Colorado regulators will hold a hearing later this month to discuss new rules that would limit, but not prohibit, the offering of pick’em-style fantasy sports contests in the state.
The Colorado Division of Gaming released new draft regulations for fantasy sports that will be considered at an October 30 rulemaking hearing.
The revised draft considers feedback from an initial stakeholder workshop held last month.
“These changes will bring the fantasy contest operator rules into better alignment with [casino] gaming and sports-betting rules and will clarify the rights and responsibilities of fantasy contest operators and patrons,” the division said in a notification to stakeholders.
In a previous draft, the rules would have required contests that were based on proposition picks to include at least four different players or positions to be selected as part of the contest, but the updated rules only require a minimum of two athletes or positions from at least two different teams.
However, the rules would require that the outcome of the contest where a player selects an over or under option be based on the accumulation of fantasy points rather than a set statistic, such as number of yards gained in a football game or rebounds collected in a basketball game.
The rules also say that fantasy contests “shall include contests where patrons compete against other patrons” and go on to add that “contests that include parlay-style wagers that are stacked wagers on single athletes against fantasy contest providers shall be prohibited.”
Representatives from FanDuel and DraftKings had argued during the September workshop meeting that permitting house-banked contests was against state law regarding fantasy sports, after the previous draft included language that said that fantasy contests could be patrons competing against other patrons or contests “where a single patron is playing against the fantasy sports provider.”
“There's a provision that says that all winning outcomes reflect the relative knowledge and skill of the participants, plural, that provision I think clearly requires multiple participants,” said Andrew Winchell, director of regulatory affairs at FanDuel.
“If the legislature intended to allow for contests where an individual participant is playing against a fantasy contest provider, they could have included language to specifically authorize such contests or simply provided that winning outcomes reflect the knowledge and skill of the participant, or participants.”
“I would just note that obviously the statute is written in the plural all winning outcomes, meaning there can be a single participant in each outcome,” said Nicholas Green, general counsel for Underdog Fantasy in response.
“But more importantly, when the operator is participating in the contest, it is by definition a participant, which is not separately defined.”
FanDuel and DraftKings have consistently lobbied against the pick’em-style games offered by rivals PrizePicks, Underdog and Sleeper, arguing that games mimic sports betting, even under the fantasy points only-model that Colorado is proposing.
“This is almost indistinguishable from parlays that are offered by sports wagering operators,” Winchell said during the workshop. “We still feel like this section in general is far too close to being a parlay-style model … and as such, we’re concerned that you’re offering a sports wagering product under a different taxation and regulatory regime with different consumer protections.”
Representatives of the operators that offer pick'em games have pushed back against the sports-betting comparison.
“If I go onto my DraftKings app, or my FanDuel app, I can parlay players, I can parlay teams, game props, novelty bets, whatever, up to the moon,” Underdog's Green said. “We cannot do that under a fantasy construct, fully cognizant of that.”
“This is a tasting menu compared to the Cheesecake Factory menu that is player prop parlays on sportsbooks, they are absolutely distinguishable,” added Josh Kirschner, an attorney representing PrizePicks and Sleeper.
The proposed Colorado changes come as several states have taken even stronger action against the pick’em-style contests, with regulators in New York and Michigan adopting regulations that effectively prohibit the games and Florida regulators recently sending cease and desist letters to PrizePicks, Underdog Fantasy and Betr, ordering them to stop accepting “illegal bets.”