New DFS Regulations Proposed in Massachusetts

Steve Ruddock : November 20th, 2015

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On Thursday morning, Massachusetts Attorney General Maura Healey held a press conference where she unveiled a set of proposed regulations for daily fantasy sports. Under Healey’s recommendations, the regulation of the DFS industry would fall under consumer protections and not as gaming, as Gambling Compliance’s Kevin Cochran noted on Twitter.

Overall, the proposed regulations were widely considered to be sensible and modest. People calling for regulation feel they are strong enough to reign in the industry, and the industry (by and large) believes the regulations aren’t so burdensome as to be crippling to their business.

In fact, a number of industry followers expect DFS operators to preemptively enact many the proposed Massachusetts regulations across the country – DraftKings has already added problem gaming language to their website.

This is a smart move. As the first-mover on regulations, Massachusetts will likely set the bar for other states that look into regulating the daily fantasy sports industry. And with the industry pretty content with Massachusetts’ regulations they’d be happy to see them enacted across the board.

Here is a breakdown of the proposed regulations.

Noncontroversial regulations

  • Data security measures that comply with state and federal laws.
  • All player funds must be segregated from operational funds.
  • Add procedures to respond and report to player complaints.
  • Players must be notified of closed accounts and refunded.
  • DFS sites must implement player verification and geolocation technology to “the greatest extent possible” using commercially and technically available measures.
  • Players may not open more than one account.
  • Meet “truth in advertising” standards, including no depiction of minors or amateur sports, as well as limiting representations on winnings.
  • DFS contests based on college games are prohibited.
  • Advertising at colleges is also prohibited.
  • Operators must “fully and accurately” explain promotional offers.
  • DFS sites must add “problem gambling” code of conduct.
  • DFS operators cannot issue credit to users.
  • Employees and contractors of the sites, and athletes cannot participate in DFS contests at any site.
  • Sites must offer “beginner” games (beginners is defined as players with fewer than 51 contest entries) and keep “non-beginners” out of said contests. The sites will also need to develop games that exclude highly experienced players.

Debatable regulations

  • All participants must be 21 years of age – the current age requirement is 18, and according to Adam Krejcik of Eilers Research, 5% of all DFS players are under 21.
  • Add on-boarding procedures for new players, including opportunities to learn how to play and identify experienced players.

Potentially controversial regulations

  • Limit deposits to $1,000 per month.
  • “Highly experienced” players must be identified – According to the definitions a highly experienced meets one of the following three criteria: 1) entered more than 1,000 contests offered by a single DFSO; or 2) entered more than 250 contests offered by a single DFSO and has prevailed in more than 65% of the total number of such contests; or 3) has won more than three DFS contest Prizes valued at $1,000 or more.
  • Locking contests prior to their start.
  • Operators must limit the number of entries in each contest based on total entries. This information must be prominently displayed.
  • The banning of scripts to set or alter lineups.

Industry reactions to proposed regulations

FanDuel

“Attorney General Healy’s approach towards regulating fantasy sports makes a tremendous amount of sense — it provides strong protections for consumers and allows sports fans to continue doing something they love.  FanDuel believes that regulations which increase transparency and ensure contests are fair will benefit the entire fantasy industry.  We appreciate that there will be a public notice and comment period to collect input from all relevant parties and FanDuel will submit our comments to the regulations in the next 60 days.  We also welcome the opportunity to work with Attorney Generals in all states, along with other lawmakers, to implement fair regulations that benefit both consumers and sports tech innovators.”

DraftKings

“The Massachusetts Attorney General has taken a thoughtful and comprehensive approach to the Fantasy Sports Industry.  While we do have some concerns with the draft regulations, we intend to work closely with the Attorney General’s office to ensure we are operating in the best interest of our customers.  We will utilize the next 60 days to share our comments in the hopes of effecting some changes and are firmly committed to continuing to operate in a lawful and transparent manner.  We will immediately begin taking steps to prepare to implement the changes to our product that the Attorney General requires.

“We appreciate that, in addition to Attorney General Healey, a number of state regulators and other authorities are taking a reasoned approach to the Fantasy Sports industry that considers the interests of sports fans who love to play these games and recognizes the value in innovation and entrepreneurship.

“We believe the process followed by AG Healey and the Commonwealth of Massachusetts will ultimately result in a positive outcome for the millions of fantasy sports fans around the country who want to be able to enjoy DraftKings’ games in a fun, fair, and transparent environment.”

StarsDraft/Amaya

“As the most licensed online gaming company in the world, Amaya advocates for state regulation and licensing for daily fantasy operators and are happy to see Massachusetts move toward a regulated environment that will protect consumers and ensure a legitimate and competitive marketplace. We are happy to see StarsDraft is already largely in compliance with the proposed regulations and look forward to submitting comments and working with Massachusetts legislators and regulators.”

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