Limits Needed in World of Fantasy Sports

Editorial

Some might be tempted to call Massachusetts Attorney General Maura Healey’s proposed rules, or limits, for daily sports businesses half a loaf.

The full loaf, of course, would be what New York, Nevada, and other states have done, and that’s declare that operations like DraftKings, FanDuel, and others like them are gambling houses — which they are — and thus need to be banned or licensed.

Healey’s not going that far, and is instead proposing regulations, such as a ban on players under 21, measures to prevent sophisticated contestants (the so-called ‘sharks’) from dominating games, and changes in these companies’ advertising practices.

We’re not sure why she won’t go further — perhaps because DraftKings is based in Boston and is one of the state’s most intriguing technology startups, or because Gov. Charlie Baker is a fan of these sites, or because Patriots owner Robert Kraft is a huge investor in DraftKings, and is also partnering with Healey in a joint initiative to raise awareness about domestic violence and sexual assault.

Whatever the reason, we have half a loaf — but half, as they say, is better than none, and something certainly needs to be done to regulate this industry. That’s not just because everyone is totally numb to those endless radio and TV commercials, with more than two months of the NFL season still to be played.

Indeed, most people are getting quite tired of hearing how people have invested only $20 or $30 in the one-day competitions and won millions with only a few mouse clicks. But obviously misleading ads are only a small part of the fantasy-sports story now.

The bigger story is the movement by states who are viewing these sites as gambling operations, and responding accordingly by either moving to ban them (because gambling is illegal in said states) or licensing them, because gambling operations require licensing. That latter step is tantamount to shutting down the sites in those states, because the owners would rather not do business in them than admit that their operations are gambling and get a license.

The controversy stems in large part from two points of argument — only, there really isn’t an argument in either case. First, does fantasy sports constitute gambling? And, second, should individual states be trying to regulate or license such activity?

The answer is a ridiculously obvious ‘yes’ in both cases.

The argument proffered by DraftKings and FanDuel is that fantasy sports isn’t gambling because it’s a game of skill. While there is some skill involved, obviously, there are always huge amounts of luck at play as well (after all, Drew Brees might get hurt in the first quarter and not play the rest of the game). And even if you buy into that argument, the fact that this is mostly skill does not mean it’s not gambling. Where do those millions in payouts come from, the DraftKings scholarship fund? Of course not — they come from the money put down by others who think they’ve got the best fantasy lineup for that week. It seems ‘put down’ is not the same as ‘gamble’ or ‘risk.’

As for states wanting to regulate or license this? Some equate such actions to a giant shakedown, a ‘you-can-run-your-business-but-we-want a cut’ mentality. Others say states like Nevada and others are simply trying to stem the flow of money away from their lotteries and casinos and into the pockets of the fantasy-sports operations.

Both assessments are right on the money, figuratively as well as literally, but those states can’t, or shouldn’t, be blamed for adopting such stances.

Yes, fantasy sports is free enterprise. But every free enterprise — whether it’s in financial services, healthcare, or construction — has to play by some rules when it comes to regulations and licensing, and this industry should not be an exception.

Healey is proposing regulations, and we would certainly welcome them. The TV ads are misleading, to say the least; we don’t need college students devoting limited time and money to putting together fantasy lineups; the sharks should be kept in deep water, perhaps competing only with each other; and other steps, such as a $1,000-per-month deposit limit and a ban on college sports contests, also make sense.

Moving to regulate or license fantasy sports sites is not an anti-business step, nor is it necessarily anti-gambling — although Healey has campaigned as someone opposed to gambling.

Instead, it would be a simple, common-sense step, one she should go ahead and take.

Yes, fantasy sports are fun. But that doesn’t mean that this industry shouldn’t be regulated.