Minnesota gambling regulators are not considering changes to fantasy sports betting rules even as sports sites FanDuel and DraftKings face increasing scrutiny across the country, with regulators questioning whether the companies are soliciting illegal sports bets.
"There is currently no prohibition in Minnesota regarding fantasy sports," Bruce Gordon, a spokesman for the Minnesota Department of Public Safety, said in a statement. "Minnesota currently follows federal law, which permits fantasy sports."
New York Attorney General Eric Schneiderman has ordered FanDuel and DraftKings to stop accepting bets in the state, calling them illegal gambling sites. His decision follows the Nevada Gaming Control Board, which also said fantasy play constitutes gambling and thus requires licensing in the nation's only state with legal sports betting, and one that is an influential venue on gambling regulatory issues.
The debate has erupted as fantasy sports betting has quickly blossomed into a controversial billion-dollar industry across the country. In recent months, the sites have been advertising nonstop in the Twin Cities and in other sports markets around the country.
Minnesota Attorney General Lori Swanson's office said that state gambling regulation is not under her office's control, but that her office "has been in touch with state and federal officials elsewhere on the subject." A spokesman declined to elaborate.
A 2006 federal law, the Unlawful Internet Gambling Enforcement Act, made online gambling illegal but specifically exempted fantasy sports as games of skill, not chance.
Fantasy players try to predict the performance of athletes and are rewarded based on the quality of their prediction — most Minnesotans are familiar with the hobby because they have co-workers, family and friends who obsessively check their player rosters and stats. The big companies allow customers, who now number in the millions, to play every day and with the touch of a smartphone.
The question of whether this is skill or luck has become hugely important as regulators and state attorneys general and possibly the federal government determine whether the business model of the big online daily fantasy companies is in fact legal.
State Rep. Joe Atkins, DFL-Inver Grove Heights, thinks it is a game of skill. He is drafting legislation that would formally legalize and regulate the business, and he will meet later in November with the Department of Public Safety, the State Lottery and the Racing Commission to discuss the plan, he said. He also said he recently met with lobbyists for the industry to gather more information.
Minnesota anti-gambling forces are also mobilizing, however.
Citizens Against Gambling Expansion will be calling on state regulators to shut down the big daily fantasy sites, said spokesman Jake Grassel.
Grassel, who said the group is not against fantasy games among friends and family, compared daily fantasy play to off-track horse betting.
"You pick a horse. Everyone is picking the favorite to win. You pick the 50-1 long shot to win, you get lucky," He said. "You lose, you're done and lose your money. It's a wager, not a competition among friends."
Atkins, whose legislation would levy a fee on the companies to undergo audits and background checks conducted by the Department of Public Safety, said a better analogy is the stock market, where he said skilled research can yield bigger investment returns than the overall market.
Gene Schaum is certain that winning at fantasy sports requires skill. The Brooklyn Park resident turned a single $25 wager into $1 million playing online fantasy football in October, beating out 262,000 other players when he smartly picked a Lions quarterback and the Dolphins' defense.
"That's not luck," he said. While conceding good fortune played some role in his success, he said this could be said of any successful endeavor. "I'm a believer that you put yourself in a position to be there, to make it happen," he said.
"It's not bingo. It's not picking lottery numbers," he said.
The skill vs. luck issue isn't the only problem the companies are contending with, however.
The companies faced an investigation from Schneiderman, according to a New York Times report, over whether employees were using information not available to the wider public to win payouts of their own, a situation critics compared to insider trading.
The companies are fighting back against the legal and regulatory scrutiny.
They are expected to fight New York in court to keep doing business there.
"Fantasy sports is a game of skill and legal under New York state law," FanDuel said in a statement, responding to the decision of the attorney general there. "This is a politician telling hundreds of thousands of New Yorkers they are not allowed to play a game they love and share with friends, family, co-workers and players across the country."
J. Patrick Coolican • 651-925-5042
