A message from MGC Chairman Steve Crosby:

Friends Interested in Daily Fantasy Sports-

As many of you know, Daily Fantasy Sports (DFS) was launched in 2007.  It is variant of fantasy sports, that offers a condensed version of the season-long fantasy experience, providing for the drafting of a team and participation in weekly or daily contests.  The most popular DFS sport is football, followed by baseball, racing, basketball and hockey, with golf on the rise.

With the kickoff of NFL Football season and its advertising last Fall, coupled with the widely-distributed story of a DraftKings insider making big money on a competitor’s site, DFS exploded into the public’s consciousness. Gaming regulators, Attorneys General, and Legislatures across the country suddenly confronted complex questions about the legality of DFS, the definition of gambling, the significance of skill vs. chance, and the overall muddled state of societal views of gambling and the equally muddled state of much of its regulatory infrastructure.

The Gaming Commission has no regulatory authority over DFS (that resides principally  with the Attorney General) and has no policy-making authority (that resides  exclusively with the Legislature).  But with all this attention to DFS—surely a gambling-like activity, at least– and with encouragement from political leaders on Beacon Hill, the Massachusetts Gaming Commission is publishing this White Paper, offering our thoughts on a range of issues the Legislature and the Governor  will likely confront as they come to grips with the challenge of regulating DFS, and perhaps other online (also referred to as “internet-based,” or “remote”) gaming.

Although we have no direct experience with DFS, and no authority over it, we do have a great deal of experience with the challenges of introducing  a new kind of gambling to the Commonwealth, and to the fascinating and troublesome nuances of making public policy on controversial issues. And we operate under an expanding statute from the Legislature, many years in the making, which raised and addressed many if not virtually all of the complex issues raised in gambling law. With that guidance from the Legislature, coupled with our experience, we expect that certain  issues will need to be addressed soon, concerning DFS:

• Not so much the issue of whether DFS is legal under existing relevant law, but rather whether DFS should be legal.
• If the Legislature determines DFS should be legal, should it be regulated?
• If the Legislature determines that DFS should be regulated, what are the critical issues that need to be addressed by that regulation?
• As the Legislature determines what issues need to be addressed, it will likely consider what regulatory structure is appropriate, ranging from consumer protection laws, the regulatory style of the Department of Public Licensure (hairdressers, plumbers, etc.) or the full agency-led regulation like the Division of Banks, the Division of Insurance or the Gaming Commission.

Right now, it appears to us that the law concerning DFS is at best unsettled, and that there is a possibility that DFS could be considered illegal, even though the Attorney General has seen fit to move directly to the issues that really matter—consumer protection regulations that will permit the pleasure of DFS play, while protecting against its possible downsides. Until this legal uncertainty is resolved—which can only be done by the Legislature—the citizens of Massachusetts, DFS players, and DFS companies alike (including one of the leaders, DraftKings, which is located in Boston), will find their activities risky, and the DFS future utterly uncertain.

The last section of this paper will suggest the possibility of the Legislature establishing a regulatory environment which is applicable to all online gaming technologies (not just DFS), assigning that regulatory structure to an agency for implementation, and leaving the daily work of drafting and adapting regulation of new gaming types to the regulatory agency that can be nimble and flexible in responding to technological gaming innovations. Our agency stands ready to accept that role, and stands equally ready to work with another or a new agency that the Legislature may consider appropriate.

Special thanks go to Commissioner Gayle Cameron, who led the background research and Education Forum on DFS, and to Staff Attorney Justin Stempeck and Director of Licensing Paul Connelly who did most of the research, ran the Forum,  and did much of the drafting of the White Paper, and to Commissioner Lloyd MacDonald and former Commissioner Jim McHugh for their help in contemplating these issues and in drafting this paper.

Too often controversial topics like this one are discussed only with bumper sticker epithets, anecdotes, and spinning PR strategies, rather than facts and objective contemplation. We hope this White Paper will contribute to a sober, thoughtful and objective consideration of regulation of this new form of gambling (or gambling-like) activity. Until DFS gets this consideration, the citizens of Massachusetts, DFS players and DFS operators alike will be subject to serious legal and operational risk.

To view Daily Fantasy Sports white paper, click here.