DraftKings and FanDuel Gear up for Fight with Regulators

Photo by Ken Richardson for “Power Lunch: Draft Kings”

The two biggest players in the online gambling daily fantasy sports world are digging in their heels for a fight with government regulators.

For whatever reason, it’s only now that FanDuel and DraftKings thought, “Hey, you know, we run a highly visible business that challenges current laws, so maybe we should go out and hire some heavy hitters to deal with the inevitable scrutiny from government busybodies.”

New York-based FanDuel looks to be going the Uber route by utilizing petitions and leveraging its existing client base as an army to influence regulators who are keen on cracking down. Like Uber, the revolutionary ride hailing service that has smashed its way into impenetrable markets around the world, FanDuel is abiding by requests by local regulators to cease operations in some parts of the country.

Boston-based DraftKings is going down a different path.

Reports out of Nevada said the company ignored a recent state ban on daily fantasy sports and continued to operate there over the weekend. (Even with Nevada action on the board, FanDuel and DraftKings saw wagering on their sites drop this weekend by three and nine percent, respectively.) Meanwhile, the company has shown a less defiant posture by meeting with state regulators in Massachusetts like Attorney General Maura Healey to help “review” their legality. Healey’s press office said there is no timeline for when her report on DraftKings will be public.

On Monday, news broke that DraftKings hired former Attorney General Martha Coakley as an outside advisor to the company. DraftKings could not be reached for comment.

“I have great confidence in DraftKings’ commitment to operating with the highest standards and taking the necessary steps to ensure that sports fans who want to play these games are protected. DraftKings is committed to working cooperatively with all state regulators to implement policies that protect consumers. My role will be as an advisor to DraftKings. I will utilize my insight and experience to help the company implement additional best practices designed to preserve the integrity of the game,” said Coakley in statement emailed to Boston after press time.

The news of Coakley working for DraftKings came hours after the Beacon Hill Big Three met with reporters at their weekly leadership meeting. In the scrum, Governor Charlie Baker said he was concerned the gambling sites operate with no state oversight but said officials need to wait to hear from Healey before acting.

“The question is, does a game that involves a significant amount of thinking, strategizing, tactics and risk fall into the existing statue or not, and that’s something we can ask her, and I think we probably should,” said Baker, according to reports.

Senate President Stanley Rosenberg and House Speaker Robert DeLeo have said in the past they would like to see the state tax daily fantasy sports sites, but the two differed on state regulation.

DeLeo pumped the brakes on regulating the games until Healey publishes her review, while Rosenberg said he wants regulation now and even called daily fantasy sports “a form of gambling.”

The intense scrutiny of the companies comes in the aftermath of an insider trading scandal that revealed employees at daily fantasy sport sites have been winning major cash in games organized by competitors. An independent investigation into the recent scandal cleared any DraftKings employees of wrongdoing.

Daily fantasy sports operators insist their sites comply with the rules in the draconian Unlawful Internet Gambling Enforcement Act of 2006, which considers fantasy sports a game of skill, rather than gambling, a designation regulators in Nevada seem eager to overturn.