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US – Massachusetts moves to regulate Daily Fantasy Sports

By - 23 November 2015

The state of Massachusetts is to allow Daily Fantasy Sport sites to operate in the state under a set of new rules.

Attorney General Maura Healey has revealed that these will include banning anyone under the age of 21 and banning advertisements and promotions aimed at college campuses.

It is the first-of-its-kind consumer protection regulation for the new and rapidly evolving Daily Fantasy Sports (DFS) industry to ensure that players are protected and that minors can’t access the sites.

The draft regulations, to be filed with the Secretary of State’s Office, lay out a significant number of consumer protections that include prohibiting play by minors, ensuring more truthful advertising, and an increase in transparency. The regulations also require protection of players’ deposits and robust data and security measures, address problem gamblers, and require changes to games to provide a more level playing field for all consumers.

The AG’s Office began its review of the industry earlier this year, and continues that investigation. The regulations proposed today are an immediate response to some of the concerns the Office has uncovered in the course of its review to protect consumers immediately.

“These regulations are a first of their kind for the Daily Fantasy Sports industry, and they focus on protecting minors, ensuring truthful advertising, bringing more transparency to the industry, and levelling the playing field for all consumers,” AG Healey said. “This is a first step, but an important step, as we continue to evaluate this new industry and make sure our laws keep up with these evolving technologies.”

DraftKings has welcomed plans to regulate daily fantasy sports (DFS) in Massachusetts, despite the threat of ban on players under the age of 21.

“The Massachusetts Attorney General has taken a thoughtful and comprehensive approach to the Fantasy Sports Industry,” said a DraftKings spokesperson. “While we do have some concerns with the draft regulations, we intend to work closely with the Attorney General’s office to ensure we are operating in the best interest of our customers. We will immediately begin taking steps to prepare to implement the changes to our product that the Attorney General requires. We believe the process followed by AG Healey and the Commonwealth of Massachusetts will ultimately result in a positive outcome for the millions of fantasy sports fans around the country who want to be able to enjoy DraftKings’ games in a fun, fair, and transparent environment.”

Attorney General Healey added: “It is my hope that they will see that his is what is right, this is what is necessary to protect consumers in our state, and they will willingly work to copy with these regulations. We should take these steps today even while this rule-making process is ongoing to make sure that we do everything we can to get the right policies in place.”

The AG’s Office has met several times with representatives from DFS companies, requested and analyzed extensive information, and uncovered a number of concerns about their business practices and the ability of consumers to have a fair shot while playing these games.

The proposed regulations set forth a number of requirements for all DFS operators with players in Massachusetts to adhere to in order stay in compliance with state consumer protection laws. Minors under the age of 21 will not be able to participate in any DFS contest. DFS operators cannot advertise or run promotional activities at schools or on college campuses. DFS operators cannot advertise or run promotional activities at amateur, school or college sporting venues. They cannot offer contests that are based on the performance of college or high school athletes. Advertisements cannot portray minors or market endorsements from colleges or college athletes.

Alongside this, professional athletes, agents, employees or others connected to a particular sport will not be allowed to enter DFS contests in their sport. Company employees and others with access to insider information will not be allowed to participate in DFS contests. Less than two per cent of all players win 90 per cent of all prizes. These professional and other highly-experienced players will be easily identifiable to other players. Games limited to beginners will exclude experienced players from participating.

Deposits will be limited to no more than $1,000 each month, unless the DFS operator obtains verification from the player that establishes the player’s ability to sustain losses at a higher limit. Operators must provide options for players to exclude themselves from all contests, set self-imposed deposit or loss limits, or limit the amount of contest entered per week.DFS companies cannot extend credit to players.

The draft regulations also detail entry limits, reinforce the obligation to comply with tax laws and to disclose tax liabilities for players, provide protection from unauthorized withdrawals, and layout a complaint procedure for consumers. Violations of any of these regulations will be actionable under the state’s consumer protection laws.

Nevada was the first state to question the daily fantasy sports industry; although it didn’t ban the sector but rather outlined that DFS operators apply for a license to operate betting pools with the Nevada Gaming Control Board.

New York, the largest state in the country for daily fantasy sports, is though moving towards an outright ban. New York Attorney General Eric Schneiderman has suspended FanDuel’s operations and has halted payments to DraftKings.

A court hearing is scheduled for November 25 in New York to determine whether the activity constitutes gambling and is therefore illegal.

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