More states in the U.S. last week considered legalizing daily fantasy sports (DFS).
A North Carolina House committee recently voted 7-4 to reject a bill that would have required fantasy sports operators to register with the secretary of state’s office and meet minimal operating standards. State alcohol law enforcement agents would made sure the requirements were met and fines would have been imposed for violations. The bill’s sponsor, state Rep. Jason Saine, said North Carolina should join the dozen states that allow fantasy sports. He said 1.6 million people in the state already participate in the online contests. His bill, he said, would prevent potential abuses by fantasy sites like FanDuel and DraftKings.
A fantasy sports player, Saine said the games do not meet the state’s definition of gambling, which is operating or betting on “any game of chance” with money, property or anything of value. He said fantasy sports contests are games of skill whose outcomes “are determined by accumulated statistical results and the performance of individuals. This definition clearly separates fantasy sports from gambling activity.”
FantasyDraft.com Chief Executive Officer Stephen Krombolz said, “The bill contains commonsense consumer protections that we’d like to embrace.” His company, based in Cornelius, serves thousands of customers in North Carolina.
However, North Carolina Family Policy Council lobbyist John Rustin said the bill would represent a “massive expansion of legalized gambling.” Currently gambling in the state includes a state-run lottery and casinos operated by the Eastern Band of Cherokee Indians. Rustin added the bill was weak regarding protecting children, and stated, “The elements of chance far outweigh the elements of skill.”
The bill most likely will not be taken up again until 2019. Until then, state law is ambiguous about whether fantasy is considered to be illegal gambling.
While the industry has attracted more participants, more than two-thirds of the companies that existed in April 2016 have shut down, changed their focus or merged with competitors, according to the Fantasy Sports Trade Association.
Vermont Near DFS Legalization
Vermont could become the 12th state to legalize Daily Fantasy Sports (DFS) if the bill under just enacted is signed by Governor Phil Scott. The bill has not yet been transmitted to the governor.
The bill is a direct result of a statement by the state Attorney General William Sorrell last year that DFS violates the state’s gambling laws. If Scott neither vetoes the bill or signs it, S 136 will automatically become law.
The bill creates a regulatory process whereby the attorney general and secretary of state would jointly create rules. It sets a $5,000 licensing fee and would allow the two executives to set taxes. It sets a minimum age of 18 for players.
Mississippi and Arkansas approved DFS bills earlier this year. Texas and Florida considered but didn’t approve such bills.
Massachusetts Near Action
Online fantasy sports sites such as DraftKings and FunDuel are waiting to see what rules an ad hoc commission appointed last year to make recommendations on all online forms of gaming in Massachusetts except the lottery will recommend. Among the options the commission is exploring are fees of $85,000 annually and taxes as high as 12 percent on games.
Last year the legislature passed interim rules governing Daily Fantasy Sports (DFS) that are good until next year. Under the temporary rules, games based on college or amateur sports are banned and players are prevented from spending more than $1,000 a month on the games unless they can demonstrate that they can withstand the losses.
It then empowered a commission whose members include Massachusetts Gaming Commission Chairman Stephen Crosby, Assistant Attorney General Dan Krockmalnic and several lawmakers to make recommendations by this summer. It also includes some members of the industry that would be regulated.
The nine-member commission has met several times since then.
Members of the fledgling DFS industry point to the fact that the number of companies running the games has decreased dramatically under the heat and light of scrutiny in multiple states.
Peter Schoenke, chairman of the Fantasy Sports Trade Association, who also serves on the commission, told the Eagle Tribune he expects the winnowing to continue.
DFS game players create team rosters made up of actual athletes and play their teams, with performance based on the actual performance of the athletes in real world games. The question that faces regulators is whether such games are a form of gambling or games of skill. Different states have taken different approaches to this question.
Schoenke says the DFS industry is going to resist one proposed rule: a 21-year-old limit for participating. He notes that 18-year-olds can vote and serve in the military.
Rep. Jim Kelcourse, another member of the commission, said it is trying to help the new industry grow while protecting consumers. “As with any new industry, there’s a learning curve,” said Kelcourse. “We’ve been gathering a lot of information, listening to experts and hope that in the end we can come up with some recommendations that are in the best interests of everyone involved.”
James Chisholm, a spokesman for DraftKings, argues that fees and taxes will harm the industry. “We understand the Legislature’s interest in studying this issue but also believe placing overburdensome fees or taxes on the daily fantasy sports industry would negatively impact our ability to grow, create jobs and serve as an economic engine in Massachusetts,” he said. He pointed out that DraftKings, devotes considerable resources to preventing fraud and protect consumers.
Among the questions that regulators look at is the possible ties between DFS sites and professional sports franchises. In Massachusetts, for example, Gillette Stadium, the home of the New England Patriots, has a DraftKings lounge and kiosk. Some members of the Patriots have been involved in marketing the games.
