Gaming board members say daily fantasy games should be regulated
But how? That remains to be seen.
Members of the Massachusetts Gaming Commission said Thursday that daily fantasy sports, like those offered by Boston-based DraftKings, should be subject to some form of state oversight.
“You just need to have somebody watching carefully when big sums of money are being transferred,’’ Commissioner James McHugh, who is resigning from the commission this month, said at a Thursday meeting.
Daily fantasy games, in which users can win money based on the performance of real-life athletes, have been mired in controversy this fall. They have faced questions about their legality under various state and federal gambling laws, and about whether they utilize proper consumer safeguards.
The state’s five-member gambling board announced it would take up the issue last week to help state leaders determine whether and how to govern the games.
Commissioner Enrique Zuniga rattled off a list of potential regulatory needs Thursday, including age limits, how payments are processed, and ways to ensure the games are fair to consumers. Commissioner Bruce Stebbins added the games could use stronger consumer complaint options. And Commissioner Gayle Cameron said the use of algorithms or computer programs to help users select their teams could also warrant government intervention.
Gaming Commission Chairman Steve Crosby said “there’s got to be something’’ when it comes to regulating the games. But the state should be careful in determining how tight those regulations should be, he said.
“We need to think about this industry and try to get some kind of a philosophic frame on it. Why does it require what level of regulation? … We don’t necessarily set up a regulatory body for every industry that needs to be regulated,’’ he said.
Attorney General Maura Healey has said she does not believe the games violate Massachusetts law, but that they should be regulated to ensure consumer safeguards. Gov. Charlie Baker has echoed that sentiment, but demurred when asked last weekend whether the games should face a new tax, as other state leaders have suggested.
Crosby on Thursday expressed caution about new taxes for daily fantasy companies, saying they are startups funded largely by venture capital.
“If we came in heavy on this, you can crush an industry like this overnight,’’ he said. “As I understand it, nobody’s making money in this business yet. … We don’t want to kibosh that industry unless we decide we want to kibosh that industry. We don’t want to do it by accident.’’
Crosby said the gaming board will consult with experts and produce a report with insight and ideas for state officials.
DraftKings and New York-based FanDuel are the leading daily fantasy companies. FanDuel CEO Nigel Eccles on Thursday said he favors consumer protection rules. DraftKings CEO Jason Robins has said the company would accept regulations, but that the industry can govern itself.
In a statement issued after the gaming commission’s meeting, Robins signaled further willingness to submit to some government oversight:
“We applaud the careful consideration the commission is giving to issues our industry is facing. We are committed to working with all relevant government authorities to ensure that the industry operates in a manner that is completely transparent and fair for all consumers. We will definitely take the commission up on its invitation to participate and weigh in on its examination of a potential regulatory structure for fantasy sports. We are hopeful that this examination will give real consideration to the interests of the millions of individuals across the country who love to play our games.’’
The gaming commission also received a report on Thursday from a staff attorney on whether the games violate the law. It did not have a clear answer.
“As is clear from the discussion and examples set forth in this memorandum, the legal status of [daily fantasy sports] is in flux,’’ the report said.
Daily fantasy companies have argued they are legal in most states, including Massachusetts, because they are games of skill rather than games of chance.
The legal report cited several examples of Massachusetts case law that declared contests such as video poker or a bingo-darts hybrid game to be illegal lotteries, because success was judged to be more a result of chance than skill. But it said ’’no Massachusetts case has addressed whether fantasy sports or daily fantasy sports would constitute a ‘lottery.’’’
The report also said federal laws could be triggered if the games are found to be in violation of state gambling laws.
Crosby said the murkiness of the law in Massachusetts calls for the legislature to answer the question when it takes up the issue.
“Rather than debate whether it is or isn’t [legal], the legislature will probably need to step up and make a statement about whether it wants it to be or not,’’ he said.
One commissioner, Zuniga, said he had a hard time differentiating fantasy sports from games like poker and “other forms of gambling that are largely recognized as gambling.’’
“I know we’re not trying to answer the question of the legality here,’’ he said. “But I think there’s enough similarities to other forms of gambling that have been widely accepted as gambling that it merits the regulation that … everybody seems to be coalescing around.’’
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