Five talking points: Massachusetts DFS white paper

Earlier this week the Massachusetts Gaming Commission released a white paper on the regulation of DFS. Martyn Hannah picks out five key takeaways

The current state of play 

In its white paper, the Massachusetts Gaming Commission (MGC) suggested fairly quick action was needed to clarify the legal status of daily fantasy sports (DFS). Despite state Attorney General Maura Healey ruling DFS legal under state law back in November, the Commission said the sector was currently residing in “unsettled legal territory”. [private]

The report believed DFS implicates some existing civil and criminal statues, particularly in relation to the operation of betting pools under state law.

“What makes [this] so potentially problematic for DFS is that the element of skill—so central to the DFS operator’s defence to date—is irrelevant to the issue of culpability. That is because the statutes specifically reference a “trial or contest of skill” as the basis of an illegal pool.”

That aside, the Commission believes the real question is whether DFS should be legal:

“While it could be construed that DFS is arguably illegal under existing Massachusetts law, the balance of Massachusetts law may make that reading illogical,” the report noted.

Should DFS be legal and regulated? 

In short, yes. The MGC said the argument about whether daily fantasy should be regulated is “largely settled” and that after several years of a “largely laissez-faire environment”, it’s time to provide protections for players and clarity for the firms operating in the space.

“The majority of the debate in this area continues to focus on the form and extent of a future potential regulatory environment,” it said.

The report also pointed out the hypocrisy of allowing some forms of gambling such as lotteries, while barring others and the impact this has on an activity’s perception among the wider population.

“We are left now with a public policy position that seems to assert that gambling is bad/illegal, except when it is not. And what makes it not bad/illegal is when the legislature authorizes a regulatory framework and a public purpose for a particular kind of gambling.”

Regulate, not suffocate 

The MGC put forward several models of regulation, but noted the “heavy” oversight the state’s land-based casinos are subject to may be a step too far.

“The regulatory framework must be of the right size, i.e., neither so onerous that it stifles positive economic activity nor so lax that it fails to protect the public interest,” the Commission said.

It also raised concerns about the raft of regulations put forward by state Attorney General Maura Healey, saying while they provided aggrieved players with powerful tools to address concerns and grievances, they were a “random method” of enforcement.

“An appropriately robust regulatory structure would consider how to work in concert with the Attorney General’s proposed consumer protection regulations to address these same concerns prospectively, so that issues are detected and addressed, or avoided altogether without the need for consumer action,” the report said.

The bigger picture 

While the report focussed primarily on DFS, it noted the activity was not the only area of egaming the state would encounter. Internet gambling, it said, covers a “dizzying and constantly expanding” variety of games including casino, sports betting, eSports, social, skill-based games and prediction markets.

“Any new regulatory effort for just one of these types of games will surely beg the question of how to handle the others. A regulatory strategy that is broad enough and flexible enough to adapt to any and all of these proliferating games may be worth serious consideration,” the report said.

What next? 

The day after the white paper was published, Massachusetts Attorney General Maura Healey held a meeting to discuss her proposed regulations. The general consensus was that while some form of regulation was needed, the ideas put forward by Healey didn’t quite hit the target. DraftKings was particularly vocal, saying it disagreed with three key points:

• Restricting player age to 21
• $1,000 monthly deposit cap
• Clearly distinguish professional and casual players

Regulatory discussions are still at a very early stage, but Massachusetts is undoubtedly ahead of the curve when it comes to establishing a legal framework in which operators can offer daily fantasy sports contests to players. What’s more, the focus on DFS may have the unintentional but welcome consequence of opening the door for other forms of real-money gaming. And that can only be a net positive for the industry.