Md. Comptroller Drafts Regulations For Fantasy Sports Industry

He says it will make sure the games are fair & winners pay appropriate state taxes.

Proposed regulations covering daily fantasy sports games have been drafted by Maryland Comptroller Peter Franchot. He says these rules, unveiled on Thursday, make sure that the games are fair, and that winners pay the appropriate state taxes.

“As with any new industry that’s developed, such as fantasy daily sports, there are abuses and there is consumer harm that occurs because the industry is brand new and there aren’t protections for consumers,” he says.

Daily fantasy sports is an online game where participants pay a fee and assemble imaginary or virtual teams made up of actual professional athletes. The teams compete based on the statistical performance of these pro athletes in actual games. These “games” are marketed as “contests,” where players can win a predetermined amount of money from participant’s collective entry fees.

In 2012, the Maryland General Assembly passed legislation which stated that fantasy sports were not subjected to state prohibitions against wagering. The State Comptroller’s Office was given the authority under that law to adopt regulations covering these games. The industry has grown since the legislature enacted that law.

Franchot says these regulations, which were written¬† with the assistance from the Maryland Attorney General’s Office, are needed because of reported abuses in the fantasy sports industry. “They had employees that were playing the games that they were monitoring and were overseeing,” he said. “And that obviously is self-dealing by their own employees.”

And, he says, there were incidents of some participants who were being taken advantage of. “There are computer-driven versions of daily fantasy sports, or ‘scripts,’¬† that sometimes take advantage of new, beginner players,” says Franchot.

The regulations ban participation in fantasy sports games by those under 18, professional athletes in the games of their individual sport, and employees, principals, officers, directors or contractors of fantasy sports operators. In addition, game operators are required to identify players that are highly experienced before a potential player decides to enter a game. Third party, anti-competitive “scripts” are prohibited, along with game operators depicting minors, students and school or college settings in their advertisements. Also, participants are limited to a maximum of $1,000 in deposits each month unless they ask the operators to raise the limit. Operators are not allowed to extend credit to participants. Finally, fantasy sports operators are required to notify Marylanders of their potential for tax obligations, and all operators must comply with State and Federal data security laws.

“These regulations don’t apply to those casual players of fantasy sports at all,” says Franchot. “It’s only the folks that are playing Draftkings and Fanduel who have 95% of these daily fantasy sports registrants.”

Franchot says more than 200,000 Marylanders are registered to play daily fantasy sports.