Goodwin Gaming
June 13, 2016

Massachusetts Gambling: Daily Fantasy Sports and the Lottery in the State House

All was relatively quiet on the daily fantasy sports (DFS) front in Massachusetts after Attorney General Maura Healy issued regulations for DFS in March. But legislative developments over the past few weeks suggest significant changes may be lurking over the horizon.

The Massachusetts State Senate recently submitted its budget recommendations for FY 2017. Among the many budget amendments approved by the Senate is one filed by State Senator Eileen Donoghue (D-Lowell) dealing with DFS and online gaming. Sen. Donoghue’s amendment creates a special commission to “conduct a comprehensive study” of the regulation of daily fantasy sports and online gaming. The nine-member commission is instructed to consider several issues including “taxation, legal and regulatory structures.” In a press release Donoghue stated, “The daily fantasy sports industry is here to stay, but questions remain about its impact on the commonwealth and about other new forms in Internet gaming. This commission will answer those questions and provide the additional clarity that businesses, regulators, and consumers need.”

Change will not happen overnight – the commission has until October 1, 2016 to meet and does not need to submit a report or recommendations until March 1, 2017 – but this is a significant first step. The commission’s report could open the door for more stringent regulation as well as taxation of DFS in Massachusetts.

Donoghue’s amendment is also significant for what it directs the commission not to consider. The amendment specifically states that the commission should not review “the state lottery or its ability to provide lottery products online or over the internet.”

This comes at the same time that Michael Sweeney, director of the Massachusetts State Lottery, is arguing that an online presence is essential for the continued success of the Lottery. According to Sweeney, if the Lottery does not respond to consumer demand for online games, it risks becoming “the next bingo.” He is seeking clear authorization from the legislature to explore online options. Senator Jennifer Flanagan (D-Leominster) offered an amendment doing just that but the amendment was ultimately withdrawn.

It is unclear whether the Lottery has the authority to study moving online or if Sweeney simply does not want to get out ahead of the legislature, but the deadlock on this issue reflects the variety of competing considerations at issue. In particular, brick-and-mortar Lottery retailers largely oppose the Lottery’s attempts to move online. Although Massachusetts State Treasurer Deborah Goldberg has expressed support for an online Lottery presence, she also does not want to negatively affect the thousands of state Lottery retailers.

Whether and how DFS is ultimately regulated and taxed by states may have some effect on how lotteries move online. Regulations could potentially limit the extent to which DFS competes with lotteries. But as Sweeney acknowledges, Lottery revenues are stagnating because of changing consumer demands. How the Lottery will adapt to evolving consumer tastes remains to be seen.