A gigantic industry dominated by large, out-of-state companies that contribute little to Maine’s economy is trying to write the rules that regulate it, right now in Augusta. And almost nobody knows that it’s happening.
Like most industries, they’re writing these rules not to benefit the consumer, but to protect their own profits. The Maine push is part of an effort to install industry-friendly regulations in states across the country.
This isn’t big oil, renewable energy or the gun manufacturers. No, it’s not even something most people would think to call an industry. It’s fantasy sports.
Yes, fantasy sports – where you draft players from a variety of teams, and attempt to win prizes based on how they perform – is big business. It falls outside the regulations governing gambling at both a federal level and in most states, and the industry wants to make sure it stays that way.
That’s all well and good: There’s no need for big government to go after fantasy sports. Unfortunately, the industry isn’t fighting to stay regulation-free. Instead, they’re trying to write new regulations giving them an unfair advantage.
As written, L.D. 1320, “An Act to Regulate and Tax Sports Fantasy League Activities in Maine,” would stifle competition, help gigantic corporations maintain their current dominance and do little for consumers. For example, the bill establishes a registration requirement and fee for those wishing to offer a platform to play fantasy sports. The fee is set at 10 percent of the operator’s gross revenues for the past year, but that’s capped at $5,000. So, if you start a new business running a fantasy sports website that makes $50,000, the state could take 10 percent of your profits in the first year – but companies like ESPN or Yahoo will just pay a flat $5,000 fee. That places a much larger burden on a hypothetical startup trying to compete than it does on the pre-existing corporations.
The registration provision wouldn’t just affect potential competitors to the large companies. It would also apply to individuals who decide that, rather than be customers of the big boys, they’d like to build their own websites and run their fantasy leagues that way. They would have to register with the government in order to do so – even if their operation had no profit whatsoever. This prevents consumers from exercising their right to create their own products, essentially forcing anyone who plays fantasy sports to use a large corporate site.
It’s the fantasy sports equivalent of a fast food chain pushing for legislation requiring anyone in the state to register their backyard grill with the government. The provisions regarding registration and the accompanying fees are clearly designed to limit consumer choice, letting the big companies essentially pull the ladder back up after them.
Now, there are portions of this legislation that are geared toward consumer protection, and that’s a good thing. Among other provisions, they prohibit fantasy contest operators from profiting from their own contest or from sharing inside information with others.
This has been a big issue for some fantasy sports companies, leading to legal action being taken against them in several states. It’s certainly a good thing to explicitly prohibit this kind of manipulation, just as it’s good to require companies to provide information on responsible play.
However, it’s also worth noting what the consumer protection provisions don’t include. They don’t specifically bar fantasy contest operators from colluding with one another to set industry-standard user fees or other policies, essentially allowing them to set up a de facto monopoly. They also specifically limit the civil penalties that may be imposed to a very low amount: $1,000 for each violation, with a cap of $5,000 for each transaction. That shields fantasy sports operators from the kind of open-ended lawsuits that have plagued them elsewhere.
For a big company, fines of that amount are essentially parking tickets, and small ones at that; for a startup trying to break into the industry, they could be devastating.
This bill seems to be an example of what happens when industry lobbyists sit down with legislators to write their own regulations: They focus on their clients’ bottom line, with a few nominal consumer protections tossed in. That’s not good for Maine, and that’s not how good legislation is written.
If legislators believe fantasy sports needs more regulation, they should ask their constituents what they want done. That might actually result in a free and fair market that puts consumers first, instead of corporations.
Jim Fossel, a conservative activist from Gardiner, worked for Sen. Susan Collins. He can be contacted at:
Twitter: @jimfossel
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