Crosby: Commission to focus on ‘key issues’ raised by fantasy sports

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STATE HOUSE — Midway into a review of pay-to-play daily fantasy sports, Attorney General Maura Healey said she will leave it to lawmakers to decide whether to continue to permit the relatively novel form of gaming in the state.

“What I have said is important is that there needs to be a decision as to whether or not this industry be permitted to continue here in Massachusetts,” Healey told the News Service Tuesday night. She said her office has received documents from DraftKings, based in Boston, and from FanDuel, a New York-based fantasy sports site.

The Massachusetts Gaming Commission plans to discuss the industry at its Thursday meeting. During an appearance Tuesday on “Greater Boston” on WGBH, commission chair Steve Crosby said his agency hopes to give Gov. Charlie Baker and the Legislature a sense of the key issues involved with fantasy sports, whether the industry should be regulated and if so by whom. The commission has experience with licensing gaming operators and problem gambling protections, he said.

“We’re going to give them our advice,” Crosby said. “They’ll make the decision, the Legislature and the governor.”

Crosby added, “I tend to be somebody who leans away from regulation. The question is – are the same factors at play that make us regulate casinos, in this business? Are there similarities? I don’t know. We haven’t thought about it yet. But it’s worth thinking it through intellectually, not just assuming that we’re going to go out and regulate a new industry.”

Healey hopes that by the end of the week she will have named a successor to gaming commissioner James McHugh, who earlier this year announced plans to step down.

“We hope to be in a position to make an announcement before the end of the week,” said Healey, who said her choice would not necessarily need to share her opposition to casinos, the industry the commission regulates.

Healey, who supported repeal of the 2011 gaming law, said, “There is no litmus test. The only thing that we were looking for is somebody of utmost integrity, somebody with experience and by statute somebody with experience in criminal investigations and law enforcement.”

McHugh is a former Superior Court and Appeals Court judge.

Speaking after a wheelchair basketball event at the Charlestown Community Center, Healey reiterated her call for consumer protections in fantasy sports and said the industry should protect problem gamblers from harm, too.

“Clearly this is an industry that cries out for a more robust legal and regulatory framework than currently exists. That’s really important,” said Healey. “And the things I continue to be focused on are ensuring that there is no fraud in the business or in the conducting of business, ensuring that consumers are protected, protecting against problem gamblers, protecting young people from gambling addiction, and making sure there’s a level playing field for participants.”

Healey has said the form of gaming is legal under federal and Massachusetts law and she has not taken a position on whether the state should tax the industry.

“Certainly considerations about licensing, taxation, revenue-sharing, the like, all really important, but that’s not really for an attorney general to decide,” Healey said.

DraftKings trumpeted the ability for fans to win cash through a massive advertising campaign this year, and was subsequently beset by questions after an inadvertent data leak and news of DraftKings employees winning money on FanDuel.

Major League Baseball Commissioner Rob Manfred recently defended the league’s partnership with DraftKings.

“We did thoroughly investigate the games that were available on the site, that was a major factor in terms of selecting a partner in the fantasy space,” Manfred said, according to the New York Daily News. “And we were completely comfortable with the idea that those games were consistent with the existing federal law.”

John Pappalardo, the former U.S. attorney for Massachusetts, is investigating the data leak on DraftKings’ behalf, and the company has also hired Martha Coakley, Healey’s predecessor and former boss.

Healey confirmed that as a former state employee, Coakley must abstain from appearing before the attorney general’s office for one year and said she couldn’t predict whether she would speak to Coakley about DraftKings when the cooling-off period ends.

“I have not spoken with Martha Coakley about this, nor do I intend to speak with her,” Healey said.

Coakley, who is now a registered lobbyist for Foley Hoag, was at the State House on Wednesday, where she was seen going into Senate Majority Leader Harriette Chandler’s office.

Coakley is only registered as a lobbyist for DraftKings, according to the firm. DraftKings has also retained the lobbying firm Bay State Strategies Group.

During a televised interview Sunday on WCVB’s “On the Record” program, Gov. Baker said fantasy sports players are taxed on their winnings and DraftKings is taxed on its earnings.

Asked about potentially imposing the kind of higher tax rates that resort casinos face in Massachusetts, Baker said, “I think the regular corporate tax is certainly where the conversation should start. Somebody would need to convince me that in some way these things are so profoundly different, they should be treated differently. But as I look at it right now you tax the winnings, you tax the company and you make sure the consumer protections are in place to ensure that people who play are getting a fair shake.”

Baker said fantasy sports businesses are not totally unregulated. “I mean they’re businesses, they have to comply with all the rules everybody else does,” he said, mentioning the requirement to have workers’ compensation insurance for employees.

Baker noted the industry is new and based on a “relatively unusual concept.”

“Bravo to the kids who decided to take this thing and turn it into something big,” the governor said. “That’s very entrepreneurial but I am concerned about the consumer protection piece and that’s the part I’m primarily interested in.”

A former professional basketball player, Healey spent more than an hour Tuesday night practicing wheelchair basketball and playing a game, where she said her team lost.

“I definitely was not on the winning side, but I think I had the most fun,” Healey said.

The event was hosted by Spaulding Rehabilitation Network’s Adaptive Sports Center, and Healey said one of the women she played with had invited her to the event.

The attorney general squared off in a scrimmage against a squad that included Paul Cowan, the assistant coach and director of the New England Blazers, a team in the National Wheelchair Basketball Association. The team regularly practices at the Brockton VA Medical Center, said Cowan, who also explained players are allowed two pushes without a dribble before they are committing the foul of traveling.

— Written by Andy Metzger and Michael Norton

[Matt Murphy contributed reporting]

Copyright State House News Service