House Committee Holds Hearing on Daily Fantasy Sports

The House Energy and Commerce Committee held a hearing on May 11 on “Daily Fantasy Sports: Issues and Perspectives.” The hearing of the Commerce, Manufacturing, and Trade subcommittee was held in response to a letter by Rep. Frank Pallone (D-NJ) in the fall of 2015 asking for a thorough committee hearing on the issue. The hearing looked at current state restrictions, current laws on other types of gambling, the growing state of the DFS industry, and other factors.

Notably absent from the hearing were any representatives of FanDuel or DraftKings, or any representative of sports leagues. In addition, none of the lobbyists recently retained by the industry were present.

Rep. Jan Schakowsky (D-IL) the ranking member of the Commerce, Manufacturing, and Trade Subcommittee, said that she was “disappointed,” that representatives were not present to hear the committee’s questions. Pallone also said he was disappointed that those stakeholders “refused” to participate.

Rep. Fred Upton (R-MI) stated that the industry must have relevant controls in place, particularly in regard to underage gamblers. He said that most activity was at the state level, and the hearing would partially deal with whether federal regulation would be necessary at some point.

Pallone, in his opening statement, stated that daily fantasy sports are occurring in a “murky legal framework by an industry that is mostly unregulated.” He also said he believed there is potential harm to consumers, citing recent allegations of insider trading at fantasy sports sites, among other concerns.

Pallone pointed out that he is not trying to dismantle the industry, saying, “today, we will explore not how to stop people from playing, but how to bring fairness and transparency to the industry.”

John McManus, one of the witnesses at the hearing and the Executive Vice President, General Counsel, and Secretary of MGM Resorts International told the subcommittee that his organization was initially interested in being involved in the daily fantasy sector – however, they said they concluded there was too much risk, since there was not enough clarity as to whether it was legal. He said that legal clarity was “critical,” for the industry, and cited that as a major concern of the gaming and gambling sector. He also advocated for state determination on the issue.

Kurt Eggert, a witness at the hearing and a professor of Law at the Chapman University Fowler School of Law, said that he “I don’t oppose daily fantasy sports or gambling; my purpose is to argue is that if is legalized, it needs to be regulated so there’s proper consumer protection.” He said it is important to protect players from, “being cheated or beaten unfairly, and also to make sure that problem gamers get the help they need so that gambling and daily fantasy sports don’t destroy the players or their families.”

Many have debated whether DFS is a game of “skill” or of “chance.” Eggert holds that it is not a game of skill or chance, but for people who are good at it, it is in fact a game of “algorithms.” He believes most skilled players come from poker or from data management and are not necessarily sports experts. He pointed out that the poker industry is opposed to use of algorithms, but the DFS industry does not seem to have that opposition. This, in Eggert’s view, leads to the vast consolidation of wins in a small proportion of top players.

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