DFS Regulations Filed in Massachusetts
On Friday, Massachusetts became the third state this month to enact regulations for the daily fantasy sports (DFS) industry. Unlike Virginia and Indiana, though, no new bills were passed; instead, Attorney General Maura Healey simply filed her final regulations for the industry, supporting any laws that are already on the books. In fact, the regulations even state, “Nothing in this regulation may be interpreted as authorizing a wager, bet, or gambling activity that is prohibited by law.”
Healey’s office began reviewing the DFS industry in 2015 after industry leaders DraftKings (based in Boston) and FanDuel became ubiquitous in the minds of sports fans (and even non-sports fans) because of their seemingly non-stop television commercials. DFS has been around for a number of years, but it wasn’t until 2015 that it really exploded. Normally, that would be a good thing, but DFS’s popularity also brought with it attention from lawmakers and law enforcers, many of whom said, “Hey, wait a second…isn’t DFS gambling and isn’t gambling illegal in our state?”
As such, some state Attorneys General, such as New York’s Eric Schneiderman, sought to shut DFS sites down (or at least boot them from the state), while some, like Healey, took a more reasonable, academic approach, wanting to understand DFS better and see if regulations could be put in place to better protect consumers. And that is what is happening in Massachusetts.
Healey initially put forth a preliminary set of regulations in November, saying in a press release:
These regulations are a first of their kind for the Daily Fantasy Sports industry, and they focus on protecting minors, ensuring truthful advertising, bringing more transparency to the industry, and leveling the playing field for all consumers. This is a first step, but an important step, as we continue to evaluate this new industry and make sure our laws keep up with these evolving technologies.
She also held a press conference, saying of her office’s research into the DFS companies:
We’ve learned a lot about how this business model operates. Our review has already uncovered a number of significant concerns about their business practices and the ability of Massachusetts consumers to be protected and to have a fair shot while playing these games.
For instance, I believe that most people would be surprised to know that in many contests, less than two percent of the people win 90 percent of the prizes. That’s because there’s a small set of professional players who have figured out advanced ways to win a majority of the games. There needs to be more disclosure about how these contests work and about who people are playing against.
To that end, the regulations submitted Friday, which are essentially the same as those from November, require that the DFS sites identify and categorize “highly experienced” players and actually place some sort of icon next to their screen names in the DFS software so that other players know who they are. A highly experienced player is defined as someone who has either played more than 1,000 contests on one site or has won $1,000 in a contest more than three times. DFS sites are required to have contests that highly experienced players are not allowed to enter.
The regulations also put restrictions on how many entries a player can have in any one contest. For example, in the massive GPP’s for which DraftKings and FanDuel are known (more than 100 entries total), players may not have more than 150 entries or more than 3 percent of the total entries, whichever number is smaller.
Players are also not allowed to use scripts. One concession that was made, though, is that “late swaps” are permitted. This means that if some of the real-life sporting events that comprise a DFS contest have yet to begin even after the DFS rosters have locked, contestants can still make lineup substitutions for players in those later games. For instance, weekly NFL DFS contests typically lock at 1:00pm ET on Sunday, as that is when the early games on Sunday begin. There are some games, though, that do not start until later in the afternoon, Sunday night, or Monday night. In these cases, DFS contestants can change out a player on his roster if he is in one of those later games (with another player in a later game), as long as those games haven’t started yet.
There are, of course, many other regulations. Nobody under 21-years old may compete, DFS operators cannot market to minors, cannot host events at schools or colleges, and cannot have contests based on the results of amateur games.
Player protections in place include things like the ability to self-exclude or self-restrict, the required segregation of player funds from operating funds, and a $1,000 per month limit on individual player deposits. This limit, though, can be increased on a case-by-case basis at the discretion of the operator.
The entire regulations document can be found on the Massachusetts AG website. Operators must be in compliance by July 1st.