Former New Jersey regulator speaks on daily fantasy spors

Michael Epps, a ten-year former member of the New Jersey Casino Control Commission, entered the daily fantasy sports regulatory debate over the weekend with an op-ed in the publication NJ.com, warning against the application of casino-style regulations to DFS, and asserting that the vertical is “simply not the same beast”.

Epps, who is upfront with the information that he has been retained by FanDuel to evaluate the regulatory landscape in New Jersey, makes his points against a backdrop of political and enforcement calls for the genre to be regulated, but claims that there are fundamental misperceptions about fantasy sports that are colouring the discussion.

“While the intentions in the legislature are good – protecting consumers – any effort to treat fantasy sports like casinos or online gambling is the wrong approach,” Epps opines. “It’s simply not the same beast and we don’t need to limit the right to play fantasy sports in New Jersey by applying casino-style regulations.”

Epps’s departure point is that fantasy sports does not constitute gambling, because the games require  skill more than chance.

“Gambling is defined in state and federal law as games of chance,” he writes. “Whereas fantasy sports is a game of skill – just ask a player. The key determining factor for consistent fantasy success is who understands the nuances of positive and negative correlation, game theory and – of course – the sports themselves.

“Fantasy players research and evaluate professional athletes, review their schedules and individual matchups and look at a myriad of other variables – and that is same dynamic in a season-long league where friends have been playing each other for years or in the daily fantasy contests that have become so popular in the last few years. That is not a game dominated by chance.”

He discusses the legislative exemptions for fantasy sports under federal laws, and points to New Jersey regulations established in 2013 that allow land casinos to offer fantasy sports in an express distinction from gambling.

Discussing potential problems in putting all fantasy sports operators in New Jersey under the authority of the Division for Gaming Enforcement, Epps notes that the casino regulations require all equipment used by providers – including computers and servers – to be physically located within the boundaries of Atlantic City.

“This could effectively kill all fantasy sports in New Jersey – ESPN, CBS, FanDuel and the other fantasy sports sites are not likely to move their servers here. They are more likely to stop offering their games in New Jersey,” he claims, saying that this would deprive the public of a form of popular entertainment.

Epps acknowledges that real questions have arisen around fantasy sports recently, and these need to be addressed, but he calls for the focus to be on consumer protection, which he claims can best be achieved without casino-style oversight.

“We are seeing this approach emerge in other states, where reasonable, right-sized proposals are popping up. They include requirements for age verification to ensure minors are not able to play; separating player funds from general company accounts to ensure player cash is always available for withdrawal; protecting user information; safeguarding against use of proprietary contest information to ensure no one has an unfair advantage in any contest; and requiring third-party audits,” Epps writes.

“Legislators have expressed openness to alternative ideas and want to reach consensus on this legislation. Looking at some of the smart proposals already presented in other states like Illinois – which provide the needed consumer protections, but don’t put fantasy sports under the control of casinos and the casino regulatory bodies – would be a good place to start.”

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