Language that would have restricted pick’em-style fantasy sports has been removed from proposed sports-betting regulations in North Carolina following pushback from fantasy operators.
The Sports Betting Committee of the North Carolina State Lottery Commission voted Tuesday (November 14) to move an amended version of its first set of sports-betting rules forward for a vote by the full commission.
A significant amendment was removing a provision introduced last month that would have redefined fantasy sports to prohibit contests “based on proposition wagering” or those that “have the effect of mimicking proposition wagering or other forms of sports betting.”
The rule would have also prohibited contests where players do not compete against other individual fantasy players, including those where players compete against the operator.
Billy Traurig, chief legal officer for the North Carolina Lottery, said Tuesday that staff had recommended removing the definition from the regulations.
“We actually had a pretty decent split on whether this definition should be in or should be removed,” Traurig said.
“However, we want to take this time to focus on moving the rules forward, getting the operators licensed and the suppliers and service providers and getting our places of public accommodation ready to operate and have sports betting launched in a timely and efficient manner.”
Traurig said the commission was mindful that the legality of pick'em games has been an issue in numerous other states.
“We are going to monitor the developments in other states and put this aside for now,” he said. “We suggest this definition is removed from the rules for the time being, as we focus on the launch of sports betting.”
In public comments obtained by Vixio GamblingCompliance, fantasy contest operators argued that the lottery commission was exceeding its authority and operating in contrast to state law by attempting to limit the pick’em-style games.
In North Carolina, fantasy sports are unregulated, and the sports-betting legislation passed this June specifically excluded fantasy contests from the commission’s regulatory purview.
“By proposing to define 'fantasy contests' in a manner that augments, supplements, or, in our view, contradicts the statute by narrowing fantasy contests beyond what the legislature provided, the Lottery Commission is expanding its own jurisdiction through rulemaking,” said Nicholas Green, general counsel for Underdog Fantasy.
“Whatever powers a state agency possesses through legislative delegation, it cannot determine its own jurisdiction by defining the dispositive terms — what is sports wagering, and what is not; what is fantasy sports, and what is not — through rulemaking.”
Even if the commission had the authority to proceed, operators such as Underdog and PrizePicks argued that the statute adds that the sports wagering act does not apply to fantasy or simulated games or contests in which one or more fantasy contest players compete and winning outcomes reflect the relative knowledge and skill of the fantasy contest players.
“The proposed rule is an impermissible means of backdooring the commission into a posture of authority by carving out exemptions from the legislature’s exemption of authority,” wrote Tom Lee, a partner at the Nelson Mullins law firm representing PrizePicks.
Representatives from Betr and Sleeper, which also offer pick’em-style fantasy contests, also wrote in opposition to the rules.
On the other end, prospective sports-betting operators DraftKings and Caesars Entertainment were among those who supported keeping the fantasy contest rule in place.
"These guardrails are necessary to ensure that the only entities offering parlays, over-unders, and proposition wagers — three wager types specifically enumerated in the 'sports wagering' definition of the authorizing act — are entities licensed as interactive sports wagering operators,” DraftKings wrote in its comments.
“If the commission were to allow entities without an interactive sports wagering license to offer these types of wagers, it would put those operating in the legal regulated sports wagering framework in the state at a disadvantage and prevent the state from fully realizing its sports wagering tax revenue potential.”
Dean Hestermann, Caesars' vice president for issues management and strategic communications, made a similar pitch to the commission.
“Companies that would like to offer these types of wagers in North Carolina must be licensed as sports-betting operators, pay the sports-betting tax rate, and abide by all compliance obligations established by Chapter 18C of the North Carolina General Statutes and the regulations promulgated pursuant thereto,” Hestermann wrote.
The lottery commission is expected to vote to approve North Carolina's first batch of sports-betting rules at a meeting Thursday. A second package of rules was released last week and is currently available for public comment.