Attorney General Healey announced new regulations for the daily fantasy sports industry today. From the Boston Globe, the highlights are:
Under Healey’s proposal, entrants in the contests would have to be at least 21 years old and cannot be professional athletes or their agents and employees.
The rules also would prohibit daily fantasy companies from extending credit to their customers or running promotional activities on college campuses or at amateur or student sporting events.
The regulations also include provisions to help problem gamblers, though Healey’s office did not immediately detail those sections of the proposal.
These are ok proposals, but they completely miss what is at the core of these companies. They are online gambling, plain and simple. The NY Attorney General sees that and has asked for the games to be shut down in New York. Arizona, Louisiana, Iowa, Montana, Washington, and Nevada ban the games, although Louisiana and Nevada have bans largely due to lobbying from their legal gambling operations.
For an amusing and brutally honest take on the industry, John Oliver has some great stuff. When the CEO of DraftKings compares the game to poker, you know it’s clear what these games really are.
For someone who ran as both a strong consumer advocate and a very vocal opponent of casinos, Healey’s approach to this industry has been inexplicable.
Is this about Martha Coakley doing a great job for her lobbying client, DraftKings, or is this about not wanting to anger a particular sector? DraftKings is a well-loved darling of the “innovation sector” here which is increasingly tinged with anti-regulation libertarianism that has taken over Silicon Valley. Is AG Healey worried about angering that side and losing support from young, urban voters?
Whatever the answers, I am disappointed. These companies have huge potential to take advantage of players, just like every other type of gambling. If we want to tightly regulate or even ban certain types of gambling, these companies should be no exception. And if they are legal, online poker should be as well.
Granted, the NY approach may be better, but it is important to list all of them and not just the three seemingly weakest ones.
I am not sure if the NY AG is on the most stable legal ground, since as the Oliver piece points out, Congress exempted fantasy sports from it’s internet gambling prohibition and it’s a loophole these sites have certainly exploited, but a loophole that exists and will continue to exist until Congress narrows it, which seems as unlikely as them closing any other loophole anytime soon.
These regulations are a sensible start, I do wish the first one didn’t include the problematic second clause that seems to totally eviscerate it’s effectiveness: “unless the daily fantasy operator verifies the player can sustain losses at a higher limit.” What the fuck does that even mean? How would that even work? Is it basically is saying ‘here’s a limit, but if you do determine your sucker won’t be bankrupted by his stupidity, prove it to us and we may let you harm him’? I might be willing to tolerate these sites if we had a harder limit that was set a few hundred dollars lower, $500 might be reasonable. These sites can quickly bankrupt people.
Thank you for adding the additional regs, but I’m not sure the ones mentioned in the Globe piece would be the weakest ones. They are all pretty weak.
The first one could be strong, but as you point out, the second clause opens too many doors. The shark one could be effective – but why not ban them?
The legal landscape is a bit more complicated than just the federal law from 2006, which exempted fantasy sports but was likely meant to address season-long games, not these new types of daily games (which have a lot fewer of the hallmarks of a game of skill). State law controls much of what happens related to gambling. Schneiderman obviously views these sites as a workaround for illegal sports betting. It’s very much a question of whether exemptions were meant to (or should) allow for these companies to operate, especially when they seem to be doing things like improperly allowing users from states where these sites are clearly banned to play.
The NY AG’s approach is that these look and smell like illegal gambling sites and should be paused and evaluated. Even looking just at the federal law, it is not at all clear that these games fall into the exemption.
Also, the DraftKings CEO seems to agree with Schneiderman’s characterization.
Healey’s approach is that they are clearly legal but we need to put some controls on them. That’s disappointing from someone who, during her campaign, so clearly articulated the societal and consumer protection problems associated with gambling.
As I argued here at the time, it was unlikely her opposition would sway voters or that she could do much in office to stop it if the voters ended up allowing it. This is a key early test, and while I think her regulatory approach could be stronger, it might be more pragmatic than the NY approach, which likely will go through cycles of appeals before we can see if it works or not. But yeah, it’s definitely a form of sports gambling, even their own logic concedes that.
As a traditional fantasy player (in a pool with friends and co-workers), there is an element of skill and specialized knowledge to be successful that playing the slots, or even playing poker, does not require. You gotta know that Le’Veon Bell is a first round RB while James Starks is not. But you can’t know, as I didn’t, that one would be injured and you’d be playing the other instead.
It’s closer to a prediction market or stock market in that way, it’s why it’s so easy for people with access to algorithmic modeling software have dominated both, but it still requires regulation like gambling and the ads are plainly misleading.
NY will be testing the limits of gambling definitions, for which there seems to be more support than otherwise that daily fantasy sports fall under. If it is determined to be legal, the AG still has all the other powers of that office to deploy on regulating the industry. Healey has given up on that first step, assumed legality, and, I think, suggested a pretty weak regulatory framework given the incredibly broad powers of the AG under 93A. Maybe the regs will get stronger after the comment period, but I wouldn’t bet on it.
Typical fantasy sports, playing out over a season, are absolutely games of skill (or at least games of spending as much time as one can researching players and potential trades). Daily fantasy sports, however, remove a lot of those skill elements. It’s like poker in that way. Poker is a game of skill over hundreds or thousands of hands (that’s been verified in studies), but a game of chance over a few hands (although great players could still minimize losses and maximize gains). And these games are being used by exactly the same people who exploited online poker – using sophisticated algorithms and playing hundreds or more “hands” at once to maximize winnings. A person hoping to win big by following the pitch of the commercials and putting a bit of money on one or two lineups has almost no chance and is being taken for a ride.
I’m concerned that AG Healey does not see these companies for what they are. If she did, I think her proposals, at the very least, would be much stronger than what come out today.
And I’d love to know what the conversations were like between the MA AG and NY AG offices, along with Coakley likely involved with lobbying at each.
Our Attorney General office can’t quite make up its mind.
Either fantasy games are gambling, in which case they should get banned. Or they are not gambling, in which case they should be regulated to prevent abuse of the data.
The new regulations accomplish neither.
Of everything proposed, only one makes marginal sense (‘ban employees of daily fantasy companies from playing in any fantasy contests for cash’). Even that one is more or less unenforceable, because employees can play under a relative’s account.
And what’s the reasoning for banning fantasy games for people under 21? While allowing them, say, for people over 85?
Maybe the 21 age limit is the nanny state’s grand design to upset young people and get them more vocal in politics. Maybe it is because the AG judges fantasy games to be bad for your health.
One of the Republican campaign points has been that they clean up nonsensical and overbearing regulations that have been set in place just for the sake of making regulations. And here comes the AG office, waltzing in with a set of overbearing regulations.
…but it is certainly reasonable to restrict something like this to adults. Not sure what reason there would be for an upper limit.
21 makes sense for normal casinos because you are allowed to drink on the floor, where you can get drunk for free and lose all your money to the house.
Making that distinction in this situation just seems arbitrary.
…why alcohol is allowed anywhere near a casino floor. To me it is a no-brainer to prohibit it and thus not introduce that judgement inhibitor into the equation.
Unfortunately.
What I have never understood is using “sports” and “fantasy” in the same phrase.
When you’re fraternizing with the intention of romance. Talk about impairing your judgement and making the wrong choices.