THE FUTURE OF FANTASY SPORTS AND THE STATE LEGISLATURES NCSL Capital Forum Jeremy Kudon National Counsel for DraftKings, FanDuel, and FSTA December 10, 2015
FANTASY SPORTS: THE THENEW NATIONAL PASTIME How big is fantasy sports? Really big. We estimate that over 50 million Americans participate in some form of fantasy sports. Why do they play? Because it s a form of entertainment that gives players a deeper appreciation for the sports that they love. 2
A BRIEF PRIMER ON FANTASY SPORTS FANTASY SPORTS: THE NEW NATIONAL PASTIME Players get the opportunity to channel their inner general manager: Select a team of real-world athletes who earn points based on their real life statistical performance in a real life game. Example: A QB receives 1 point for every 20 yards he passes, 4 points for every TD he throws, and loses 2 points for every interception he throws. No correlation to who wins or loses the game. 3
DAILY FANTASY: ALL THE SAME SKILL, JUST A MUCH SHORTER SEASON
FANTASY SPORTS: THE NEW NATIONAL PASTIME FANTASY SPORTS IS A GAME OF SKILL Goal is to assemble a team of athletes that will score the most possible points. Game of skill where effort you put in has a major impact on the outcome of the contest. Hundreds of businesses compile and sell research to players to give them an edge over the competition. 13
FANTASY BUT DON T SPORTS: JUST THETAKE NEWOUR NATIONAL WORD PASTIME FOR IT 1. Congress exempted fantasy sports contests from Unlawful Internet Gambling Enforcement Act of 2006. 2. Major professional sports leagues either offer fantasy sports contests themselves or have partnered and/or invested with/in major DFS companies. 3. The experts agree that DFS is a game of skill: MIT, University of Chicago, Gaming Laboratories International have all conducted studies that demonstrate that DFS is a game of skill. 14
FANTASY SPORTS: THE STATE THE NEW OF THE NATIONAL LAW PASTIME Prize + Uncertain Outcome Gambling Instead, for an activity to be considered illegal gambling in most states, chance must predominate over skill 15
FANTASY THE SPORTS: STATE OF THE THE NEW LAW NATIONAL (CONTINUED) PASTIME Two states Kansas and Maryland have enacted laws that exempt fantasy sports from their state s definition of gambling. Major fantasy sports operators have interpreted gambling laws in 6 other states as prohibiting fantasy sports. Nevada has taken position that DFS falls within ambit of the state s expansive definition of gambling. New York AG has filed lawsuit vs. FanDuel and DraftKings. 16
EVOLVING APPROACH TO THE LEGISLATURES
FEBRUARY 2015: A MODEST APPROACH
MAY 2015: OPEN STATES ANDPUSH FOR CLARITY
JANUARY 2016: THEYEAR THAT JEREMY MAKES DIAMOND
POSSIBLE LEGISLATIVE OPTIONS
FANTASY SPORTS: KANSAS THE NEW APPROACH NATIONAL PASTIME Confirm that fantasy sports contests are not a form of gambling under state law. Establish criteria for contests to ensure that they are skill based entertainment. 22
FANTASYTHE SPORTS: ILLINOIS/FLORIDA THE NEW NATIONAL APPROACH PASTIME Kansas + tough but fair consumer protection obligations Employee ban Age verification Self-exclusion Segregate player funds Annual audit Oversight by state AG or state agency 23
FANTASYPROPOSED SPORTS: THE MASSACHUSETTS NEW NATIONAL REGS PASTIME Far more extensive consumer protection obligations than Illinois or Florida. Ban on college sports and raises age limit to 21. Additional problem gaming controls. No more than one account per player. Changes to gameplay. 24
FANTASY SPORTS: OTHER LEGISLATIVE THE NEW NATIONAL PROPOSALS PASTIME Partner with in-state casinos Anti-competitive Constitutional issues Regulate as Gaming Violates PASPA Would likely require a constitutional amendment 25