The Michigan Gaming Control Board (MGCB) has proposed new daily fantasy sports (DFS) regulations to ban contests that too closely resemble sports bets. The new rules, which legislators would need to approve, will prohibit DFS operators from offering single-player DFS pick ’em contests and predictions similar to the proposition bets offered by sportsbooks.
The changes come after concerns by the regulator that DFS “proposition selection” products mimic sports betting. The worry is that DFS operators may be inching into sports betting territory without a license.
The proposed rules would prohibit DFS operators from allowing “proposition selection or fantasy contests that have the effect of mimicking proposition selection” and “any fantasy contests that involve, result in, or have the effect of mimicking betting on sports.”
Currently, three DFS operators, Boom, PrizePicks, and RealTime Fantasy Sports, offer these types of bets in Michigan. Meanwhile, another popular DFS operator, Underdog Fantasy, exited the state when Michigan created DFS licensing requirements.
Michigan joins several states that have recently looked into whether these bets fall under daily fantasy (considered a skill-based game) or sports betting. As a result, several regulators in states that allow sports betting have proposed changes in regulations or banning the bets. Interestingly, Michigan is the only jurisdiction with legal online casinos which allows DFS prop bets.
MGCB Protects Legal Industry & Players Alike
Sportsbooks and casino operators in states like Michigan undergo an approval process and obtain a license before offering their products. That ensures the safety of users by providing access to only reputable operators. In contrast, unregulated illegal operators can engage in fraudulent activities like offering rigged games, not paying out, or stealing information.
But beyond protecting consumers, regulators like MGCB also work on protecting legal operators that have secured licenses and pay their tax obligations. That’s critical because illegal operators would gain a competitive advantage by offering better terms. That’s because they don’t pay licensing fees, taxes, and other regulatory-related expenses.
MGCB was one of seven state regulators that asked the Department of Justice for help fighting illegal operators. The group also warned legal operators that may participate in illegal activities outside the US.
That is why it’s critical that if DFS prop bets are deemed sports bets, the MGCB prohibits them. This will help ensure that DFS operators don’t gain an unfair competitive advantage over legal sportsbooks in Michigan.
Gray-Area ‘Skill Games’ Pose Regulatory Challenges
DFS prop bets belong in a category that has sparked much debate, which is “skill games” and their legal status. By definition, gambling involves an element of chance. The term “skill games” implies that they are not gambling. But the lack of definition puts these types of games in a gray area.
Because of the ambiguous interpretation of skill games, some states have tried to ban them. The most recent example is Kentucky, which banned the games as of July 1. However, the state will likely face lawsuits from the games’ manufacturers. That happened in Pennsylvania, where Pace-o-Matic sued the state and won.
Elsewhere, Virginia state lawmakers approved a similar ban in 2021, but it hasn’t gone into effect due to legal challenges.
In 2022, MGCB claimed that a bill on skill games would increase illegal gambling and go against the agency’s efforts. The bill passed the state Senate but died in the House.
Multiple States Are Looking Into DFS Prop Bets
Michigan is the only state with iGaming that currently allows DFS prop bets. In addition, over ten states that allow online sports betting also allow these types of bets. However, that might change soon.
Multiple states, especially those with sports betting, have recently reviewed the legal status and classification of these types of bets. Just a week before Michigan, the New York State Gaming Commission also said prop-style DFS bets are “essentially sports betting.”
In July, the Wyoming Gaming Commission sent a cease-and-desist letter to Underdog Fantasy and PrizePicks because they offered illegal sports betting. Maine also sent a notice of complaint to Underdog for possible unlawful sports betting.
The Ohio Casino Control Commission, which has established itself as a tough regulator, started an investigation into five DFS operators in June. Massachusetts is also beginning an inquiry into the matter.
As a response, Underdog founder and co-CEO Jeremy Levine penned an open letter to his site’s players, insisting that its products are legal, as confirmed by multiple state regulators. He mentioned that this includes states with regulated sports betting, like Arizona, Colorado, and Indiana.
Levine also said that government officials in Alabama and North Carolina (which is launching online sports betting next year) have said that pick ’em is not sports betting.