Denied the chance to authorize sports betting, New Jersey is turning to a similarly popular activity that carries little risk of being challenged in court, observers said.
The Division of Gaming Enforcement published temporary regulations Monday authorizing casinos to operate fantasy sports tournaments, allowing them to charge patrons an entry fee and pay out winnings through the casino cage similar to what gamblers of slot machines and table games experience but with one key difference. The activity is not considered gambling.
Fantasy sports tournaments are contests in which participants create and manage a team — made up of individual players from various real teams — which competes against other fantasy teams based on statistics players generate in the course of playing real games. While some people argue the activity is a form of gambling, professional sports leagues, who sued New Jersey to block the state from authorizing sports betting said in the course of that lawsuit that they viewed fantasy sports as recreation and not real wagering.
“This is an alternative,” Joe Brennan, director of the Interactive Media Entertainment Gaming Association, said of the state’s new fantasy sports regulations. “The leagues can’t argue against it, because they lobbied so hard for it.”
The newly published regulations have caused a stir in gambling and fantasy sports circles, including praise from the casino industry, concern from those worried about problem gambling and questions about whether the move marks the start of fantasy sports regulations.
“We thank the Division of Gaming Enforcement for its visionary efforts to proactively regulate fantasy sports tournaments,” Tony Rodio, president of the Casino Association of New Jersey, said in a statement. “No state gaming regulatory agency has yet taken such a precedent-setting step to provide regulations that establish guidelines to casinos that wish to provide this product. This new product will allow our casino members to provide new and exciting entertainment opportunities.”
Unlike gambling on table games and slot machines, fantasy sports winnings and entry fees collected by the casinos will be treated like ordinary income and not subject to the 8 percent gambling revenue tax and redevelopment fees.
Casinos will be able to run the sports tournaments themselves or partner with another company to offer the service as long as the partner is licensed as a casino industry vendor. That requirement signals the first time any state will regulate fantasy sports, some observers said.
“That is the first license requirement that this industry has seen,” Brennan said.
But others, such as Peter Schoenke, chairman of the Fantasy Sports Trade Association, said the licensing requirement is similar to what other business go through, such as companies that provide food to a casino, and wouldn’t subject the industry to any additional burdens.
“I don’t see it likely going down that path, since the Division of Gaming Enforcement acknowledges that fantasy sports are legal and in-casino fantasy games will not be subject to any state tax,” he said in an e-mail. “So I don’t think this is an effort to potentially regulate the industry, rather a way to just get the growing market for fantasy sports into casinos.”
The Fantasy Sports Trade Association estimates there are 35 million players in the United States and Canada with the overall mean age of 41. Football is by far the most popular sport. Adults who graduate from college are twice as likely to play fantasy sports than those that did not, according to the association. Atlantic City tournaments would only be open to those 21-years-old or older.
Gaming enforcement officials said one of the main reasons the division developed the regulations was to encourage casinos to tap into this market. Casinos could run fantasy sports tournaments had the regulations not been approved, but they would have had to partner with fantasy sports organizations that offer the activity online or through some other means that does not involve casino cashiers. Anything having to do with the casino cage requires the approval of regulators.
With the approval of the new regulations, which go into effect April 22, casinos will be able to allow patrons to set up an account and allow them to collect their money almost immediately after winning a fantasy sports tournament.
“It’s just an amenity that we’re making more convenient,” said Deputy Attorney General Chuck Kimmel. “We’re hoping Atlantic City casinos use it as a marketing tool.”
Daily fantasy games, which require a shorter time commitment, have grown in popularity in recent years, and are likely what casinos will offer and market to patrons, Schoenke said.
“That’s a really fertile growing market,” he said, adding he could see casinos capitalizing and marketing to patrons with the promise of an immediate payout. “Maybe there’s a competitive advantage for you to physically be in the location.”
But the convenience factor is what concerns Donald Weinbaum, executive director of the New Jersey Council on Compulsive Gambling, who sees fantasy sports as the same as sports wagering.
“It’s definitely gambling,” he said. “It’s a risk factor and it’s a relapse factor. It doesn’t matter if it’s real or if it’s fantasy.”
The council, which also is marking Problem Awareness Month in March, said it wants to ensure that any marketing of the activity will exclude known problem gamblers and controls are in place to promote responsible gambling.
“That’s a real issue from our standpoint,” Weinbaum said.
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