The Massachusetts Special Commission on Online Gambling, Fantasy Sports Gaming, and Daily Fantasy Sports released a preview of its report which recommends placing DFS sites under the umbrella of “online gaming”. The report calls for DraftKings, FanDuel, and other sites to be regulated and taxed.
The Special Commission began work 9 months ago on its report, which it plans to submit to the Massachusetts legislature next week. The draft of the report was released this week, though the Commission does not plan a final vote on the report will not happen until July 31.
The draft recommends permanently legalizing daily fantasy sports, according to the Statehouse News Service. The commission recommends that other forms of online gaming, such as online poker or online casinos, not be legalized at the moment.
Why Legalize Daily Fantasy Sports?
The reasons for the distinction is impact and scale. Daily fantasy sports generates a far smaller amount of revenue than online casinos or poker sites, so the impact of such iGaming is far less. The commission wrote, “At this time, the Special Commission recommends legalizing DFS as a subset of online gaming and enacting legislation that would put into law the proposed regulatory, governance, and taxation system described above.”
“However, the Special Commission recommends not legalizing more expansive online gaming at present, particularly in consideration of the fact that two resort casinos are not yet open, but urges re-evaluation in the near future and legislative oversight to continue to evaluate online gaming and activity at state and federal levels.”
Online Gambling Proponents Displeased
The commission’s decision will not make many in the online gaming community happy. For proponents of legalized online casinos and poker sites, the recommendation suggests a long delay on any legalization efforts. The Special Commission represents a broad range of legislative, bureaucratic, and business interests, so the legislature is likely to take their advice. If so, then online gambling has little chance of gaining passage in Massachusetts in the near future.
Daily Fantasy Sports Proponents Displeased
The Special Commission’s recommendations does not please the daily fantasy sports industry, even though it legalizes their form of gaming. DraftKings and FanDuel have fought for years to keep from being labeled a form of gambling. While that distinction might do not harm to the DFS sites in Massachusetts, it makes life more difficult for the sites in other states.
At present, 47 states ban online gambling. If DraftKings and FanDuel admit to being a form of gambling in Massachusetts and applies for a license as a gambling operator, then those other states might shut down their operations for being an admitted online gambling operator. Two years ago, DraftKings and FanDuel pulled out of Nevada’s market to avoid that very distinction.
DraftKings Statement on “Online Gaming”
James Chisholm, DraftKings’s Director of Public Affairs, told Statehouse News, “We fundamentally disagree with some of the recommendations in the Commission’s draft report, particularly its proposal to define fantasy sports as ‘online gaming.’ No other state in the country has characterized fantasy sports this way.”
Mr. Chisolm added that the policy being advocated by the Special Commission could hurt a local business. He told Statehouse News, “DraftKings is proud to call Boston and Massachusetts home. We have more than 300 employees from 79 cities and towns across the state, and while we are committed to growing and innovating here, this provision, if adopted, could impact our ability to do that.”
Of course, the daily fantasy sports sites’ lawyers could argue the definition of “online gaming”. In some states, the term “gaming” has been used to avoid calling fantasy sports “gambling”. Unfortunately, the language in the Massachusetts report seems to throw all forms of gaming into the same category, so DraftKings and other DFS operators seems to be viewed like a gambling operation.
Stephen Crosby’s Recommendations
The Massachusetts Gaming Commission’s chairman, Stephen Crosby, called for a more flexible solution throughout the Special Commission’s deliberations. Crosby was one of 9 people placed on the Special Commission, people who naturally have many different approaches to online gambling.
Stephen Crosby backed what he calls the “omnibus approach” to online gambling. Instead of the legislature passing a rigid set of online gambling laws, they would appoint a commission or panel to oversee online gambling on a trial basis, then set policies as they learned more about the industry. Crosby suggested his Massachusetts Gaming Commission could handle the job, though he suggested he would still recommend the approach if a separate commission was appointed.
Chairman Crosby said the omnibus approach would avoid the skill-versus-chance debate that has plagued so many other states. That might circumvent the need to decide whether daily fantasy sports is gambling or something else, too. Lawmakers are not prone to giving up their right to formulate laws, though, so it is uncertain how realistic the omnibus approach is.
Stephen Crosby on Litigating DFS
In defending his views, Stephen Crosby said, “There have been millions of dollars spent litigating whether DFS is a game of skill or a game of chance, and if it’s some skill is it enough skill to make it avoid the regulations of games of chance. That just makes no sense to me.”
With years to study the issues, the GMC chairman thinks many of the political arguments are nonsense. He added, “What difference does it make as a matter of public policy whether you gamble on the throw of dice or the throw of a dart? Does it make any difference that one is skillful and one is pure chance? Should they be regulated any different? I just don’t get that.”
