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June 26, 2017

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Experts put social harms of daily fantasy sports on (mock) trial

The attorneys sat next to each other on one side of Ballroom H. The judge, a former gambling regulator, sat on the other side of the room, flanked by a podium bearing the logo of the Mirage. The jurors, not “12 Angry Men” but 38 casino industry experts, sat in the audience considering both sides of the case.

On trial was a familiar question: Should daily fantasy platforms, such as DraftKings and FanDuel, be regulated under existing gaming laws, given the potential for underage use and problem gambling?

“I’m here to present to you a series of proofs that are designed to demonstrate that the answer to that question is a definite, affirmative ‘yes,’” argued Michigan gaming attorney Robert Stocker at the mock trial Thursday during the 16th International Conference on Gambling & Risk Taking at the Mirage.

Regulations, he argued, are needed to prevent a long list of issues, including money laundering, age and identity verification, deceptive marketing practices and problem gambling.

With the daily fantasy market’s rapid growth in recent years, how the industry should be regulated is a question that is being taken up in courthouses and legislatures across the country. Two of the more popular platforms — DraftKings and FanDuel — stopped operating in Nevada last fall after a Gaming Control Board notice said the activity constituted gambling. On many occasions, the companies have argued instead that their platforms differ from traditional chance-based gaming because they are games of skill.

There is a nationwide divide on whether daily fantasy platforms constitute gambling, as states across the U.S. decide whether to create new regulations for the industry or apply existing gambling rules.

“There is no need to expand gambling regulations,” said Jennifer Roberts, an adjunct professor at UNLV who was assigned to argue that existing laws should not apply to the daily fantasy market.

To apply the, she said, would have a ripple effect, putting into jeopardy the legality of NCAA bracket pools, sweepstakes, season-long fantasy sports and social games, such as “Candy Crush.”

“It’s a slippery slope,” she said.

Her opening argument complete, Stocker called his first witness.

Jeffrey Derevensky, who runs the International Centre for Youth Gambling & High Risk Behaviors at McGill University in Montreal, backed up Stocker’s opening argument with data. Of 1,800 teenage males his team surveyed in Ohio, roughly 20 percent had played in daily fantasy leagues. He said the industry should take a more proactive approach in preventing minors from playing in contests.

Protecting minors, Derevensky said, is vital because they are more susceptible to compulsive activities.

“These individuals are much greater risk-takers, in general,” he said.

The other side’s rebuttal: What difference would regulation make? In cross-examination, Roberts used the same data to show even more minors had placed sports wagers that are already outlawed. Her argument was that if minors are already engaged in illegal activity, more rules might not stop them.

When Derevensky left the stand, the audience — not a stone-faced jury — clapped, at which point the judge, former longtime Nevada Gaming Commission Chairman Peter Bernhard, joked that he needed a gavel.

And a second witness was called.

Keith Whyte, executive director of the National Council on Problem Gambling, testified that his organization had identified risks involved with daily fantasy and had crafted regulatory guidelines.

“The national council determined that there was a risk for gambling problems by daily fantasy sports players and therefore it was apparent that the national council (needed to) develop responsible playing guidelines,” Whyte said, casting the standards as a lighter version of its standards for other online games.

But Whyte appeared to be open on how to implement them. “We encourage that our guidelines be encoded in law, adopted by regulators and (adopted) by corporate operators,” he said in cross-examination.

This left the jury to decide on the appropriate path: Should state officials regulate daily fantasy sports by incorporating them into existing law or was there reasonable doubt that approach might not work?

Thirty-eight votes were cast, via text message, and Bernhard announced the verdict. More than half the jury, about 55 percent, agreed that existing gaming regulations should apply to the daily fantasy industry.

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