Pallone, Menendez: Any Investigation into Daily Fantasy Sports Should Include Pro Sports Leagues

Nov 10, 2015

FTC says it has authority to investigate daily fantasy sports

Lawmakers ask FTC for more info ahead of Congressional hearings

WASHINGTON, D.C. – Congressman Frank Pallone (D-NJ-06) and U.S. Senator Bob Menendez (D-N.J.) today urged the Federal Trade Commission (FTC) to take all appropriate actions to ensure a level playing field for participants in Daily Fantasy Sports (DFS) leagues.  In response to the federal lawmakers’ letter sent Oct. 6, FTC Chairwoman Edith Ramirez stated that the agency has the authority under Section 5 of the FTC Act to investigate DFS. 

“I’m glad that the Federal Trade Commission says it has the authority to investigate the daily fantasy sports industry,” said Rep. Pallone.  “With widespread concerns about improper conduct in the daily fantasy sports industry, this gives momentum to our call for a hearing.  The legal ambiguity surrounding the industry and its relationship with professional sports makes this issue ripe for Congressional review.  As we prepare for a hearing, it will be important to hear from the FTC about what it would need to enact regulations on the industry.”

“The FTC has told us that they have the authority to investigate the fantasy industry, but I believe that any probe should include daily fantasy sports companies’ practices beyond access to nonpublic information, and extend to any professional sports leagues and their personnel who have a financial stake in fantasy games,” said Sen. Menendez.  “If employees of fantasy sports games should not be allowed to play the games due to the potential use of insider information, then certainly neither should those who actually run, catch, throw, or kick the ball.”

The Senator and Congressman suggested that any regulations also include the conduct of the major professional sports leagues and their personnel, many of whom have financial interests in DFS, to ensure no one with access to inside information or the ability to effectuate on-the-field performance, is gaining a competitive advantage or manipulating the outcomes of DFS games. 

“As the FTC is charged with the broad mission of protecting consumers, we believe that you would be in the best position to promulgate common sense regulations that govern the conduct of daily fantasy sports websites and other organizations, including the professional sports leagues and their personnel, which can materially affect the outcome of these games,” the federal lawmakers wrote in a follow-up letter to Chairwoman Ramirez.”  “Federal regulations could ensure uniform rules governing conduct and could set uniform consumer expectations about these fantasy games.”

The two noted that the CEO of DraftKings and the commissioners of the National Football League, National Basketball Association and Major League Baseball have publicly acknowledged that regulation of the DFS industry is both warranted and required to ensure fairness of competition.

Following published reports that employees at the two leading daily fantasy gaming websites—FanDual and DraftKings—had potentially used nonpublic information to place bets at each other’s websites giving them an unfair advantage over the general public, the companies voluntarily barred their employees from playing DFS. 

Sen. Menendez and Rep. Pallone held a news conference last month outside MetLife Stadium to call attention to the hypocrisy of the professional sports leagues in opposing sports betting while supporting daily fantasy sports.

“While traditional gambling establishments are highly regulated through both state and federal law and online gambling and sports betting is severely restricted, daily fantasy sports remains completely uncontrolled,” they wrote.  “The sophistication of online fantasy sports contests and the amount of money at stake has increased dramatically.  Protecting the American people from harmful unfair and deceptive practices is of critical importance to our society.”

The New Jersey lawmakers requested additional information from the FTC ahead of Congressional hearings into DFS.  Rep. Pallone, ranking member of the House Energy and Commerce Committee, was the first to call for hearings. 

“We understand that the FTC cannot comment on pending investigations, but we urge you to use all available tools to ensure that consumers are protected in this space,” the letter stated. “Congressional hearings may lead to a determination that additional regulation is needed.”

The full-text of the letter follows and can be downloaded here:

November 10, 2015

Edith Ramirez

Chairwoman

Federal Trade Commission

Dear Chairwoman Ramirez:

Thank you for your response to our October 6, 2015, letter regarding possible use of nonpublic information by employees of FanDuel and DraftKings.  We appreciate your acknowledgment that the Federal Trade Commission (FTC) has the investigative and enforcement authority to take action for unfair or deceptive practices in the context of daily fantasy sports websites.  We understand that the FTC cannot comment on pending investigations, but we urge you to use all available tools to ensure that consumers are protected in this space.

You stated in your response that you do not believe that additional regulations or legislation is necessary.  It is clear, however, that new proactive consumer protections should be considered.  And the industry’s attempt to establish a self-regulatory scheme through the recently announced Fantasy Sports Control Agency is simply not enough.  In fact, just days after that announcement, FanDuel CEO Nigel Eccles sent a letter to customers last week asserting that fantasy sports “needs strong, common sense, enforceable consumer protection requirements” for its own success as well as for the welfare of consumers.  And the commissioners of the National Football League, Major League Baseball, and the National Basketball Association, have agreed that daily fantasy sports games need regulations.  While traditional gambling establishments are highly regulated through both state and federal law and online gambling and sports betting is severely restricted, daily fantasy sports remains completely uncontrolled. 

Congressional hearings may lead to a determination that additional regulation is needed.  As the FTC is charged with the broad mission of protecting consumers, we believe that you would be in the best position to promulgate common sense regulations that govern the conduct of daily fantasy sports websites and other organizations, including the professional sports leagues and their personnel, which can materially affect the outcome of these games.  Federal regulations could ensure uniform rules governing conduct and could set uniform consumer expectations about these fantasy games.

In preparation for Congressional hearings, we therefore request you specify the powers FTC would need to prescribe regulations in a timely manner and in particular to the agency’s expertise, including age verification, compulsive gambling safeguards, privacy protection, data security, and deceptive advertising practices.  Please include necessary changes to general authorities, such as rulemaking under the Administrative Procedure Act, as well as any specific authorities needed to regulate in this context.

As acknowledged in your letter, the sophistication of online fantasy sports contests and the amount of money at stake has increased dramatically.  Protecting the American people from harmful unfair and deceptive practices is of critical importance to our society.  Thank you for your attention to this matter.  If you have any questions, please contact Senator Menendez’s Counsel, Andrew Geibel, at (202) 224-4744 or Representative Pallone’s Counsel, Lisa Goldman at (202) 226-3400.  We look forward to hearing from you.

Sincerely,

 

___________________                                              ___________________

Robert Menendez                                                       Frank Pallone

United States Senator                                                 Member of Congress