By: Daniel Larson
Daily fantasy sports (“DFS”) have taken the online gambling industry by storm in the past few years. DFS operators such as DraftKings and Fanduel have thrived since their inception with revenues reaching well into the millions and are continuing to grow. You can find a DraftKings or Fanduel advertisement anywhere and everywhere, littered all over sports arenas and constantly on television commercials. The amount of advertising is so tremendous that the company DraftKings, at one point, spent more on advertising in one week than any of other company in the U.S. This a hyper growth in the DFS industry can be attributed to many different variables but two clearly resonate above the rest: (1) people simply love to gamble and (2) the DFS industry lacks any type of substantial governmental regulation.
One of the major concerns regarding the DFS industry is whether it should be considered a form of gambling. With state gambling statutes varying across the country, DFS operators have being forced to navigate a legal maze. Most state gambling statutes analyze gambling by determining whether it is a game of chance or a game of skill. For example, Massachusetts uses a predominant factor test which states that “a game is … considered a lottery if the element of chance predominates and not a lottery if the element of skill predominates.” Some states such as New York and Arizona apply their gambling statutes differently and have therefore found DFS an illegal game of chance. Other states such as Nevada now require DFS operators to obtain gambling licenses in order to continue business. Massachusetts, however, has taken a separate and unprecedented approach by initiating a regulatory model for DFS operators.
Massachusetts Attorney General Maura Healy’s initiative to place regulations on DFS operators has been viewed generally as a positive step forward by the industry, public, and DFS consumers. Surprising, there has been a growing consensus within the DFS industry itself that regulations is the right approach. Such regulations may provide a desirable solution due to the many confusing legal challenges DFS operators are facing. FanDuel CEO Nigel Eccles’ stated that “now is the time to memorialize [regulations] into law.” Eccles’ decision to get behind the regulatory model is a correct one for a number of reasons. First, regulations will allow FanDuel and other sites to continue to operation in Massachusetts for the near future. Second, regulations will benefit the community by adding well paying jobs and generating revenue for the state. Third, a regulatory model will provide predictability to the industry and also protection for its consumers. AG Healy, in stating her goals of the regulations, explained, “these strong regulations will bring needed transparency to this industry and protect consumers, minors, and their families.”
The Massachusetts regulations hit on important issues and focus mainly on the vulnerability of youth and unfair advantages by players. These regulations include the following terms:
- Fantasy players must be 21 or older;
- Deposit limits of $1,000 per month (with exceptions for those who can afford it);
- Preventing advertising on college campuses; and
- Leveling the playing field by preventing those with insider information from playing the games.
Although opponents to this initiative have argued that allowing DFS operators to continue business is essentially creating “the biggest expansion of gambling in state history…opening Internet gambling to every living room, every bedroom and every smart phone in Massachusetts.” Others have argued that the regulations do not go far enough and that a more comprehensive outline of regulations should be enforced to encompass the vast array of issues DFS entails.
Daniel Larson is Staff Member of the Journal of High Technology Law. He is currently a 2L at Suffolk University Law School. He received a B.A. in Political Science from Rhode Island College. In addition to being a law student, Dan is a web developer specializing in video production and photography.
Disclaimer: The views expressed in this blog are the views of the author alone and do not represent the views of JHTL or Suffolk University Law School.