Massachusetts DFS Regulations Come Into Focus

With the introduction of the Massachusetts Gaming Commission’s daily fantasy sports white paper, which occurred just a day before a public hearing to discuss the proposed regulations Attorney General Maura Healey first unveiled in November was held, Massachusetts continues to move forward with its plans to pass sweeping regulations designed to bring the daily fantasy sports under the state’s regulatory umbrella.

But it may not be as easy as some initially thought, as a consensus on how sweeping those regulations should be has yet to be reached.

There are several discrepancies between the attorney general and MGC’s views of DFS’s legality, and if this weren’t enough, the industry has also weighed in on the matter.

Legality of DFS “unsettled” according to MGC

In their white paper, the MGC questioned the legality of DFS contests in Massachusetts, and Attorney General Healey’s opinion that it complies with state laws. For the MGC, the matter remains “unsettled,” and something the legislature should bring clarity to. “Massachusetts is in unsettled legal territory with respect to DFS as there are no statutes or legal decisions that directly address the topic,” the white paper states.

Concerns were also raised about DFS’s potential violation of federal PASPA laws, something attorney Daniel Wallach has also broached in the past. The MGC doesn’t believe DFS is expressly illegal under current Massachusetts law, rather they feel the attorney general’s opinion that it’s legal is overstated. This is an issue the MGC feels can only be resolved by legislative action, putting forth the following opinion in the white paper: “The real question for the Legislature is ultimately not “Is DFS legal?” but “Do we want DFS to be legal, and if so, under what conditions?”

Amount of regulation

The MGC white paper also calls for stricter regulations of the industry than the proposed regulations Healey put forth in November. Further complicating matters, at a public hearing last week, industry representatives pushed back on several of Healey’s proposals. While all three parties are in agreement that regulations are needed, there is subtle to strong disagreement as to how severe these regulations should be.

After several years of a largely laissez-faire environment, there is a growing consensus amongst regulators, industry analysts and the DFS industry itself that some form of regulation is necessary not only to protect the interest of DFS players, but also to provide some clear guidelines and predictability to DFS operators.

The MGC white paper makes the case for a regulatory body to be put in place to oversee the DFS industry, as it worries the attorney general’s proposal, where aggrieved customers file formal complaints, might not be enough:

This tool, however, necessitates that an aggrieved consumer or law enforcement agency seek remedy which for many may be too costly or time consuming to pursue, and which in any case provides only a very random and reactive method of enforcement. An appropriately robust regulatory structure should 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.

Such a model would require a body or an agency to promulgate regulations, monitor compliance, enforce corrective action and continuously work with the DFS operators to ensure the proper functioning – from a regulatory perspective – of the industry

However, the MGC is also in favor of a “light” regulatory approach that gives the regulatory body discretion, and wouldn’t be as inflexible as the typical casino-style regulatory model.

• The scheme must be commercially viable
• The scheme must be technologically feasible
• The scheme should attempt to balance the “problem solved” with the “cost increased”
• The scheme should be “risk-based,” balancing the risk and seriousness of the problem with the cost and imposition of the solution

The MGC also notes that the nascence of DFS, and the speed online industries evolve, could lead to future problems if the regulations put in place are tailored to the current version of DFS or too narrowly defined:

Finally, in this particular case, given the nascent nature of the DFS industry and its likely, but unpredictable evolution, the issues examined should be fundamental in nature (broadly defined) so as not to confine the analysis to the games as they currently exist, but rather to identify and anticipate the universal public policy issues of concern both now and in the future.

What approach will the state take?

The public comment period on Attorney General Healey’s proposed regulations is coming to an end, and the MGC has recently indicated that the matter is now in the hands of the legislature. So it appears we’re now in the wait-and-see phase of the process.

That being said, it’s likely the legislature will take the advice of the Attorney General, the MGC, and the DFS industry, and craft reasonable regulations.