As legal scrutiny focuses on Boston-based DraftKings, a popular online fantasy sports site that promises hefty payouts for winners, some Beacon Hill lawmakers see state lottery opportunities in online gaming.
Although a federal law bans the acceptance of payments from bets placed over the internet, the law exempts fantasy sports where there is no financial payout as well as online games that require players to exercise skill to win.
Industry leaders DraftKings and New York-based FanDuel maintain that winning requires knowledge and skill rather than luck, thus exempting the contests from the federal Unlawful Internet Gambling Enforcement Act of 2006. Still, DraftKings won’t let residents of some states, including Arizona, Iowa and Montana, play because of their more restrictive state gaming laws.
At DraftKings’ request, Massachusetts Attorney General Maura Healey is looking into whether state law, which doesn’t expressly allow online gambling, permits the suddenly popular fantasy sports sites to pay cash prizes to winners. At the same time, several Beacon Hill lawmakers have proposed giving the state lottery the chance to enter the virtual arena by taking a similar approach to gaming as the fantasy sites.
For the uninitiated, here’s how fantasy sports leagues work: Participants, who can play for free or can deposit funds to have a chance at greater winnings, draft mock teams based on current players in any of the major professional and collegiate sports leagues. They then compete with other users in a variety of daily and weekly contests, pitting the actual performance of their rosters against rivals’ teams. Winners can collect as much as $1 million, according to the hard-to-escape commercials airing for some sites that sponsor actual sporting events.
Seasonal fantasy leagues have long been popular with sports fans. Companies like Yahoo! and ESPN act as intermediaries, letting enthusiasts create or join free leagues. Participants can – and do – wager on the eventual outcome on the side.
The ad blitz that has made these sites well-known – DraftKings and FanDuel spent about $26 million on TV ads during the first week of the National Football League season alone, according to the Boston Globe – has drawn attention from at least one Washington lawmaker. On Sept. 14, U.S. Rep. Frank Pallone Jr. (D-N.J.) pushed colleagues on Capitol Hill to examine the legality of betting on fantasy sports websites.
“Fans are currently allowed to risk money on the performance of an individual player,” Pallone said in a statement. “How is that different than wagering money on the outcome of a game?”
New Jersey, Delaware and Nevada currently permit online casino gambling, according to the National Conference of State Legislatures. In addition to pending bills in Massachusetts, lawmakers in six other states, including New York, are considering measures that would make online gaming legal.
In Boston, Healey told reporters that a legal examination like her office’s review of DraftKings is not unusual.
“We get calls from any number of the industry folks wanting to come in and talk about what they’re doing and it’s as simple as that,” Healey said on Beacon Hill Monday, according to the State House News Service.
DraftKings did not immediately respond to a request for comment.
The American Gaming Association, a casino trade group, supports such legal reviews. Geoff Freeman, the group’s chief executive, said his members are interested in the concept, but remain cautious about entering the arena.
“Many of our members would like to leverage their brands and years of gaming expertise to provide this product to their customers. But the current lack of legal clarity is an obstacle,” Freeman said in a statement.
Online games that take advantage of the same carve out in the 2006 federal law may also be set up by the lottery, under proposals from some Massachusetts lawmakers. A bill from Sen. Michael Rush (D-West Roxbury) would let the state lottery set up “online games of skill,” including fantasy sports and poker.
Rush told State House News that his proposal will keep Massachusetts on the cutting edge.
“The future of gaming is before us,” he told the news service. “It’s important that we as the commonwealth grasp it, enhance the technology and move with it.”
Another bill, from Sen. Jennifer Flanagan (D-Leominster), also would allow the lottery to go online. Though the bill has raised concern among merchants who rely on the customer traffic to buy things like scratch tickets, Flanagan views it as a way to boost state revenue.
“The intent is not to take away from the stores,” said Annie Reiser, Flanagan’s spokeswoman. “The idea is that we want to make sure there is a way to work with businesses to make sure people have the convenience and ease of gaming, but also have the option for stores to benefit. In addition, the hope is that this option would also boost state revenue.”
As for DraftKings, there is no timeframe for Healey to complete her review of its activities.
“We’re just looking to learn more,” Healey said at the State House.
Draft Kings photo 
