Fantasy sports operators suggest an independent regulatory regime

Probably motivated by the current legislative and enforcement storm that has generated so much generally negative mainstream coverage over the past month, the Fantasy Sports Trade Association is pushing ahead with plans to create an independent and external control board to oversee the burgeoning industry, apparently basing its concept on the Financial Industry Regulatory Authority, which monitors the securities industry.

Lawyer and former Obama administration official Seth Harris, who was deputy labour secretary from 2009 to 2014, is reportedly the front runner to head the body, tentatively titled the Fantasy Sports Control Agency, and tasked with monitoring daily and non-daily fantasy sports companies.

Talking to reporters this week, Harris said that the control body will develop a set of industry standards. “We’re going to ask all of the companies that are engaged in cash games to establish controls, processes, and leadership that will ensure compliance with those standards,” he said, observing that his plans also include audits and enforcement provisions.

Asked by the Wall Street Journal about staffing levels, Harris said that it was too early to answer that question, but that the FSCA activity would  be independent and include a certification process aimed at “prevention and pre-emption for any unethical, irresponsible, or illegal behavior.’’

The CEO of market leader DraftKings, Jason Robins, appears to be on board with the concept, commenting Tuesday that the body will assist the industry in establishing best practices in order to ensure that all customers have a level playing field.

Paul Charchian, president of the Fantasy Sports Trade Association, said: “We can establish and enforce these systems ourselves, or we can put our industry in the hands of outside entities who do not understand the industry as we do.’’

In related news, an Illinois Democrat has become the latest politician to insert himself into the DFS debate.

On Tuesday Representative Michael Zalewski announced that he is drafting a bill aimed at controlling both players and operators in the burgeoning DFS industry.

The Chicago Tribune characterises Zalewski’s proposal as “…so tame that both DraftKings and FanDuel issued statements supporting the legislation.”

DraftKings issued a statement declaring: “We believe Representative Zalewski’s legislation represents a reasonable and measured step toward oversight of fantasy sports,” and giving an undertaking to work with all relevant authorities to ensure that the DFS industry operates in a manner that is completely transparent and fair for all consumers.

Zalewski told the Tribune that he wants to make sure that money spent in fantasy leagues is kept in an escrow account to pay off the winners and that limits are put in place to prevent players from losing their entire bank balance in one day.

“I want the kind of regulations we’ve put in place at riverboat casinos in Illinois to make sure that people who are addicted don’t lose their life savings,” Zalewski said. “I don’t want to do anything that would prevent people from enjoying this sort of thing; I know millions of people do. I just want to make sure they are run legitimately.”

Zalewski’s bill would prohibit employees of sports fantasy web sites from competing on other Internet sites, and he wants to ban players under 18 and set policies for audits….pretty much what the proposed new Fantasy Sports Control Agency is being set up to do.

Under the Zalewski proposal, operators would additionally be required to check players to make sure they don’t owe child support payments or have tax liens on property.

The regulatory authority in Illinois should be a combination of state Attorney General Lisa Madigan and the Illinois Gaming Board, according to Zalewski, whose bill does not presently appear to include any state taxation provisions.

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