Pennsylvania Report On Fantasy Sports: Sites Should Partner With Casino Licensees

Posted on May 20, 2016

[toc]The Pennsylvania Gaming Control Board released its report about the state’s possible role in regulating the daily fantasy sports industry.

The recommendation? Treat DFS much like the regulated gaming industry.

The report was written after a law was passed by the legislature mandating its completion by the PGCB, to examine DFS as a “gambling product.”

You can read the full report here.

Recommendations from the PGCB on DFS

The report echoes the sentiment that has existed all along in Pennsylvania: That the same rigor that is applied to licensing and oversight of the state’s casinos should be applied to the DFS industry, in an ideal scenario.

From the summary near the start of the report:

If the Gaming Control Board should be given oversight responsibility, the Board suggests that the play of fantasy sports in Pennsylvania be provided through the existing slot machine licensees as a gaming related amenity operated through the licensee’s web-site.

DFS providers would contract with slot machine licensees much like current gaming service providers and would be vetted and licensed as determined appropriate by the Board.

And then:

Operating DFS through the already-licensed slot machine licensees provides several significant advantages to the Commonwealth.

But If Pennsylvania goes down that route, it would be the first state to take that legislative path. A number of states have passed much less onerous legislation for operating a DFS site.

Currently, only Nevada has a similar stance toward the DFS industry.

The report does, however, suggest this is not the only way to regulate the industry.

DFS tied to online gambling in PA?

It appears that DFS may end up being tied to legislation already active in the state.

That bill — HB 649 — would regulate online poker and casino games, as well as provide for a number of other gambling expansions in the state.

The PGCB suggests that DFS would be best handled alongside online gambling legalization:

More recently, House Bill 649 was introduced which, among other things, would have authorized intra-state Internet gaming to be conducted within Pennsylvania’s borders and only through Pennsylvania licensed casino facilities.  … The Board cites to the research as to Internet gaming because fantasy sports are in their simplest form just another means of Internet gaming.

And then:

In light of the similarities, the regulation of fantasy sports could fit within the established regulatory authority of the Board as contemplated in HB 649.

Online Poker Report’s Steve Ruddock suggested that the iGaming bill could be the vehicle for DFS regulation as well, after a recent conversation with the bill’s sponsor, Rep. John Payne.

Also of note in the DFS report

In general, the report prescribes rigorous consumer protections and oversight for the DFS industry.

In many ways the report is modeled after the Massaschusetts attorney general’s regulations, but with the addition of a casino licensing regime in charge.

  • The PGCB thinks it should be given a lot power to oversee the DFS industry, if the legislature sees fit to put it under the board’s purview. The report “advocates the development of a regulatory system which assures broad discretion to the regulator to prescribe rules and respond to ever-changing technological advances.”
  • The report is agnostic as to the general legality of DFS contests under current PA law. However, it does say that DFS is “understood as involving the exercise of the elements of both skill and chance during the course of the contest.”
  • The report touches on the subject of problem gambling, noting licensed DFS operators should “provide compulsive and problem gambling funding in a manner similar to commercial gaming licensees.”
  • The board recommends a minimum age of 21 for players.
  • The report notes that other parts of the state government could be placed in charge of DFS regulation, such as the Department of Revenue or the state lottery.
  • The PGCB “takes no position currently as to an appropriate licensing fee or tax rate.”

What will the DFS sites think about this?

The DFS industry — namely DraftKings and FanDuel — has generally opposed the idea of licensure in this manner. For example, it has not gone through the licensing process to become regulated in Nevada.

The larger sticking points, however, would be:

  • Would Pennsylvania describe DFS as a game of skill or gambling under state law? The industry has resisted the idea it would submit to regulation in a jurisdiction where it is called “gambling,” because of possible concerns in other states.
  • How much would sites pay in fees and taxes? Pennsylvania is a large market, but onerous fees and taxes like casino operators are subject to may make it difficult for DFS sites to operate there.
  • Is DFS an interstate or intrastate activity? The report doesn’t get into this, although lawmakers have expressed some desire to ring-fence the DFS market in the past.

However, some smaller operators have been hoping for a chance to partner with the regulated gaming industry, and Pennsylvania could provide that opportunity.

What’s next on DFS in Pennsylvania?

The House Gaming Oversight Committee will be presented with the report, although apparently not at a scheduled May 27 scheduled that was canceled. Tentatively, it appears the subject of DFS will be the subject of a June 1 hearing, per the aforementioned Online Poker Report story.

After that, expect legislation to be drafted, and likely added to HB 649.

Pennsylvania has been thinking about the issue for awhile — including a hearing last year. The commonwealth has been on the sidelines in considering actual DFS legislation, but that appears set to change this summer.

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Dustin Gouker

Dustin Gouker has been a sports journalist for more than 15 years, working as a reporter, editor and designer -- including stops at The Washington Post and the D.C. Examiner.

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