Bet on steep regulations for daily fantasy sports

The days of friends getting together to draft players for low-stakes fantasy football leagues gave way about a decade ago to the digital age. Daily fantasy sports companies launched sophisticated web sites and gave people new ways to win money and — more often — more ways to lose.

These companies took advantage of a loophole in a 2006 federal law intended to curb Internet gambling and built lucrative businesses. Last year they were expected to rake in $1.5 billion in revenue, before lawmakers across the county began scrutinizing them.

Regulation of this industry is needed big time. We support, with just a few reservations, a bill proposed by Rep. Mike Zalewski, D-Riverside, that is designed, above all, to protect fantasy players in Illinois from being exploited.

Under current law, these businesses constitute illegal gambling, Illinois Attorney General Lisa Madigan declared in an advisory opinion in December.

But in a strange twist, one that seems to acknowledge that daily fantasy sports betting has become woven into our popular culture, Madigan didn’t try to shut them down while a lawsuit is pending.

Daily fantasy sports companies prefer to face regulation than risk being banned by a judge. To that end, they’re on board with new rules, which frankly is neither here nor there for us. Our concern is the consumer. Zalewski’s bill looks strong, but only if the Illinois Gaming Board is empowered and staffed to chase down every last violation. In its current form, the bill calls for penalties as high as a fantasy sports contest’s revenues. So if a particular contest with violations brought in millions, the penalty also would be in the millions.

The key element to the bill is oversight. It calls for the Gaming Board to vet, license and monitor daily fantasy companies. Fees for licenses would range from $500 for low-budget companies to $50,000 for companies with revenue greater than $10 million. Companies also would have to pay taxes.

Employees of the betting sites would be barred from playing, a nod to a controversial $350,000 win last year by a DraftKings employee, who bet at a rival site with insider knowledge. The bill also calls for yearly audits of bigger companies by the Gaming Board, and that’s vital. At least once a year the Gaming Board needs to do a thorough formal review. If large-scale gaming of the system is found, the law would have to be revisited.

Under this bill, fantasy players must be at least 21. This is tougher than the minimum age of 18 required by a law passed recently in Indiana.

Some lawmakers have expressed concerns that it would be difficult to prevent children from playing. All you need, after all, is access to a computer or mobile device and a credit card.

But that’s where parental involvement comes into play. If you wouldn’t let your 11-year-old shop on, you shouldn’t let your child bet on a fantasy sports site. And just as you might lock a liquor cabinet to keep your teens from boozing, you would want to keep your fantasy sports passwords — as well as your credit cards — out of your kids’ hands.

We’re taking a realistic view of this industry. It has grown too big to be shut down for good. There are an estimated 56.8 million fantasy players in the U.S. and Canada. Better to strongly regulate the business than to drive it underground into the hands of bookies and the mob.

Under the bill, protections would be put in place for inexperienced players who could fall victim to more aggressive, savvy bettors. Some serious gamblers rely on computer software to submit hundreds or thousands of lineups at once. A representative for one company told a New York Times Magazine writer for an article published in January that this practice, known as scripting, could not be reliably detected.

To avoid losing their licenses in Illinois, however, the burden would be on the companies to keep such players out. The bill puts limits on entries.

Additionally, most fantasy sports operators would be required to separate beginners — those who have entered 51 or fewer events — from more experienced players. If experienced players tried to meddle with beginners, they would be suspended.

To curb losses, a player could operate just one account with a company and deposit a maximum of $3,000 on a quarterly basis. Exceptions would need vetting.

One lawmaker, Rep. Ron Sandack, R-Downers Grove, has said the bill is being rushed, that companies such as FanDuel and DraftKings should not be allowed to operate while the Gaming Board vets them. On that we defer to the judgment of the attorney general, who could have fought to immediately close the online sites after her December ruling.

Regulation and strict oversight are the answers here. We’ll bet on them.