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Lawmakers Keep Close Eye on Fantasy Sports Gambling

The industry has been growing exponentially, but when an employee of a fantasy sports company won $350,000 on a rival site, many saw the need for regulating the industry.

by Christopher Keating, The Hartford Courant / October 8, 2015
Fantasy sports gambling is serious business, and one that legislators think should be regulated. Flickr/Chimpanz APe

(TNS) -- A key legislator said Wednesday that fantasy sports operations are actually gambling and should be treated as such.

Rep. Stephen Dargan, the co-chairman of the legislative committee that oversees gambling, said the recent controversy over the sports betting sites has placed the issue in the spotlight. An employee at a fantasy sports site recently won $350,000 on a competing web site – raising questions about the amount of internal knowledge that employees might have that others players do not.

“It’s almost like insider trading,’’ Dargan told The Courant. “When I started seeing this advertised, I said this is going to be a big issue. It’s not regulated, and people are making big, big money.’’

He added, “It’s fairly new, and it seems to be highly unregulated. How is this not a form of gambling? I think it is.’’

The two biggest sites in the business are DraftKings and FanDuel Inc., where passionate sports fans assemble teams of actual players and then the outcome is determined by the real-life statistics of those players.

New York State’s attorney general has launched an investigation, and FanDuel said Wednesday that it is now preventing its employees from earning money from the games on any site.

Jaclyn M. Falkowski, a spokeswoman for Connecticut attorney general George Jepsen, said the office is aware that the sites are operating in Connecticut.

“To the extent that the operation of these sites constitutes gambling under Connecticut law, that would be a criminal matter over which jurisdiction would lie with the chief state's attorney,’’ she said. “We are currently consulting with the Department of Consumer Protection, with whom we collaborate on consumer protection matters, to determine if information in public reports or from other sources suggests that sites have operated in a manner that involves unfair or deceptive trade practices.’’

State consumer protection commissioner Jonathan Harris said that any criminal cases would be prosecuted by the chief state’s attorney’s office.

“We have jurisdiction over legalized gambling, which is casinos, off-track betting, and the lottery,’’ Harris said. “We don’t do anything with respect to illegal gambling, which is the purview of the state’s attorney’s office. If it’s illegal, it doesn’t matter if it’s an unfair trade practice, because then it is a criminal matter, and the chief state’s attorney office takes care of that.’’

State officials have only recently become aware of the fast-growing popularity of the sites.

“The whole rise of fantasy sports – the explosion – I started noticing it in the last month with the advertising,’’ Harris said. “This organized fantasy sports is relatively new.’’

Nationally, fantasy sports is not considered gambling because of a federal law that Congress passed in 2006 that is known as the Unlawful Internet Gambling Enforcement Act. The key point is that fantasy sports is viewed as a “game of skill,’’ rather than a game of chance. As such, it is not considered as gambling and is legal.

Sports gambling is illegal in 46 states, including Connecticut. The only states that permit sports gambling are Nevada, Montana, Oregon and Delaware.

In a detailed statement Wednesday, FanDuel said, “Based on everything we know thus far, there is no evidence indicating that the integrity of FanDuel’s contest was in any way compromised, or that non-public information was used for unfair advantage. That said, the incident has raised questions about the trust-based relationship we have with our players so just relying on what we know right now isn’t enough.’’

As such, the company said it has already “permanently banned our employees from playing any daily fantasy games for money, on any site.’’ The company also asked former U.S. Attorney General Michael Mukasey to study the incident and review the company’s practices.

“His mandate is to conduct a review to identify ways that we can ensure we are doing the right things to maintain the trust we have with our players,’’ the company said. “He will have the freedom and authority to look at any areas he thinks appropriate.’’

FanDuel will also be “speaking with regulators across the nation about how to define the right set of rules for our industry as it continues to grow.’’

©2015 The Hartford Courant (Hartford, Conn.) Distributed by Tribune Content Agency, LLC.

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