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June 23, 2021

Draft regulations don’t apply to casual, season-long fantasy sports games

Maryland Comptroller proposes new measures for DFS

Maryland Comptroller proposes new measures for DFS
Maryland Comptroller Peter Franchot announced proposed regulations for the daily fantasy sports industry on Thursday.
United States | 07/15/2016

Maryland Comptroller Peter Franchot announced proposed regulations for the daily fantasy sports industry on Thursday.

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ldquo;Daily online fantasy sports games have established a significant presence in Maryland,” Franchot said. “It is entirely appropriate that we begin making sure the games are fair, anticompetitive abuses are declared out of bounds, and appropriate taxes are paid.”

The proposals issued Thursday would:

• Ban daily fantasy sports game participation by Marylanders under 18; professional athletes in games of their individual sport; and employees, principals, officers, directors or contractors of fantasy sports operators (or members of those individuals’ immediate families).

• Ban games based on amateur or college sports.

• Require game operators to clearly identify players that are highly experienced before potential players decide to enter a game.

• Ban the use by players of third-party created anticompetitive “scripts” – mini-programs which experienced players are currently using to gain advantages that are unfair to more casual players.

• Limit participants to a maximum of $1,000 in deposits per month unless they proactively ask the operator to raise their limit – and certify to the operator they have the financial assets to deposit additional funds.

• Bar game operators from extending any credit to a player.

• Require game operators to hold player funds separate from company operating funds and to establish a reserve fund sufficient to pay all prizes offered to winning Fantasy Sports players.

• Prohibit game operators from depicting minors, students and school or college settings in their advertisements.

• Require game operators to notify Marylanders of their potential tax obligations, and require game operators to comply with State and Federal data security laws.

"These games are being played by a huge number of people in Maryland, but with no regulatory framework to ensure fair games, and no notification of players that if they win, they are potentially subject to Maryland income taxes," Franchot said

The draft regulations would only apply to daily fantasy sports contests, not the traditional, season-long fantasy leagues run by companies like Yahoo and ESPN that attract office coworkers, softball teammates or church groups. They will be shared with the General Assembly’s Joint Committee on Administrative, Executive and Legislative Review. Mechanisms will be announced for interested parties to provide input.

Daily fantasy sports are a subset of internet-based fantasy sports games. Players compete against other players by building teams of professional athletes from a particular sports league or competition. The players earn points based on the actual statistical performance of those athletes in real-world competitions.

Daily fantasy sports are an accelerated variety of these fantasy sports in which contests are conducted over short-term periods such as a week or a day instead of over an entire season. They are usually marketed as a “contest,” with winners receiving a share of a pre-determined pot of dollars funded by the players’ collective entry fees.

In 2012, the Maryland General Assembly passed legislation asserting that fantasy sports were not subject to state prohibitions against wagering and delegated authority to the Comptroller to adopt regulations to carry out the provisions of the law. Since 2012, the games have grown exponentially in popularity.

“These games are being played by a huge number of people in Maryland, but with no regulatory framework to ensure fair games, and no notification of players that if they win, they are potentially subject to Maryland income taxes,” Franchot said. “Lawmakers and law enforcement officials can continue to discuss issues, but we need some rules in place for the benefit of Maryland consumers.”

Drafters of the proposed rules based much of their conclusions on regulatory frameworks in states that have taken action. Rules on the activity are still relatively new. Fewer than half of states have acted to regulate or prohibit daily fantasy sports activities since the activities became mainstream.

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