Fantasy meet reality
Even the most casual sports fan and many non-fans know the term March Madness refers to the college basketball playoffs, now entering the second week of elimination games leading up to next weekend’s national championship.
But anyone who wants to make a little money on the hoops action through their fantasy sports account had best get in on the games today because tomorrow may be too late. Attorney General Maura Healey is set to issue her final regulations governing daily sports fantasy, making Massachusetts the third state to restrict the websites while still allowing them to operate.
Daily sports fantasy is different from traditional sports betting. It’s somewhat an off-shoot of the increase in statistical analysis used to measure performance in sports. In daily fantasy, participants select a “team” with a salary cap and the statistical performance of those players in games determines who garners the points that determine winners in different contests. Some fantasy games have prizes in excess of $1 million.
Healey, a former college basketball standout who played professionally in Europe, first outlined her proposed regulations last fall when a couple incidents involving employees of Boston-based DraftKings and its competitor, FanDuel of New York, cast an unwelcome spotlight on the possibility of inside information being used to win games.
After a decade of growth spurred by an exemption in the federal Unlawful Internet Gambling Enforcement Act, states suddenly began paying attention last fall when a DraftKings employee won $350,000 playing on FanDuel on the same day he prematurely released proprietary information that can be helpful to seasoned players. That caught the attention of lawmakers and law enforcement officials around the country.
Since then, 13 states have banned daily fantasy sports as illegal gambling with DraftKings and FanDuel launching legal challenges in the lucrative New York and Texas markets. But those courtroom efforts come with a price and the companies agreed to withdraw their suits and cease operations for the time being, hoping legislators there and elsewhere will craft regulations allowing them to resume operations.
Earlier this month, Virginia and Indiana became the first states to regulate the once-burgeoning industry. Virginia set the floor for playing at 18 while Indiana banned anyone under 21. Both states instituted a $50,000 registration fee for any site to operate, a fee that is unlikely to deter the big players, such as DraftKings, FanDuel, or Yahoo, but could be a bar to any one of the dozen or so smaller daily fantasy operators or the less-lucrative season-long websites.
Healey’s regulations are a lifeline for the faltering industry, especially the hometown DraftKings. Officials at DraftKings had already begun to implement some of Healey’s proposals and a look on the site today finds they’re prepared in Massachusetts, with no college contests offered beyond Thursday’s four Sweet Sixteen games. Other sites, such as Yahoo, had already begun imposing restrictions on themselves in anticipation of emerging regulations. The sites can restrict access by identifying location and fencing off players in those states where it is regulated or banned.
Unlike Virginia and Indiana, Healey is looking to govern the games from a consumer protection angle rather than as gambling. In addition to age restrictions and the college ban, Healey wants to limit how much a player can keep on deposit with the fantasy sites, clearly identify professional players so they won’t butt heads with amateurs, and creating more low-risk, low-reward games for beginners.
Given the lucrative market and the years of unfettered growth – FanDuel and DraftKings last year combined for $3 billion in entry fees despite the growing pressure from states – the companies are not pleased with having their hands and their profits tied. But some profits are better than no profits and you can bet they’ll find a way to thrive.
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