDuel. Across all their NFL guaranteed prize pools, DraftKings took in just over $21.5m in entry fees, down from $22.7m in Week 7 and from $25m in Week 5. FanDuel took in $18.3m, down from $19.1m in Week 7 and from $20.6m in Week 5, the research firm said.
In another matter, Washington Redskin’s player Pierre Garcon is suing FanDuel over the use of his name and image. The suit accuses FanDuel of exploiting him and other National Football League players. The suit seeks to include every NFL player to appear on a team roster whose name or likeness has been used by the company since 2013.
FanDuel said the lawsuit is without merit.
“There is established law that fantasy operators may use player names and statistics for fantasy contests,” the company said in an e-mailed statement to Bloomberg News. “FanDuel looks forward to continuing to operate our contests.”
