Coley: Some daily fantasy sports games break Ohio law

A new bill introduced in the Ohio legislature aims to "clarify" the state's rules regarding daily fantasy sports and electronic gaming.

But representatives from sites such as DraftKings and FanDuel say Senate Bill 356 is an attempt to ban these companies from operating in the state.

During a Monday press conference, Sen. Bill Coley, a Republican from Liberty Township, said that certain contests that companies such as DraftKings and FanDuel operate are illegal under Ohio law.

Under state law, betting pools are allowed, but only when operators pay out at least 100 percent of the entry fees as prizes. But if a pool operator requires 10 entries at $10 each, but only pays out $90 in prizes, that is not allowed, Coley said.

In Coley’s bill, the Casino Control Commission would have oversight of daily fantasy sports and e-gaming sites in Ohio and create new rules to ensure companies operating in the state are compliant. Today, he said there’s no agency that has direct oversight of the activities of those companies.

"When you're taking a rake off the top, you're breaking the law and you need to stop doing that in the state of Ohio," said Coley, a Republican from Liberty Township, who is sponsoring the legislation.

Coley said his bill isn’t aimed at outlawing all daily fantasy sports gaming. At least a dozen companies from Yahoo to FanDuel court Ohioans to play a wide range of games. But he said he wants to put operators on notice and make Ohioans aware of the pitfalls that this type of gaming presents.

“Sen. Coley is completely on an island – isolated from Ohioans who love fantasy sports and isolated from his caucus where he has no support for his attempt to ban fantasy sports," said Marc La Vorgna, a spokesperson for DraftKings and FanDuel, in a statement.

States have been grappling with how to deal with increased betting through electronic gambling platforms such as fantasy sports websites for several years. But this year, states such as Alabama, Tennessee, New York and Mississippi have passed a wide range of laws or administrative rules impacting operations of contests. Earlier this year, attorneys general from Alabama and Delaware told sites such as FanDuel and DraftKings that paid fantasy sports contests were illegal. Site operators were restricted from collecting contest money in New York for a period of time until legislators approved rules clarifying how companies could operate within the law.

Eight states have approved legislation this year allowing "millions of fantasy sports fans can continue to play" in contests, La Vorgna said. He said state Rep. Robert McColley, R-Napoleon, is expected to sponsor legislation that's supportive of the fantasy gaming industry. At least 1.9 million people in Ohio participate in fantasy sports, which would include players in daily fantasy contests, according to the Fantasy Sports Trade Association.

In an advisory opinion released June 30, lawyers from Ohio Attorney General Mike DeWine's office said they lacked authority to pursue a civil investigation into daily fantasy sports companies and no demand would be issued to companies such as DraftKings to end operations.

The opinion followed a request from Coley and other lawmakers to study whether daily fantasy contests were legal under Ohio law. Coley said his bill is the result of more than a year's worth of study into the issue.

Since Ohio became a state in the early 1800s, Coley said it has had a tendency to restrict gaming that wasn’t specifically allowed by the legislature. Even gambling that is allowed by statute such as the state lottery and casinos, which voters approved by referendum in 2009, were uphill battles for proponents.

Coley said one of the biggest issues with daily fantasy gaming is a lack of oversight over companies' operations. He said another pitfall is the lack of consumer protections in place for daily fantasy sports players. In many cases, individual players may be competing against well-funded, professional competitors who may be aided by computer algorithms in decision making, he said.

The attorney general's office raised similar concerns about whether companies provided enough safeguards for consumers in its June memo. However, it stopped short of saying whether companies were violating state law.

Daily fantasy companies say there are adequate safeguards to protect players and that people can withdraw money from their accounts through the websites at any time.

Coley said people need to understand that playing daily fantasy contests can be like gambling at a casino. At a casino, people understand although the house doesn’t always win, it does more often than not, he said.

"They want to deny reality and they don’t want to change their model because it’s very profitable," he said. “We've crafted legislation so all those in Ohio who are interested in fantasy sports continue in these activities."