WRITTEN TESTIMONY: Opposition to House Bill 2549
March 29, 2017

Honorable Members of the Oregon House Business and Labor Committee:

My name is Michael Grimes, and I serve as executive director of the Stop Daily Fantasy Gambling coalition, a national 501(c)4 nonprofit organization dedicated to stopping the proliferation of illegal gambling like daily fantasy sports gambling. I appreciate the opportunity to write you today in opposition to House Bill 2549, which is being considered in the House Business and Labor Committee. Many states across the nation are struggling with the question of whether and how to allow online daily fantasy sports gambling amid an aggressive legislative push by the big companies that run these games of chance.

I understand that the Oregon legislature is considering HB 2549 to require registration of “fantasy contest operators” with the Oregon State Lottery Commission and allowing that agency to promulgate rules to regulate “fantasy contests.” Stop Daily Fantasy Gambling is adamantly opposed to allowing online daily fantasy gambling to be legitimized in the manner prescribed by HB 2549. Daily fantasy sports gambling is operated online by a relatively new, largely unregulated corporate industry that has been plagued by scandal in many other states. These gambling events involve wagers by players on events, with winners taking the proceeds from the losers after the website operators have taken a cut for profit. Despite clearly indicating the components describing a form of gambling, HB 2549 never uses the terms “contest of chance,” “gambling” or “wager” once in the more than one thousand words of text in the bill.

Major gambling industry companies like FanDuel and DraftKings are trying to persuade legislators to give them special treatment, allowing them to circumvent the gambling laws of the state. But existing Oregon state law defines these terms already in statute (ORS 167.117), so perhaps a better approach would be to define and regulate these activities in a manner similar to the way those other forms of gambling are already treated. Until then, the SDFG coalition will remain opposed to HB 2549.

Thank you for your time and attention, and feel free to contact me with any questions or concerns.

Michael Grimes

Executive Director, Stop Daily Fantasy Gambling

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Gambling Compliance
By: Tony Batt
March 23, 2017

Two bills calling for the legalization of daily fantasy sports (DFS) in Texas are encountering pushback from a new coalition which hopes to go national in opposing the expansion of companies such as DraftKings and FanDuel.

Stop Daily Fantasy Gambling, which launched operations on March 13 in Austin, claims daily fantasy sports companies are exploiting legislative loopholes to avoid being licensed and regulated like other forms of gambling.

“They want daily fantasy sports to be treated as a game of skill,” said Michael Grimes, a public affairs consultant in Austin who organized the coalition. “We want to make sure government is protecting consumers by regulating daily fantasy sports as gambling,” Grimes said.

The new group has emerged as a Democrat and a Republican have introduced bills in the Texas House and Senate to legalize and regulate DFS in the Lone Star State.

Democratic state Representative Richard Pena Raymond unveiled his bill on February 1 in the Texas House of Representatives.

So far, more than 65,000 Texans have contacted their representatives in the House urging support for Raymond’s bill, according to Scott Dunaway, who represents the Texas Fantasy Sports Alliance. On the other side of the aisle, Republican state Senator Lois Kolkhorst introduced a similar measure in the Senate on March 10.

Marc La Vorgna, a spokesman for DraftKings and FanDuel, the two largest DFS companies which are in the process of merging with each other, described Kolkhorst as “a major conservative voice.”

“Texas is one of the biggest sports states in the country, so it’s not a surprise we have seen a tremendous swell of fan and grassroots support for legislation protecting the right to play fantasy sports,” La Vorgna said.

“We have strong bipartisan support with bills in the House and Senate, and we are hoping the legislature will act to support the four million Texans who play fantasy sports.” DraftKings sued Texas Attorney General Ken Paxton after he declared in a January 2016 advisory opinion that daily fantasy sports is a form of unlawful gambling under state law.

While the case remains pending, passage of either of Raymond’s or Kolkhorst’s bills would essentially render it moot and grant the fantasy sports companies legal security to offer games to Texans. So far, eight states have passed laws to recognize and regulate fantasy sports contests as a lawful game of skill.

But as the mainstream gaming industry and fantasy sports companies compete to establish a larger footprint in the emerging DFS market, battles like the one in Texas are likely to be duplicated across the country.

For example, the Kentucky House of Representatives voted 37-36 on March 2 to legalize DFS as a game of skill. However, 40 votes were required for passage, and the bill failed.

Similar legislation is being considered in nearly two-dozen further states, including Minnesota, New Jersey and Tennessee.

“This is going on in a lot of states,” Grimes said. “We intend to engage in all the states where they’re doing this.”

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Media Contact:
Michael Grimes
866-224-4957 ▪

Austin, Texas—March 13, 2017. Individuals and organizations opposed to illegal gambling today announced the
formation Stop Daily Fantasy Gambling, an organization dedicated to stopping the spread of unlicensed and
unregulated daily fantasy sports (DFS) gambling nationwide and, specifically, illegal daily fantasy sports
gambling using loopholes to avoid being treated like all other forms of gambling.

Online daily fantasy sports games are operated by a relatively new and largely unregulated corporate industry
that allows a bettor to attempt to win money by simulating sports team ownership or management. They are not
office pools or rotisserie-style fantasy sports leagues played among friends for fun and bragging rights. A daily
fantasy sports contestant pays an entry fee wager to the website and creates a team that relies entirely on
scoring based on the total of the statistical performance of individual players. Much like other forms of gambling,
fantasy sports players can wager every day on multiple contests whether it is baseball, basketball, football,
hockey or soccer. The money is awarded to winners competing against others in the online games, while losers
forfeit their fees and the website operator profits by taking a cut of the proceeds. This occurs in an environment
where high-volume players using computer scripts and special software submit thousands of lineups at once to
take advantage of new and less experienced players.

“Many states across this country are struggling to prevent exploitation of their citizens by online gambling that
pretends to be treated like a sporting event or a game of skill,” said Michael Grimes, executive director of Stop
Daily Fantasy Gambling. “In my home state of Texas, Attorney General Ken Paxton has clarified that daily fantasy
sports gambling is illegal, yet websites like FanDuel and DraftKings want the legislature to suspend reality to
allow special treatment and circumvent the gambling laws of the state.”

State legislatures across the country are considering ways to deal with this new virtual form of gambling and the
efforts of these companies to avoid gambling regulation, even though the betting is identical to online poker and
online horse races on the Internet – both gambling activities. While illegal online daily fantasy operators in other
countries like the United Kingdom have agreed their industry should be regulated as gambling, in the United
States, operators still claim it is a legal, skill-based game and demand an exception to gambling laws.

“Despite what proponents of daily fantasy gambling may suggest, the fact is, it is illegal gambling,” said Grimes.
“We agree with state policy makers across the U.S. who treat this activity as gambling, and we will aggressively
oppose efforts to legitimize this practice in support of an unregulated industry that has been plagued by scandal.”


Stop Daily Fantasy Gambling is a 501(c)4 nonprofit organization dedicated to fighting the proliferation of
unlicensed and unregulated online daily fantasy sports gambling nationwide — specifically, daily fantasy sports
gambling using loopholes to avoid being treated like all other forms of gambling. For more information,


  • Online daily fantasy sports games are unregulated corporate activities offered by website
    operators that allows betting on the unknown outcomes of sporting events and result in a cut of
    the proceeds becoming profits for websites like Fan Duel and Draft Kings. Fantasy sports
    operators will say they don’t collect bets but they do collect entry fees, which clearly serve the
    same purpose as bets because that is where the operator’s or “house’s” profits come from.
  • Despite efforts to avoid regulation as a gambling activity, operators like Fan Duel and Draft Kings
    are facing state legislators across the country who are considering or adopting gambling
    licensing and regulatory schemes for daily fantasy gambling or outlawing the activity outright.
  • Stop Daily Fantasy Gambling opposes efforts of online daily fantasy gambling operators to
    violate laws and avoid gambling licensing and regulation that protects the public from


  • “Many states across this country are struggling with ways to ensure their citizens are not
    exploited by online gambling that pretends to be treated like a sporting event or a game of skill.”
  • “We agree with state policy makers across the U.S. who treat this activity as gambling, and we
    will aggressively oppose efforts to legitimize this practice in support of an unregulated industry
    that has been plagued by scandal.”
  • “In my own home state of Texas, Attorney General Ken Paxton has clarified that daily fantasy
    sports gambling is illegal yet websites like Fan Duel and Draft Kings want the legislature to
    suspend reality to allow special treatment and circumvent the gambling laws of the state.”
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James Barragán
American-Statesman Staff
Thursday, Feb. 2, 2017

Texas lawmakers are venturing into the debate over the legality of daily fantasy sports leagues, a billion-dollar industry that has created regulatory battles across the country.

State Rep. Richard Peña Raymond, D-Laredo, on Wednesday followed through on a promise last summer to propose a bill that plainly designates fantasy sports as legal, skill-based games in direct contradiction to the opinion handed down by Texas Attorney General Ken Paxton last year deeming them illegal gambling.

“If you don’t think fantasy football is a game of skill, then you haven’t played it,” Raymond said. “This is something that government shouldn’t stick its nose into. A government shouldn’t take away our right to play fantasy football.”

Participants in daily fantasy sports contests pay an entry fee and create teams from a menu of professional or amateur athletes, then compile points based on statistical performance, such as yards gained and touchdowns scored in football. Money is awarded to the owners of the top teams in the online games, which typically last one day to one week.

Daily fantasy sports games are a relatively new and largely self-regulated industry, with operators required to interpret each state’s laws — most of which, like in Texas, do not mention fantasy sports — to determine whether the games are allowed.

Raymond, along with four co-sponsors, filed three bills Wednesday related to fantasy sports.

Two of the bills, HB 1418 and the identical HB 1422 Raymond filed as the sole sponsor, would require fantasy game operators to pay a registration fee of $5,000 with the Texas secretary of state. Those operators would also be required to pay an annual $5,000 renewal fee.

The bill would also aim to prevent insider information trading and other activities that led to scandals that prompted governments to scrutinize the industry over the past two years. It would carry civil penalties of $1,000 for violations of the law.

But Raymond said he would be pushing forward HB 1457, a proposal that has no filing fee and no civil penalties but includes provisions to combat insider information trading. Under the bill, the attorney general could stop a fantasy sports business from operating if it violated the rules of the proposal. Violators would be subject to paying back any costs incurred by the attorney general in case of an injunction.

All the proposals require participants in paid fantasy sports contests to be 18 or older.

More than 57 million people in the country — including 4 million in Texas — play fantasy sports, according to trade groups. Participants spend an estimated $556 over a 12-month period to invest in their fantasy sports team, the Fantasy Sports Trade Association said.

“(Texas Fantasy Sports Alliance) applauds Rep. Raymond for proposing legislation that clarifies the right of Texans to play fantasy sports, while also providing consumer protections, and allowing this growing industry to prosper in Texas,” Scott Dunaway, a spokesman for the pro-fantasy sports group said in a statement. “We are confident the legislature will follow their lead by affirming the legality of this extremely popular leisure-time activity.”

Raymond said he feels confident that his proposal could make its way through the House. No corresponding bill has been filed in the Senate, but Raymond said he’s spoken to several lawmakers in that chamber about his proposal.

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Ezekiel Elliott rumbles up the middle for a 50-yard touchdown run. The Dallas Cowboys get a victory, and you win money with your fantasy football team.
Were you lucky or good?

That’s the question lawmakers aim to answer when they settle on whether to allow fantasy sport companies like FanDuel and DraftKings to operate in Texas.

At first glance, the issue doesn’t appear a winner for the companies. Texas legislators have long shunned anything that resembles gambling. Last year Attorney General Ken Paxton issued an opinion that because daily fantasy sports involve “partial chance,” they qualify as gambling.

“Paid daily ‘fantasy sports’ operators claim they can legally operate as an unregulated house, but none of their arguments square with existing Texas law,” Paxton wrote. “Simply put, it is prohibited gambling in Texas if you bet on the performance of a participant in a sporting event and the house takes a cut.”

But the issue has split conservative lawmakers. Some view it as a matter of protecting the free market and don’t see fantasy sports as gaming. Others see the games as an expansion of gambling and fear racetracks and American Indian casinos could one day include machines to play fantasy sports.

Rep. Richard Raymond, D-Laredo, seeks to settle the matter with a bill he’s pushing this year.

“There’s no difference between that and a fishing tournament or a golfing tournament,” said Rep. Rodney Anderson, a Grand Prairie Republican who’s co-sponsoring Raymond’s bill. “It’s me against everybody else.”

Still, the role of luck is a fact. Does a basket from Dirk Nowitzki in a blowout game that makes you money mean you were skilled in picking him that night?
“As long as it maintains the characterization in the attorney general’s opinion, I’m not in favor of it,” said Rep. Matt Krause, R-Fort Worth. “The biggest part is when the house keeps a cut. How do you distinguish that from gambling?”

Raymond disagrees.

“It is a game of skill, not a game of chance,” he said. “If you don’t think fantasy football is a game of skill, then you haven’t played it.”

The anti-gambling lobby could be critical in the debate.

Robert Kohler, a lobbyist for the Christian Life Commission of the Baptist General Convention of Texas, said he doubts the Legislature or the governor would see the issue as anything but an expansion of gambling.

“Attorney General Paxton got it right,” Kohler said. “Folks on both sides will agree there’s an element of chance. At the end of the day, trying to sneak this thing in as a skill is a bad way to sell this policy.”

Kohler said letting fantasy sports companies operate in Texas should require a constitutional amendment, which the group would oppose.

Rep. John Kuempel of Seguin, the chairman of the House Licensing and Administrative Procedures Committee, supports allowing daily fantasy games.

“I am proud to support legislation that protects Texans’ right to participate in fantasy sports contests, while preventing unnecessary government involvement in Texans’ personal lives and pocketbooks,” he said in a written statement.

Popular pastime
Millions of Texans play fantasy sports. Most have football, baseball and basketball leagues with friends or co-workers. They pick players based on a points system. League winners usually win money derived from league fees.

FanDuel and DraftKings, however, use technology that allow daily fantasy leagues, where people can win money by playing against each other. Advertisements boast that a player can win thousands of dollars in one day.

The contests attract professional players who use computer formulas and other information to excel. They are not your average Sunday fantasy football players, though company officials point out there are different levels of fantasy play.

Marc La Vorgna, a spokesman for DraftKings and FanDuel, said the companies have sought clarification of the law in other states. New York reversed field when lawmakers passed legislation that allowed fantasy companies to operate there.

“In Texas our goal is to see that Texas’ law is updated to include the evolution of fantasy sports,” he said.

La Vorgna disagrees with Paxton’s argument that it’s luck, not skill, that produces fantasy sports winners.

“It’s clear that it’s a skill,” La Vorgna said. “A player is no different than a manager of a professional sports team…Was it luck, or a process of evaluating assets and players?”

Gambling in disguise

Some opponents worry about how daily fantasy sports could evolve.

In Nevada officials declared that fantasy sports would be regulated as a gambling interest in that state, though industry leaders are pushing back, saying their games involve skill.

The lottery in Montana allows fantasy sports betting, but only in casinos and certain bars.

There are also fantasy gaming operations at American Indian casinos in Minnesota.

In Texas, the state Lottery Commission was scrutinized for efforts to pursue daily fantasy games. Abbott squashed that plan before it got rolling.

But there’s no denying the games’ popularity. Texas sports owners have taken notice. Cowboys owner Jerry Jones has an investment in DraftKings.

Meanwhile, Dallas Mavericks owner Mark Cuban has said he would invest in a fantasy sports company.

Scott Dunaway, a spokesman for a group called the Texas Fantasy Sports Alliance, said he hoped the Legislature would clarify that Texans to continue to enjoy football Sunday and other fantasy pursuits.

“They’re a lot of people in Texas that play fantasy sports,” he said.


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WASHINGTON — The House subcommittee hearing was labeled “Daily Fantasy Sports: Issues and Perspectives.”

The real purpose, however, for the nearly two-hour long hearing on Wednesday became clear minutes in: the decriminalization of sports gambling nationwide.

“The biggest thing for me is that I would like us to legalize sports betting,” Rep. Frank Pallone (D-N.J.) said after the hearing. “I am hoping this panel and the statements that were made about why it doesn’t make sense to allow (sports betting) to go underground and run by organized crime would lead us to some kind of legislation.

“The point is allowing sports betting to be legal in states like New Jersey who want it. That’s what I was hoping this would contribute to, primarily.”

Pallone was the driving force behind the hearing, asking for the U.S. House Subcommittee on Commerce, Manufacturing and Trade hearing to review daily fantasy sports to probe whether consumer protection legislation was needed.

And the landscape of daily fantasy sports was discussed extensively.

A handful of committee members queried the panel – which lacked representatives from FanDuel, DraftKings and the major sports leagues – about protecting the average daily fantasy player from algorithms used by elite players that tilt the odds in their favor, and the patchwork of state laws that currently govern how the daily fantasy is regulated.

Industry-leading DraftKings and FanDuel have been forced to cease operations for paid games in 12 states after daily fantasy was deemed illegal under respective state gambling laws: Alabama, Arizona, New York, Hawaii, Iowa, Louisiana, Mississippi, Montana, Nevada, Washington, Texas and Idaho.

Pallone said he was “disappointed” that FanDuel and DraftKings declined to attend the hearing. The NFL also declined the invite as did NBA, NHL and MLB – three leagues that have partnered and even purchased stakes in either FanDuel or DraftKings.

He wanted to show the hypocrisy in how leagues treat gambling versus their support of daily fantasy sports,” sports and gambling law attorney Daniel Wallach told USA TODAY Sports. “Unfortunately, there was no patient to examine since all the key stakeholders stayed away.”

Pallone said more hearings and legislation to protect consumers were possibilities.

“At worst, this hearing was a colossal waste of time,” said Wallach, partner at the firm Becker & Poliakoff. “Maybe (Pallone) elicited enough support for another hearing.”

Pallone has authored legislation over the years to exclude New Jersey from the Professional and Amateur Sports Protection Act of 1992 (PASPA), which, effectively, has limited state-sponsored sports betting to Nevada. None of his proposed legislation has moved out of committee.

Pallone also supports an appeal pending in front of the Third Circuit Court of Appeals as New Jersey argues it should be allowed to conduct sports betting at casinos and horse tracks. A decision by the appeals court is expected within weeks.

“I take the position that it’s not even constitutional,” Pallone said.

A line formed outside the hearing room in a House office building where inside, Fantasy Sports Trade Association chairman Peter Schoenke spoke on behalf of FanDuel and DraftKings.

“We don’t really feel that PASPA impacts us at all,” Schoenke told USA TODAY Sports. “We are a game of skill. That’s a law about sports gambling, so whatever Congress decides to do with that, we are neutral.”


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The first time that daily fantasy sports caught the attention of New York Attorney General Eric Schneiderman was late last summer, when an advertising blitz made it close to impossible to watch an NFL game without seeing an ad for one of the industry’s two most popular sites, DraftKings and FanDuel.

“I think DraftKings and FanDuel spent something like $31 million in the first week of the NFL season alone,” says Schneiderman. “Then the stories started to break about employees of these companies using non-public information to get a competitive advantage to win money on other sites. At that point, we launched our investigation.”

New York has become a key battleground in the fight over whether daily fantasy sports should be legal or not. In November, Schneiderman decided that the two sites were in violation of New York’s gambling laws. In a cease-and-desist letter, he ordered the two sites to stop accepting “wagers” in the state, the largest market in the nation for the daily fantasy sports industry. An appeals court judge later ruled that the sites could keep operating until questions over their legal status were better settled.

While the sites defend their contests as perfectly legal games of skill, Schneiderman’s office has described daily fantasy sports as a “convoluted scheme.”

In the below interview with Walt Bogdanich of The New York Times, conducted for our joint investigation into daily fantasy sports, Schneiderman talks about why he chose to investigate the industry, why he thinks the odds are stacked against users, and why he calls the sites “a particularly pernicious form of gambling.”

This is the edited transcript of an interview conducted on Jan. 25, 2016. 

A Fan Duel executive told me that daily fantasy sports is really all about entertainment. Why, then, would the government, and you in particular, decide to get involved in a product that’s just about entertainment.

Well, gambling is entertainment. People go to casinos to be entertained. The issue here is not whether or not it’s entertaining, it’s whether or not it is gambling. … And you can’t have unregulated gambling without running into problems.

There’s the saying, “no harm, no foul.” Is that the case here? I mean, who’s being harmed?

Well, the fact is, we just don’t know what’s going on in there. So our investigation is ongoing. It’s clear to us that what they’re doing is gambling, And there are people who have gambling addiction problems. And for them to contend that it’s not gambling, you can almost lure people who know they have gambling addiction problems into getting back involved in betting. And gambling addiction experts have come forward to say this is a particularly pernicious form of gambling.

Is perhaps one of the reasons that they’ve been able to operate so freely across the country due to this 2006 law, or shall I say the ambiguity of the 2006 [Unlawful Internet Gambling Enforcement Act]?

No, the 2006 federal Internet gaming statute is not ambiguous. It does not prohibit gambling on fantasy sports. Now in 2006, of course, the technology for DraftKings and FanDuel didn’t exist. All that exists were the season-long rotisserie baseball leagues and things like that, where traditionally, the sites made money from administrator fees and advertising. They weren’t online gambling enterprises here, where FanDuel and DraftKings described themselves with poker terminology. They take a rake, they take a portion of each betting pot. These are not a new version of traditional fantasy sports. This is just a new version of Internet gambling, more in common with Internet poker than with traditional fantasy sports leagues.

FanDuel told me that they engage in self-regulation and that they’re doing a good job of that. What’s your opinion of that answer?

The answer is no one knows, really. They only caught the attention of state regulators, for the most part, in the second half of 2015, with their advertising blitz, and reports of the improper use of non-public information by employees at DraftKings and FanDuel. State regulators have just started to look into this. They’ve not filed reports, there is no regulatory agency like the Securities and Exchange Commission, which regulates stocks, so we don’t know what they’re doing. We know some of their misrepresentations out there are clearly false and we’re looking at the fraud issues there.

The threshold question is [whether] they’re gambling. Even Nevada, which has a lot of different kinds of gambling, their gaming commission ruled that this is gambling. That doesn’t mean that they’re never going to be able to operate in Nevada, that just means that they have to fully disclose what they’re doing, demonstrate that they’re not committing fraud, and submit to the heavy regulatory structure that all gambling in Nevada is subject to.

Have these daily fantasy companies implemented sufficient consumer protection safeguards?

Well, they clearly had not prior to this round of investigations by my office and others. They claim that they’re implementing new ones, but we really have no way of knowing since there’s no regulatory agency that supervises them. They’re not filing reports as other enterprises would. In New York State, we have a gaming commission that regulates pari-mutuel betting, for which there’s an explicit exemption from our state constitutional ban on betting. We just amended the constitution a couple of years ago to allow for a limited number of Las Vegas-style casinos. They will be subject to heavy regulation. Up until now, FanDuel and DraftKings have not been subject to any regulation, so all we’re doing is taking them at their word that they’re doing the right thing. …

The standard in New York is not whether or not there’s some skill involved. In fact, our laws make it explicitly clear that if there’s a material element of chance, even if skill is involved, it’s still gambling.

… FanDuel told me that they know of no players who are addicted to fantasy sports. Are they telling the truth?

I can’t speak to what they know, but it would be incredible to me that they do not, since we’ve already found in our investigation … produced from DraftKings and FanDuel requests from players to “Take me off, shut my account, I’ve got a gambling problem.” We’ve included in our papers we’ve submitted to the court statements from gambling addiction experts.

This is a particularly pernicious form of gambling, because it’s an app on your smartphone. You can go into a sports bar, with your buddies, and lose your rent money. The casino, at least you’ve got to go to the casino, go in, and you know what you’re doing, and you can set limits for yourself. This is a real problem for gambling addicts, for gambling addiction experts, and again, the fact that they continue to deny that it’s gambling really sends a message to people, “you don’t have to worry about your addiction here,” when in fact, people do.

Are daily fantasy games fair, as far as you know?

That is something that we’re looking into in our investigation. It’s an ongoing investigation. There certainly have been allegations that they’re not fair … What the daily fantasy sports sites do to make this worse, is they run ads that are clearly geared to attracting “the minnows,” attracting the small players, suggesting that “it’s easy to win,” “everybody can win.” In fact, it’s very difficult to win, for an average player … Eighty-nine percent of the players lose money. If that’s true, or if it’s even worse, then that raises the question of who is winning all of the money, and if there are a small number of professionals using computer scripts so that they can quickly move hundreds of lineups at a time, based on the latest breaking information about player injuries, and things like that, they have a huge advantage over the casual player. This is something that we’re investigating.

We’re also very curious about what representations are being made. We know that there have been representations, for example, that average winnings are in excess of $1,200. That representation fails to take into account the losses, so yes, for the winners, that’s their average, but the overwhelming majority of people lose. The average net is a loss. That type of misleading statement makes us wonder what other kinds of misstatements they’re making and what other sorts of misconduct are going on inside this incredibly, opaque, massive gambling enterprise.

If most people who play lose, what percentage of the players win?

Again, according to DraftKing’s own statistics, fewer than 11 percent are winners, and a small portion of those winners win the overwhelming majority of the money. There has been some of these circumstances documented in investigative journalistic reports. One in the Sunday Times Magazine, about these professional operations that use computer scripts and that can bet hundreds of lineups, pick hundreds of lineups for a game, every day, much more nimble than a regular, casual player, about adjusting their lineups right before the deadline. And the allegations are that the fantasy sports sites sometimes cater to these high rollers, to these folks whose business they really are dependent on.

How did daily fantasy sports come onto your radar screen?

I think, for my office, and for a lot of other state regulators, it really was the advertising blitz that took place this summer.

That was a lot, wasn’t it?

Hundreds of millions of dollars. I think DraftKings and FanDuel spent something like $31 million in the first week of the NFL season alone. Then the stories started to break about employees of these companies using non-public information to get a competitive advantage to win money on other sites. At that point, we launched our investigation in early October, other states started to make inquiries, and since then, state after state has held that this, in fact, is gambling, and that subjects them to the rules and regulations and laws which vary from state to state. Once it’s gambling, you can get it inside a regulatory system and work out what is true and what is false and subject them to penalties if they’re committing fraud against any players.

If I understand your legal argument, what daily fantasy companies are doing right now is illegal, and there is no middle ground. If you’re doing it, you’re violating the law. Is there a middle ground, perhaps regulation?

In states across the country, and what I think you’re seeing in our complaint and the case we brought, and the order we already received from the Supreme Court justice who ruled on the case is that states are finding it’s gambling, but then each state has different laws and regulations about how you regulate gambling, whether it’s completely prohibited. Obviously, Nevada doesn’t prohibit all forms of gambling, but you have to submit yourself to a very rigorous regulatory process to run a gambling operation in Nevada.

… You mentioned the big ad blitz in the run-up to the NFL season. Apart from the fact that there were so many ads, was there something about those ads that troubled you?

Some of the content of the ads we’re looking into because we believe there were misrepresentations made. So beyond the issue of whether or not this is gambling, our investigation is looking at whether fraud has been committed. You’re not allowed to lure people into spending their money or betting their money based on false representations. For example, the deposit bonuses, in FanDuel’s case, they say, “We’ll match the first $200 that you bet,” is clearly a misrepresentation. I think the average that they actually match is something like $8. Things like that, that lure people in, the representations about how easy it is to win, that all comes in the category of possible consumer fraud, and that’s part of our investigation, too.

… Some have suggested that if it is concluded that daily fantasy sports is illegal in the state of New York then it might be pushed underground, much like the Internet offshore gambling sites are.

Well, I’m the top law enforcement officer in this state. My first job is to enforce the law, and I think it’s really misleading to suggest that we can’t vastly reduce the number of people who are online gamblers by enforcing the law that makes gambling illegal. In the online poker industry, they refer to the day that the U.S. Justice Department went after the big online poker sites as Black Friday, because it shut them down. The casual bettors, the people we are the most worried about are not going to seek out illegal offline sites. It would make a big difference. The extent that there are states where there are processes in place, which, it really is true in most states, to regulate and legalize gambling, they just have to go through the same process that racetracks went through, or casinos have gone through, to make sure that it’s regulated, and they’re not committing fraud.

VIDEO: The Fantasy Sports Gamble


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LA Times

Michael HiltzikContact Reporter

Californians — indeed, all Americans — had a thoughtful, consistent approach to gaming, daily fantasy sports sites such as FanDuel and DraftKings would be treated as gambling and their sponsors regulated and taxed. They’d be subjected to government oversight, background checks of employees, audits of their books and certification that their games aren’t rigged — just like most other forms of U.S. gambling.

Instead, fantasy sports games have become ensnared in the web of inconsistent laws and confusing regulations governing gaming. At issue is whether daily fantasy play really qualifies as gambling, and if so whether it should be outlawed or merely regulated.

The biggest stakes for the mushrooming fantasy sports industry may be in California, which could hold the largest population of fantasy sports players in the nation. And at the moment, the legality of their daily games is very much up in the air.

That’s likely to raise the hackles not only of the companies and their customers, but their well-heeled backers, which include the major pro sports leagues, team owners and leading media companies. Comcast and Time Warner are investors in FanDuel, Fox in DraftKings.

Walt Disney Co., owner of ESPN, backed out of an investment in DraftKings this summer over concerns about conflicts of interest, but the fantasy firm remains a key ESPN advertiser. In fact, some 59% of the media advertising revenue growth in the last quarter ($134 million) came from the fantasy sites, according to analyst Todd Juenger of Sanford C. Bernstein and Co., who called that trend “unsustainable.”

“Very powerful political players have entered the arena,” observed gambling law expert I. Nelson Rose in a recent analysis. The industry may be just beginning to flex its muscle, hiring lobbyists in Washington and Sacramento in preparation for what could be bruising battles over its future. The fight resembles that over online poker, whose supporters similarly portray it as largely a game of skill, but whose detractors cite its potential for victimizing underage and irresponsible players.

California Atty. Gen. Kamala D. Harris has launched an active investigation of the legality of daily fantasy sports, according to legislative sources. (Harris’ office refuses to comment.) Harris is under pressure to follow the lead of New York Atty. Gen. Eric Schneiderman, who on Nov. 10 ordered leading firms DraftKings and FanDuel to shut down their activities within the state. Nevada gaming authorities last month also ordered the firms to cease operations in the state until they obtain gambling licenses.

“These games should be shut down in California,” Assemblyman Marc Levine (D-San Rafael) told Harris in a Nov. 2 letter, “until California law is made clear and consumers are protected.” Assemblyman Adam Gray (D-Merced), chairman of the governmental organization committee, has scheduled a hearing for Dec. 16 to begin work on legislation that could bring oversight to daily fantasy games. “This is a very new thing, it’s growing rapidly and it’s in a gray area,” Gray told me. He doesn’t sound inclined to outlaw daily fantasy games outright, but he says, “It’s when these activities go unregulated that the problems happen.”
The first step is to classify them. Daily fantasy players assemble lineups from active pro sports athletes “priced” at different levels; like a real team, players have a budget to work with. They then pay an entry fee ranging from a few cents to thousands of dollars to enter contests in which their success is based on the performance of their lineup choices in real games.

DraftKings and FanDuel deny that their games are “contests of chance,” typically the key element in definitions of gambling. In meetings with Gray, industry representatives have asserted that “we’re skill-based entertainment, as opposed to chance-based gambling,” says Jeremy Kudon, a New York-based lobbyist for DraftKings, FanDuel and the Fantasy Sports Trade Assn. That would make daily fantasy games no more illegal than a chess tournament with an entry fee and a cash prize or, for that matter, playing the stock market for fun.

More to the point, as DraftKings asserts in a legal filing opposing Schneiderman’s order, the daily games “involve the exact same skills … as traditional fantasy sports played over a season,” which are commonly regarded as social interactions, not proxies for casinos.

Some experts disagree. “It’s gambling,” declares Timothy Fong, co-director of the gambling studies program at UCLA. “You’re putting something of value at risk on something with an uncertain outcome in the hope of earning a reward.” He argues that daily games incorporate more chance than season-long fantasy leagues, in which random developments cancel each other out over time. He also calls foul on the depiction of daily fantasy games as entertainment: “If I go to the movies, I’m not expecting to get my money back or leave with more than I started with.”

Then there’s Amaya, a Montreal-based online gaming company that owns StarsDraft, a small fantasy site, as well as PokerStars, which is hoping to enter the online poker market in California through an alliance with the Morongo Band of Mission Indians. Amaya last month irritated its larger rivals by flatly declaring daily fantasy sports to be “gaming activities” and calling for stringent state regulations. The company cited a scandal in which a DraftKings employee with access to internal company statistics emerged as a consistently heavy winner on FanDuel. (Company rules forbid him to play in his own company’s games, but not on others’.)

The revelations seemed to underscore that while especially skillful and knowledgeable players could win big in daily fantasy sports, the vast majority of participants looked more like sheep groomed for shearing. Poker strategist Ed Miller and Daniel Singer of McKinsey & Co. calculated this summer for Sports Business Journal that, through the first half of the 2015 Major League Baseball season, 91% of all winnings were collected by just 1.3% of all players. DraftKings attorney David Boies asserted in a conference call Friday that that’s actually a sign that these are games of skill — if they were games of chance, the law of averages would allow the proles to do a lot better. The companies paint themselves essentially as technology firms that happen to be selling a form of entertainment: DraftKings, in its legal response to Schneiderman, identified itself as a company built by entrepreneurs from the fields of “computer science, engineering, and analytics.”
The fantasy sports industry seems resigned to some level of regulation, including rules mandating the segregation of customer accounts, protection of customer financial data and barriers against underage players. The promoters will resist tougher rules like those governing casinos in Nevada and New Jersey, such as background checks for owners and key employees. But their biggest challenge may be persuading lawmakers that they’re almost entirely based on skill.

“The assertion that this is a game of skill and anyone can win is clearly not true,” Levine says.


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Washington Post

By Justin Wm. Moyer

Somewhere in America right now, someone — probably a man between 18 and 49 years old — is sweating his fantasy sports roster, preparing to place a wager on the real-life performance of his favored players. Which NFL quarterback will throw more touchdowns? Which NBA point guard will sink more baskets? The United States and Canada boast more than 56 million fantasy sports players who wager millions on such questions — many after doing more research than is needed to spin a roulette wheel.

“They do their homework,” Jason Robins, the chief executive of fantasy sports Web site DraftKings, said last month, comparing his enterprise to chess. “It’s like the stock market. They enjoy looking at something and trying to figure out something that someone else doesn’t see.”

But weeks after New York’s attorney general announced an investigation into DraftKings and rival FanDuel for possible corruption, a state regulator in Nevada has ruled that daily fantasy sports (DFS) — in which players wager on athletes’ performances on a single day rather than over entire seasons — is not a game of skill, but gambling. This was the distinction behind a Nevada Gaming Control Board ruling Thursday banning the Web sites from the Silver State.

“Since offering daily fantasy sports in Nevada is illegal without the proper license, all unlicensed activities must cease and desist from the date of this notice,” wrote Gaming Control Board Chairman A.G. Burnett. In an interview with the Las Vegas Review-Journal, he added: “We’re not saying they can’t do [DFS]. We’re saying they can do this as long as they have a gaming license.”

The ruling went even further: It said that existing sports books could offer daily fantasy — but cautioned them to “exercise discretion in participating in business associations with DFS operators that have not obtained Nevada gaming approvals.” A sign saying “Do not do business with DraftKings and FanDuel” would have been no less clear.

Predictably, the Web sites were not happy.

“We understand that the gaming industry is important to Nevada and, for that reason, they are taking this exclusionary approach against the increasingly popular fantasy sports industry,” DraftKings said in a statement. “We strongly disagree with this decision and will work diligently to ensure Nevadans have the right to participate in what we strongly believe is legal entertainment that millions of Americans enjoy.”

“This decision stymies innovation and ignores the fact that fantasy sports is a skill-based entertainment product loved and played by millions of sports fans,” FanDuel said in a statement. “This decision deprives these fans of a product that has been embraced broadly by the sports community including professional sports teams, leagues and media partners.”

Fantasy football fans were also dismayed.

“The Nevada decision is a blow for those of us who love daily fantasy sports, but that state usually finds a way of getting its casinos in on the action,” Matt Matros, a professional poker player who sometimes writes about gaming for The Washington Post, wrote in an e-mail.

The companies, however, said uncle.

“Because we are committed to ensuring we are compliant in all jurisdictions, regrettably, we are forced to cease operations in Nevada,” FanDuel concluded. DraftKings will also “temporarily disable” services, it said.

The ruling pounded a nail in the heart of an almost decade-old legal technicality — and, to some, a legal fiction — that allowed fantasy sports to thrive online even as Internet poker was squashed and brick-and-mortar casinos, particularly in Atlantic City, struggled to survive. How could this shady-seeming enterprise exist — indeed, be aligned with the NFL, among other professional sports organizations — while similar endeavors were regulated out of existence?

The reason: Fantasy sports were explicitly given a pass.

“The Unlawful Internet Gambling Enforcement Act of 2006 specifically mentions fantasy sports as something allowed under the law, as long as people are not betting on the outcome of a single game or the performance of a single player,” CNN Money’s Chris Isadore explained just last week. “Because fantasy sports ‘owners’ must make decisions to pick multiple players for their teams, they are participating in a game of skill. That legal status is unlikely to change.”

That prediction, however, proved wrong. As allegations of what amount to fantasy sports insider trading by a DraftKings employee and word of an FBI investigation into the industry circulate, the Nevada ruling upended conventional wisdom about the future of DFS. If one state kicked the door in, why wouldn’t another — perhaps New Jersey, which is trying to legalize sports betting in its casinos?

“Although Congress may have exempted DFS from federal laws involving gambling, it remains up to the states to decide whether DFS as games of skill fall within the available exceptions to prohibited games of chance,” Jeff Ifrah, a D.C.-based gaming attorney, told the Las Vegas Journal-Review. “I believe the industry would greatly benefit from state attorneys general and legislators speaking to this issue and consumers of course would welcome the clarity and legal certainty.”

New Jersey seems particularly eager for “clarity.”

“Daily fantasy sports is an industry crying for consumer protection,” Rep. Frank Pallone (D-NJ), who called for an investigation of the industry last month, said earlier this week. “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.”

He added: “It’s unregulated. It’s like the Wild West.”

For many, the reckoning DraftKings and FanDuel now face was long in coming.

“On the spectrum of legality to illegality, they’re getting pretty close to the line,” Ryan Rodenberg, an assistant professor of sports law at Florida State University, said two years ago. “It’s tough to make an intellectually honest distinction between the two.”

After all, one man widely viewed as the godfather of fantasy sports hasn’t been shy about acknowledging that it is gambling.

“Of course it is,’’ said Brian Okrent, a fantasy baseball pioneer. “The distinction people are making … ‘it’s a game of skill.’ Well, poker is a game of skill. Blackjack in a casino is a game of skill. Picking horses is a true game of skill, and nobody would pretend that that’s not gambling.”


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Sporting News

By Steve Petrella

Mark thought he had the right approach. He did his homework, studied winning strategies and went against the grain. And he even won his fair share of contests. But he kept chasing a big pay day, and things spiraled out of control.

Eventually, when he stepped back to see the carnage, the 43-year-old firefighter from Florida says he’d lost about $20,000, all on daily fantasy sports.

“I have so much guilt and regret,” said Mark, who asked that his name not be used. “Now that the fever’s kinda broke and I’m looking back at how much damage I’ve caused to myself and my family, it’s something I wouldn’t wish upon anyone. It’s just awful.”

Mark began playing daily fantasy sports (DFS) prior to the 2014 NFL season and continued with NBA and MLB until a few months ago. He’d seen commercials with testimonials from winning players and thought he could turn his knowledge of sports into cash.

Like many Americans — an estimated 56 million that play fantasy sports — Mark had found a hobby. But that hobby, while legal, became destructive and addictive.

Over the past month, daily fantasy sports have come under increased scrutiny from lawmakers and a population drowned out by the industry’s advertising, and many are calling for change. That’s been amplified by news Monday that a DraftKings employee leaked player ownership percentages prior to contests beginning.

The operators don’t view their games as gambling. It’s allowed them to stay legal and get involved with the American professional sports leagues. FanDuel did not respond to interview requests for this story. DraftKings said in a statement “fantasy sports contests are games of skill that allow players to exert their skill to create winning lineups.”

“It’s facile and easy for people to just lump fantasy sports together with gambling, but it’s not a fair thing to do,” said Glenn Colton, an attorney and spokesperson for the Fantasy Sports Trade Association. “The law is what it is, and Congress has spoken and has said, quite correctly in my view, that fantasy sports is not betting or wagering.”

A game of skill can be addictive

Plenty of people deposit money on a site like DraftKings or FanDuel, the overwhelming market leaders. They enter a few contests, lose their money, and then quit.

But Mark’s compulsive behavior cost him a chance to set up college funds for his three children, all under 10 years old. He works a construction job when he’s not at the firehouse to pay off credit card debt he racked up playing DFS. In about 18 months, when he’s paid it off and doesn’t have to hear his 7-year-old son ask why he has to go to work all the time, he can exhale — but will then go back to work to get ahead and actually save some money for his kids.

His family was on a tight budget to begin with, and now, it’s nearing disaster.

“(My son is) trying to go in his piggy bank and give me money so I wouldn’t have to work,” Mark said.

DFS operators argue their games are ones of skill and not gambling, and the numbers do back that up. From Bloomberg:

“The top 100 ranked players enter 330 winning lineups per day, and the top 10 players combine to win an average of 873 times daily. The remaining field of approximately 20,000 players tracked by Rotogrinders wins just 13 times per day, on average.”

The market is dominated by a small percentage of “sharks,” many former financial professionals and poker players. They’ve built statistical models to create hundreds of optimal lineups per week and while there’s always variance, these players dominate the field long term. Their investment strategies resemble those a hedge fund operator would understand, not your average sports fan.

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This non-gambling stance by DFS operators has allowed them to foster lucrative partnerships with the American sports leagues and the NCAA, though those bodies have long been opposed to legalized sports betting, saying it affects the integrity of the game.

But at their core — wagering money on an uncertain outcome — DFS is gambling, says Timothy Fong, co-director of UCLA’s Gambling Studies program.

“It’s putting lipstick on a pig,” Fong said.

“It has all the same characteristics as other forms of gambling that create addiction. It’s fast. It’s anonymous. It’s accessible. You can lose and spend unlimited amounts of money on it. It has all the hallmarks of online casinos.”

Arnie Wexler, a compulsive gambling counselor in New Jersey, says the same. So does Kenny White, a former Las Vegas oddsmaker. So do New Jersey legislators Frank Pallone and Ray Lesniak, who want to see traditional sports betting legalized for the benefit of their state.

And so does Mark, who’s lived two different hells.

Mark, a four-year army veteran, first bet on sports against a point spread in the late 1990s. He lost “about $4,000-5,000” to a D.C.-area liquor store owner turned bookie, but eventually paid it off.

Then in 2008, he lost more than $10,000 to an offshore sportsbook, betting everything from pro football to eastern European soccer.

“I kinda tricked myself,” he said, “that (DFS) was different from against-the-spread betting.”

The FSTA, which represents the industry, says on its website that “managers must take into account a myriad of statistics, facts and game theory in order to be competitive” and must also “take into account injuries, coaching styles, weather patterns, prospects, home and away statistics, and many other pieces of information in order to be a successful fantasy sports manager.”

But many of the same processes are used to bet sports, says White, who set lines in Vegas for more than two decades. DraftKings CEO Jason Robins said on “Outside the Lines” Wednesday that picking against a point spread will result in roughly an even split, making it chance-based.

“To beat sports betting is a skill. And the fantasy games are a skill,” White said. “But you go on DraftKings and go head to head (with) somebody for $5,000. … That’s gambling.”

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That accessibility is what makes these games so dangerous, says Wexler, who has been helping compulsive gamblers for more than 40 years. A player can create a lineup for cash in under a minute.

“What addicts compulsive gamblers is quick, fast action,” Wexler said. “You wake up in the middle of the night, and you’re gambling.”

All you need is a credit card and an email address. The minimum age is 18, but there’s little verification needed on many sites upon registration. Using a pre-paid Visa giftcard, easily obtained with cash at a convenience store, a 13-year-old can create an account.

Wexler runs a gambling hotline and says he hasn’t treated any fantasy players yet. He said after an industry booms, calls roll in six months to a year later.

Because their legality depends on not being classified as gambling, DFS operators offer nothing on their sites to help problem gamblers. Seth Young, COO of StarFantasy, says that’s in the works for his company.

“There’s no reason for us not to do it — it’s not going to hurt,” Young said. “For us, I think it’s just a social responsibility thing.”

Mark emailed FanDuel in March asking them to ban his account and blacklist him from rejoining after he accrued that massive debt and was shamed by his wife and her family, which had heard all about this debt. The company did so. He then signed up at DraftKings shortly after.

Last week, Mark received emails from FanDuel telling him about promotions and new games the site is offering.

His wife, who nearly left him and now has 100 percent control of the family’s finances, doesn’t believe he’s quit.

Somebody’s winning, right?

Daily fantasy sports are parimutuel, meaning all players are competing in a pool against one another. The operator then takes a rake. So a player is trying to beat his peer, not a house or bookie. Some do it often.

Cory Albertson calls the DFS/gambling argument a meaningless one. The 31-year-old who makes a living playing daily fantasy sports says lawmakers should focus on regulating the industry to make sure it’s safe and enjoyable for everyone. He also believes some pools should be segregated to keep novices away from experts.

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With a partner, the former online poker player and Notre Dame MBA graduate has made thousands of dollars playing DFS. To him, gambling is a spectrum that includes everything from options trading on Wall Street to poker.

Albertson enters close to 1,000 lineups on an NFL Sunday. He won’t say how much he invests or has won, but is among the “sharks” dominating the field.

Albertson is busiest on Saturdays, when he adjusts his projection models to reflect injuries and the latest news. Then on Sunday, he spends time with his girlfriend.

With a positive expected value system that will make him money long term, Albertson doesn’t have to (and can’t) follow every lineup. He has rooting interests — like if a player he owns in 10 percent of lineups is only owned by four percent by other players — but it’s largely a big-picture investment strategy.

“I’m just a guy with a laptop,” Albertson said. “The skill aspect is being able to organize that info intelligently and sift through the noise to find the signal and make the best decisions you can when you’re making your lineup.”

Kicking a habit

Mark is a guy with a laptop, too. He just couldn’t make responsible decisions with his bankroll. While Albertson tries to occupy a carefully-calculated percentage of the DFS market as it grows, Mark chased the money.

When his wife, whom he married in 2005, discovered Mark had cost the family $20,000, she took complete control of their finances. She had enough after Mark’s two run-ins with compulsion and gambling-related debt. And she “absolutely considers” DFS gambling, he said. If he’s caught playing again, she’ll be out the door that day.

Last month, Mark couldn’t avoid the advertisements of DraftKings and FanDuel. He had been doing tons of research leading up to the season — his wife discovered the debt in August — and didn’t want that work to go to waste.

So at the grocery store several days before the NFL season, Mark used cash back — essentially laundering it, he said — to buy a $20 pre-paid Visa and deposit it on DraftKings. He won $500 in the Week 1 “Millionaire Maker” tournament, the site’s signature contest, by placing 606th out of 572,500 entrants.

But now that $500 is just sitting there. He can’t take it out, because his wife will know he started playing again. So he continues playing.

“As a 43-year-old male, I have no control over my own finances now because the trust level has been destroyed,” he said.

Despite the relapse, Mark says he’s committed to never depositing money again. From 2008-2014 — between his battles with sports betting and DFS — he hadn’t placed money on any sporting events.

“I was a yacht above water and being able to reflect on how bad this is, how horrible this is, I’m just disgusted by this,” he said. “I feel like I will never do it again.”

But that money still sits in Mark’s account, waiting to be played. And it can be played quickly and compulsively.


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