Menendez, Pallone Decry Lack of DFS Oversight in New Jersey Press Conference

Two of New Jersey’s elected federal officials, US Senator Robert Menendez and US Representative Frank Pallone, continued their joint call for federal action and oversight of the US-based daily fantasy sports (DFS) industry with a press conference within shouting distance of the New Jersey-based Meadowlands Sports Complex.

pallone-menendez-press-photo

Congressman Frank Pallone, Jr. (NJ-06) and U.S. Senator Robert Menendez (D-NJ) and East Rutherford Mayor James Cassella hold a joint press conference calling for an investigation and regulation of the daily fantasy sports industry, using MetLife Stadium as a backdrop. (Source: pallone.house.gov)

The two federal officials were joined by East Rutherford, NJ mayor James Cassella in issuing the call for oversight, in an ongoing effort to drum up support for Congressional hearings on DFS’s presumed legality.  The industry sprang to life this decade as a result of a “fantasy sports” loophole in the 2006 UIGEA (Unlawful Internet Gambling Enforceent Act),which bans the use of the US banking system as a way to fund wagering in many other forms of online gambling.  However, in the wake of last week’s revelations that market leaders DraftKings and FanDuel may have lax internal controls over certain user data, possibly allowing the sites’ own employees to wager profitably against the industry’s general customer base, calls for reform have been widespread.

The press conference follows last month’s call by Rep. Pallone for the US Congress to hold hearings on the same issue, and also comes after Pallone and Menendez sent a joint letter last week to the head of the Federal Trade Commission, Edith Ramirez, on the same topic.  Menendez and Pallone also have their home state’s ongoing interest in legalized sports betting at heart, as New Jersey continues to battle the ongoing federal PASPA ban against more traditional sports-betting activity in the state.  Menendez and Pallone have both questioned how DFS can be legal and unregulated while their state’s own voter-approved sports betting plans continue to be stymied by the efforts of the US’s major professional and sports associations, who not coincidentally are finding ways to profit from the new DFS offerings.

“Daily fantasy sports is an industry crying for consumer protection,” said Congressman Pallone in a formal press release. “Despite its explosion in popularity and the allegation of ‘insider trading’ by employees of daily fantasy sports operators, the industry is operating in a void within the legal structure – without any regulation or the necessary transparency. The backdrop of MetLife Stadium calls attention to the fact that the same professional sports leagues and teams that support and invest in fantasy sports betting, are opposed to and serve as a barrier to professional sports wagering. The illegality of sports betting has forced it to function almost exclusively through organized crime, and the lack of regulation of daily fantasy sports has left the industry open to unfair practices and consumer vulnerabilities. Both need to be taken out of the shadows and should be legal and regulated.”

“I have serious concerns about whether these online fantasy sports leagues can police themselves,” added Menendez. “This is about fairness and ensuring a level playing field for fantasy sports fans. There’s a lot of money at stake, and these sites are drawing in tons of players. These players should know they aren’t being duped. I think Congress needs to look into this and see whether by exempting fantasy sports from the Unlawful Internet Gambling Enforcement Act, we’ve created a regulatory vacuum that leaves consumers out in the cold.”

East Rutherford mayor Cassella continued his ongoing invective against the National Football League.  The NFL is the primary force behind the ongoing PASPA ban, and many of its teams have lucrative partnertship deals with either DraftKings or Fanduel.  Cassella’s opinion of the NFL has only hardened since last year, when he told a New Jersey media outlet, “The league’s tax-exempt status should be looked at. [] I spoke about the arrogance of the NFL back when the Super Bowl was here. This is the way they operate. They’re arrogant.”

Today’s conference was held within eyesight of the Meadowlands, which is home to both the NFL’s New York Giants and New York Jets.

Pallone and Menendez are likely to continue hammering the DFS issue in coming weeks, which is one of sevral different areas of concern for the sites.  State and federal interest in the ongoing situations at the two leading DFS sites continues simmering, and at least three DFS sites (including the PokerStars-affiliated StarsDraft), have stopped serving Florida customers after that state’s attorney general expressed doubts about the industry’s legality there.

As for the recent letter to the FTC, Menendez and Pallone wrote, “We write regarding recent reports that employees of fantasy football websites may have used nonpublic information to place bets at each other’s websites. These reports raise serious questions about the integrity of these online fantasy sports websites, and it raises the question of whether there are sufficient consumer and competition safeguards to protect the integrity of these online games.”

The letter went on to site a recent LSR story which included a quote from an unidentified employee of one of he sites, who said, “[M]any of the top moneymaking players at these sites ‘are employees – often executives – of other sites.'”

The elected officials summarized their concerns by writing, “Consumers also expect companies that hold online contests to do so in a fair, transparent manner. Allowing employees of fantasy sports websites with access to nonpublic information to participate in online fantasy games, even if the games are operated by other fantasy sports companies, could give those employees an advantage akin to insider trading. Therefore, we also ask the FTC to investigate whether this constitutes an ‘unfair or deceptive practice’ as defined in Section 5 of the FTC Act.”

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