Daily Fantasy Sports Operators Must Take Proactive Role In Regulation

Posted on June 18, 2016

[toc]The daily fantasy sports industry is advancing in an exciting direction for operators. Momentum is barreling towards regulation — and fast. After a year with a lot of negative news, the march towards regulation is a positive and welcome change.

Back in April, I wrote on LSR about the need for DFS operators to collaborate with regulators. In my past land-based gaming experience, a collaborative process between operators and regulators always — without fail — worked the best.

While developments in New York and other states set a positive tone for the DFS industry, there’s still a long way to go. Here’s how the DFS industry must come together to create a smooth, clear and ultimately profitable path towards state-by-state regulation.

Like any relationship: Communication is needed

You know the couple. The happy one. The couple with that great relationship that you or your friends may sometimes make fun of but also envy a bit.

I guarantee you one trait those happy couples share across the board is open, honest and frequent communication.

It’s no different than the best working relationship between operators and regulators.

Communication is the key to the relationship between DFS operators and regulators. Knowledge defeats fear. Opening lines of communication about the opportunities and potential pitfalls helps establish trust. Trust leads to collaboration and mutually beneficial compromise.

To that point, for the benefit of the industry, I believe it is the responsibility of the DFS operators to initiate the clear lines of communication with regulators. The onus is on us. The sooner we embrace this concept, the better for us all. If you’re running a DFS site and the regulator doesn’t have your cell number, that’s a mistake.

Regulation = Opportunity

Regulation works. It is to the benefit of operators on multiple fronts.

  1. While capital markets may fluctuate, it is always easier to raise money in a regulated market than in an unregulated one. The reality is venture money is needed to grow our respective businesses. Regulation removes a potentially barrier.  
  2. Processing companies are much more likely and willing to process funds for a regulated industry as compared to an unregulated one. We’re all living this one right now. Like with venture capital, regulation helps mitigate this barrier.
  3. The process of regulation will make us better. I have been operating in the DFS space for less than a year.  Most of the regulatory bodies have been in operation for decades. I am certain that in dealing with regulation, my company’s ability to serve our customers and protect their assets will increase. This will make us a better, more profitable company. The process can be painful at times, but that’s why they call them “growing pains.”  

A common ground starting point

Regulators and DFS operators have much more in common than some think.

We both want effective consumer protection. No business can grow to what it can be without customers believing their money is safe. How do we know that our money is safe in the bank? We know because regulators who oversee the bank tell us that it’s safe.

Second, operators and regulators both want full Know-Your-Customer (KYC), most importantly around age protection. Is there anyone our there who is in favor of having underage kids play on their site?  Of course not.

Regulation just an extension of current best practices

If you’re running a good business, you’re already doing most of what regulation would require. Adherence to regulation for a DFS operator is mostly about documenting things you already do. It’s documenting how you keep underage players off the site, or documenting how you protect consumers (segregation of funds, ability for customers to self-restrict).

By taking the lead in engaging with regulators on things we as operators should already be doing, we set the stage for a quicker path to DFS legislation. And that is the best path to growth for this great industry.

Gabe Hunterton Avatar
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Gabe Hunterton

Gabe Hunterton is Chief Executive Officer of iTEAM Network. Before joining iTEAM Network, Gabe was most recently Deputy Chief Operating Officer of Galaxy Entertainments Group’s (HK:0027) Galaxy Macau, the world’s fifth most profitable casino resort, responsible for more than one billion dollars in annual EBITDA. Prior to that, he was the Chief Operating Officer at Galaxy Entertainment Group’s StarWorld. Gabe worked for 16 years at various Mirage Resorts International (NYSE: MGM) properties after starting his gaming career as a dealer at the famous El Cortez. He has a Bachelor of Arts in Economics from Yale University.

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