12/10/2015 9:56AM

Symposium casts eye on fantasy sites

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TUCSON, Ariz. – On paper, a Wednesday afternoon panel at the Symposium on Racing and Gaming had the potential to be one of the most dynamic of the two-day conference, but in execution, it turned out to be something of a dud.

The panel, entitled “Serious Realities in Fantasy Sports,” promised an in-depth discussion of the issues surrounding daily fantasy sports, a market that has drawn outsized attention recently due to scrutiny from regulators and law-enforcement officials in several states. The panel included a gambling attorney from Nevada and a state senator from New Jersey, a state that has been attempting to legalize sports wagering despite persistent challenges from the major sports leagues.

The panel was expected to discuss a lawsuit filed last week by The Stronach Group, a racing conglomerate, against Derby Wars, an internet site that allows customers to enter pay-to-play contests which reward the player who posts the highest returns from fictional wagers on a series of races.

However, the lawsuit was not mentioned once, despite the critical issues that have been raised by the suit’s arguments that Derby Wars is conducting wagering in violation of federal law and simultaneously violating the Interstate Horseracing Act by failing to cut tracks and horsemen in on a cut of its revenues. In addition, the suit has raised several related concerns in the racing industry, including questions about whether handicapping contests, an increasingly important component of racing marketing efforts, could also be declared illegal should The Stronach Group prevail.

While the suit and those issues were not addressed during the panel, participants debated whether daily fantasy sites were conducting gambling operations, as its critics contend, or whether the companies are instead offering contests that fall under an exception for fantasy sports contained in a 2006 federal law aimed at banning most forms of online gambling. Participants generally agreed that the sites were conducting gambling operations, and the legislator on the panel, New Jersey State Sen. Raymond Lesniak, appearing via video link, said he believed that New Jersey would pass legislation requiring the sites to be licensed and subject to regulations that would provide “consumer protections.”

Panelist John Ford, the chief executive of BAM Software, which develops parimutuel betting platforms, said that he believes racing needs to target daily fantasy players because “they share the same characteristics” as parimutuel players.

“I think fantasy is an opportunity” for racing, Ford said. “It’s an opportunity to convert those players.”

Of course, the same marketing recommendation was made more than a decade ago during the boom in online poker with little tangible results. That boom dried up, in large part because of a legal crackdown on online poker sites, which drove the game underground at the same time that poker became increasingly dominated by sophisticated players with precise knowledge of winning percentages for most deal variations. Curiously, that same dynamic has already appeared at the daily fantasy sites for football and other sports, with a small portion of players using sophisticated computer programs to submit thousands of entries to churn out small but consistent margins over a range of contests.

The subject of the regulation of racing fantasy sites did come up at the very end of the panel, when Tom DiPasquale, the executive director of the Minnesota Racing Commission, predicted the racing commission would pass regulations for the site that would require operators to submit to regulations, pay taxes, and direct a portion of their revenues to the racing industry. DiPasquale made his comment from the audience.

“It’s just like the way we’d treat an account-wagering company,” DiPasquale said.

Veterinary regulations

The last session of the day, and the last session of the Symposium, featured panelists outlining the challenges facing regulators as they seek prosecutions of racing violators. The panel largely drew on the experience of two former regulators, Lisa Underwood, who was the executive director of the Kentucky Horse Racing Commission from 2006-2011, and Jennifer Durenberger, who was the director of racing for the Massachusetts Gaming Commission from 2012 to May of this year.

Among the highlights, Underwood said that she favored a ban on allowing veterinarians to bring medications onto the racetrack, a statement that indicated support for the controversial idea of an ontrack dispensary which would provide medications to veterinarians based on prescribed need.

Among racing jurisdictions worldwide, Hong Kong operates a dispensary, and The Stronach Group has toyed with the idea here in the U.S. without gaining much traction due to heavy resistance from many equine practitioners. Underwood stressed that she could voice support for the concept now only because she is no longer a racing regulator. (She is an attorney with a Lexington, Ky., law firm.)

Durenberger, a former racetrack veterinarian, cautioned that vets need to realize that they are working in a highly regulated environment when they move their practices to a racetrack, where “what may be appropriate in a veterinary environment may not be appropriate in a racing regulatory environment.” She also urged racing commissioners to devote far more funding to investigatory units that work at the racetrack, where “boots on the ground” are the most effective deterrent to cheating, she said.