THE FIVE MEMBERS OF THE MASSACHUSETTS GAMING COMMISSION said on Thursday that they believe fantasy sports games should be regulated by the state, but added that more research is needed before recommending what type of oversight would be best.
A memorandum developed by a commission attorney concluded the legality of fantasy sports is murky and cast doubt on public statements by Attorney General Maura Healey that fantasy sports games do not violate federal or state laws.
Fantasy sports companies often say they operate legally under a special carve-out from a 2006 federal law, but the Gaming Commission memorandum said the federal law is very narrowly drawn and was crafted at a time when daily fantasy sports games didn’t even exist. The memorandum said the federal law “on its own does not legalize daily fantasy sports or fantasy sports of any kind.”
The memorandum, written by staff attorney Justin Stempeck, also suggested fantasy sports might be illegal under state laws dealing with betting pools. The language of the laws and court decisions suggest fantasy sports games might qualify as illegal betting pools, but Stempeck said no Massachusetts court has addressed the issue.
A Healey spokeswoman said the Gaming Commission’s input will be carefully reviewed as the attorney general conducts its own review of fantasy sports sites. In a statement, Healey’s office said “the federal statute dealing with unlawful Internet gambling left to the states the ability to regulate fantasy sports….There is little question that this industry will need to be regulated in order to protect consumers.”
Beyond the question of legality, the five commissioners began trying to help state policymakers sort through the myriad of issues raised by fantasy sports. Commissioner James McHugh tried to provide some context with a report on various types of online betting, including Esports, where professional video gamers play against each other and observers bet on the outcome. Esports have prospered online, but next year will begin appearing on cable.
The commission members reached consensus fairly quickly on the need to regulate daily fantasy sports games, largely because of the large amounts of money involved and the lack of transparency. Commissioner Bruce Stebbins said some of the fantasy game sites don’t accept complaints from players and some prohibit participation in class action lawsuits. McHugh said regulation is needed to bolster consumer confidence in the fairness of the games. “You need to have someone watching carefully,” he said.
Commissioner Gayle Cameron, who recently attended an international conference where fantasy sports games were a focus, said she was troubled to hear at the meeting that NFL players are allowed to play fantasy sports. “At the least, that’s a perception issue,” she said. She said she personally favored regulation of fantasy sports games and added that “the consensus from regulators around the world is it should be regulated.”
Commission Chairman Stephen Crosby said the commission appeared to be in agreement that daily fantasy sports games need to be regulated. But he said more research is needed to determine how much regulation is needed. For example, he said, do fantasy sports sites need to be licensed? Do the sites need to be regulated by a special agency or merely covered by new laws and regulations? He said issues such as taxation would be left to policymakers on Beacon Hill, but he noted that no one in the fantasy business is turning a profit yet.
Crosby also said McHugh’s presentation on the rapid rise of online gambling would suggest Massachusetts may need to develop a template for regulation of online gambling in general instead of crafting regulations to deal with daily fantasy sports games specifically.
Throughout the deliberations, commissioners said several times that they were viewing the daily fantasy sports sites through the prism of their current role as casino regulators. Crosby said the commission has a fiduciary responsibility to its casino licensees not to have “the playing field dramatically change on them as they invest their money in these facilities.”