Massachusetts to tag daily fantasy sports sharks with scarlet letter

massachusetts-healey-daily-fantasy-sports-scarlet-letterMassachusetts Attorney General Maura Healey has proposed new consumer protections for daily fantasy sports, including limiting access to players over 21 years of age and forcing sharp players to wear a scarlet letter.

Healey, who announced in September that she was “reviewing” the legal status of Boston-based DFS operator DraftKings, said Thursday that her review was ongoing but she introduced proposed regulations (viewable here) as an immediate response to protect consumers from “games that you carry around with you in your pocket and lose money at the touch of a button.”

Healey said the recommendations will be subject to an open comment period until Jan. 22 but she nonetheless expects DFS operators to immediately begin complying with the new guidelines. Healey ducked the question of whether she’d take legal action against any operator who failed to comply.

It’s unclear how prepared DFS sites are to abide by Healey’s recommendations. FanDuel issued a statement saying Healey’s recommendations made “a tremendous amount of sense” while encouraging “Attorney Generals in all states” to implement similarly “fair regulations.” Both FanDuel and DraftKings are currently locked in a fight to the death with New York AG Eric Schneiderman, who has formally accused the sties of being illegal gambling operations.

Healey’s recommendations include a ban on DFS contests involving college sports, the elimination of DFS operators’ ability to promote paid DFS contests on high school and college campuses and a ban on athletes at all levels from taking part in DFS contests involving their own sport.

Players under the age of 21 are totally unwelcome, even for DFS contests that don’t involve a prize. Operators are required to establish parental controls that allow guardians the means to ensure their kids can’t access DFS sites.

Also banned from participating are DFS employees as well as any DFS “contractor,” defined as any person or entity working pursuant to an independent contract with a DFS operator and who has access to any proprietary information that could affect gameplay.

However, these employees and affiliates can play on DFS sites in “private contests” provided their affiliation with the site is fully disclosed to each participant in said contests.

DFS players are limited to one account per site and sites will be required to block simultaneous log-ins on the same account. The use of proxy servers is also verboten.

Healey says her research determined that “less than 2%” of DFS players “win 90% of all prizes” and her recommendations would ensure that “these professional and other highly-experienced players will be easily identifiable to other players” via the use of “a symbol attached to their username, or by other easily visible means.”

DFS sharks are defined as anyone who has (a) entered more than 1,000 contests with a single DFS site, (b) entered over 250 contests at a single site and prevailed in over 65% of these contests, or (c) won more than three DFS prizes over $1k. Once labeled a shark, the designation cannot be removed.

Healey wants DFS sites to launch “games limited to beginners” from which sharp players would be excluded. Sharks caught swimming in these wading pools will have their accounts closed and be banned from the site.

Sites will be required to offer “on-boarding procedures” for new DFS players to explain how the games work, to educate them on how to identify sharks and to steer them toward beginner contests.

Healey proposes staggered limits on contest entries, starting with only one entry if a contest involves 12 or fewer participants, rising to two entries in contests involving 13-36 entries, and so forth, with a 3% participation cap on contests involving over 100 entries.

The use of automated scripting tools will be prohibited. Existing scripts must be scrubbed from the sites and anyone caught using such a tool in future will have their accounts closed and banned from further play.

Healey also recommended that DFS advertising that mentions an individual player’s DFS winnings must also cite “average net winnings of all players.”

DFS sites will have to comply with the state’s applicable tax laws while DFS players would be limited to deposits of no more than $1k per month, unless a player can provide evidence that establishes his or her “ability to sustain losses at a higher limit.” Players must be able to set their own deposit, loss and weekly entry fee limits and DFS operators would be prevented from extending credit to customers.

Operators must allow players the ability to self-exclude while also honoring requests for exclusion made by third parties, provided the third party can provide (a) “evidence of sole or joint financial responsibility” for the funds being deposited with the site, (b) proof that the player is a legal dependent of the third party, (c) other situations in which the third party is legally obligated for the player’s debts, or (d) proof that the player owes child support to the third party.

Healey makes it plain that nothing in her proposal “may be interpreted as authorizing a wager, bet, or gambling activity that is prohibited by law.” However, the similarities of DFS to traditional sports betting could prompt federal authorities already suspicious of DFS to pounce based on their belief that DFS represents a violation of the 1992 PASPA sports betting prohibition, much as the feds have fought New Jersey’s efforts to launch its own legal sports betting regime.