Massachusetts Recommends Treating DFS as Gaming
The Massachusetts Special Commission on Online Gaming, Fantasy Sports Gaming and Daily Fantasy Sports last week narrowly voted to recommend that daily fantasy sports (DFS) be treated as a form on gambling, while remaining legal. The recommendation from the nine-member panel doesn’t sit well with the largest provider of DFS, DraftKings, which was born in the Bay State, says if translated into law, the recommendation, will hurt its ability to grow.
The most important recommendations by the commission were the following:
• Daily fantasy sports would continue to be legal, but would be classified as gaming and would be regulated by the Massachusetts Gaming Commission (MGC.)
• Although the legislature should eventually allow other forms of online gaming, lawmakers should consider them on a case by case basis once the Bay State’s casinos have a chance to become established. The MGM Springfield is scheduled to open in September 2018 with the Wynn Boston Harbor following the year after.
The 5-3-1 vote came after many hours of expert testimony and more than a year of studying the issues.
The vote broke down this way: Yes: Massachusetts Gaming Commission Chairman Stephen Crosby; Senator Jennifer Flanagan; Hirak Shah – legal counsel the Senate; Rep. Joseph Wagner – co-chairman of the commission; Senator Eileen Donoghue – co-chairman of the commission. No: Rep. Mark Cusack; Rep. James Kelcourse; Fantasy Sports Trade Association Chairman Peter Schoenke. Assistant Attorney General Dan Krockmalnic abstained.
The commission’s co-chairman Joseph Wagner said, “There is and will be a proliferation of these kinds of things.”
Crosby said that some breathing space is needed to see how legalized online gaming might affect brick and mortar casinos. “Online things are disruptive technologies for lots of other things,” he said.
The other co-chairman, Senator Elaine Donoghue added, “I believe that the report recommends a path forward for online gaming that will bring both efficiency and, in a cautious way, an omnibus approach with a careful case-by-case analysis.” She added that the commission’s recommendations would help modernize the state’s gaming laws. She said she thought it likely that the legislature would create legislation based on the recommendation sometime next year.
Attorney General Maura Healey doesn’t entirely support online gaming, which is why her representative on the commission, Dan Krockmalnic, abstained. Healey doesn’t agree that online gaming is inevitable.
Cusack said he didn’t hear a good justification why the MGC should oversee Daily Fantasy Sports. “I hope it wasn’t just recommended to justify their existence once these casinos are built,” he added.
DraftKings spokesman James Chisholm commented, “While this commission report is merely a recommendation, it runs directly counter to the economic development law that overwhelmingly passed last year designed to promote the state’s Innovation Economy. The commission’s actions today, as we and our partners in the fantasy sports industry pointed out time and time again, could restrain our company’s ability to thrive and create jobs here in Massachusetts.”
Chisholm said if the recommendations ever became law “[it] would put us behind every other state in the country on this issue, and send a troubling message to other startups.” He added, “When it comes to our business … words matter and definitions matter.”
Boston-based DraftKings has long argued that it is a game of skill, where knowledge is key in picking a winning team, which then leads to winning cash prizes. Just because cash is involved doesn’t make it gambling, it maintains.
Chisholm said his company has already been told by business partners that they are concerned with being tagged as being in the gambling industry because it could increase their tax liabilities and create other issues.
MGC Chairman Steven Crosby is sympathetic but doesn’t think the argument is sound. “If it looks like a duck and squawks like a duck it’s probably a duck,” he said. “I mean, it’s gambling. I think almost everybody would say it’s gambling. And there’s nothing wrong with that. There’s lots of legal gambling all over the world, including Massachusetts, and it’s fine.”
Crosby added, “It just makes it what it is, in that it needs not just the consumer protection regulations that the attorney general has put out there, but it needs other sets of protections.”
He said the commission recommended that the regulatory hand be light on DFS. “ . . . because we don’t want to impair their growth. Quite the opposite. We want them to be successful and grow.”
Crosby has said that because money is put down in DFS, that makes it gambling.
DFS CEO Jason Robins disputes that, and in a letter to the commission wrote, “The draft report’s conclusion that all games played for money are ‘illegal gaming’ leads to impractical and absurd results.” He added, “Because the Boston Marathon requires an entry fee, involves an event and offers prizes, it would be considered ‘illegal gaming.’ ”
DFS is operating under a law that will expire next year. The commission’s recommendation was timed so as to give the legislature a year to craft legislation to replace it. Attorney General Healey issued temporary regulations under consumer protection laws that did such things as set an age limit for participation (21 years and over), ban DFS based on college sports and limit advertising.
Chisholm said his company will continue to lobby lawmakers not to treat it as a form of gambling. The commission’s vote is another defeat for DraftKings, which was forced to give up a merger with its main rival, FanDuel, because federal authorities raised the specter of antirust.
One key point made by the commission’s recommendation was to give the casinos that are coming on line a chance to get established before hitting them with competition from iGaming.
According to Crosby, MGM and Penn National, which operates the only operating casino in the state right now, Plainridge Park, are both interested in hosting online gaming. On the other hand, Wynn has no such interest.
MGM Springfield President Mike Mathis said last week, “We think we can pair online gambling with a brick and mortar experience. We are going to continue to study it.”