How Massachusetts wants to change daily fantasy sports

Rachel Axon

USA TODAY

Massachusetts Attorney General Maura Healey on Thursday proposed regulations for the daily fantasy sports industry to protect consumers in the state.

One of Massachusetts attorney general's proposed regulations is to limit deposits $1,000 per month unless players can verify they can sustain losses at a higher limit.

A draft of the regulations includes consumer protections that would prohibit play by anyone under 21, increase transparency and place restrictions on advertising. They seek to protect players’ deposit, help problem gamblers and level the playing field for users.

Healey has said daily fantasy sports businesses (DFS) are legal in the state but still constitute gambling. FanDuel and Boston-based DraftKings are in litigation in New York, where attorney general Eric Schneiderman has said the DFS companies are illegal.

After Schneiderman filed a cease and desist letter this month, the two companies filed a lawsuit against him in New York Supreme Court. Schneiderman responded with a lawsuit and motion seeking preliminary injunction on Tuesday.

On Monday, Justice Manuel Mendez denied the companies’ request for a temporary restraining order against Schneiderman's order from last week, and he set a hearing for Wednesday.

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"Attorney general Healey’s approach towards regulating fantasy sports makes a tremendous amount of sense," FanDuel said in a statement. "FanDuel believes that regulations which increase transparency and ensure contests are fair will benefit the entire fantasy industry.

"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 also released a statement commending Healey's proposal.

“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," the statement said. "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."

The proposed regulations in Massachusetts are expected to be filed with the Secretary of State on Friday.

According to a press release, they represent an immediate response to concerns the attorney general’s office has found in a review of the industry started earlier this year.

“These regulations are a first of their kind for the daily fantasy sports industry,” said Healey. “This is a first step, but an important step, as we continue to evaluate this new industry and make sure our laws keep up with these evolving technologies.”

Daniel Wallach, a sports and gaming law expert at Becker & Poliakoff in Florida, highlighted changes that would allow users to identify top players as innovative. The new regulations would exclude the less than 2% of players who win 90% of prizes from entering games limited to beginners.

“The greatest business risk to the industry is the perception of an unlevel playing field,” said Wallach. “If 90% of the winnings are going to 1% to 2% of the players, eventually you’re going to lose the majority of the players who are going to be frustrated and disappointed that they have a negative return on investment.

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“The sharks will now be identified, and there’s nothing wrong with being a shark but as a consumer you should have the right to understand who your competitors are.”

Among the other regulations:

• Players must be at least 21.

• DFS companies cannot advertise or run promotional activities at schools or on college campuses, including their sports venues.

• Professional athletes, agents, employees or others connected to a sport cannot participate in DFS contests in their sport.

• Company employees and others with access to insider information cannot participate in DFS contests.

• Advertisements must include information on assistance for problem gamblers.

• Advertisements mentioning individual winnings must disclose average net winnings of all players.

• Deposits will be limited to $1,000 per month unless players can verify they can sustain losses at a higher limit.

• DFS operators cannot offer contests that are based on the performance of college or high school athletes.

The regulations are open for public comment until Jan. 22.

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