Esports Betting Is A Whole New Landscape For Massachusetts Gaming Regulation

Written By Joss Wood on January 21, 2017 - Last Updated on March 11, 2022

[toc]At a meeting on Feb. 17, the Massachusetts Special Commission on Online Gaming, Fantasy Sports Gaming and Daily Fantasy Sports (the Commission) heard that esports was “really one of the biggest things coming.”

Massachusetts Gaming Commission (MGC) staff attorney Justin Stempeck told the Commission that:

“This is not 20 guys in a basement playing these games. This is every teenager who has a video game system. And it’s so popular, of course there’s money in it.

So there’s the legit people playing as a competitor, they’re playing in a contest and playing for money, and then there’s people who are betting on those people … then there’s a whole gray and black market of people betting on people playing video games for money.”

Stempeck’s characterisation of the esports demographic is a long way from reality.

A report by Mindshare released in June last year found that 60 percent of esports fans are between 25 and 39, and “Forty-three percent of eSports enthusiasts have an annual household income of $75,000 per year or higher.”

Nevertheless in creating a sense of urgency for gambling regulation, raising the point that children are at risk in an unregulated system is a common strategy.

Stempeck went onto say that:

“This is here, this is happening, It’s just nobody is really shining the lights on it yet. You want to talk about DFS and popularity, here is something else that is hugely popular with young people and hasn’t gotten nearly the level of scrutiny DFS has.”

Massachusetts legalized betting on daily fantasy sports (DFS) in a surprise move in the summer of 2016.

The H4413 bill, which eventually morphed into the new law, included provision for the establishment of a commission to study DFS; a proposal that became the current Commission with an expanded brief.

The Commission bought the message that esports should be on its agenda

Commission member State Senator Eileen Donoghue, who is Senate chair of the Joint Committee on Economic Development, was clearly convinced that esports was a topic the Commission should address.

According to the meeting report in the Lowell Sun, she commented that esports is “a whole new landscape that we’re finding ourselves in,” adding:

“I think the trick will be to come up with a framework that is appropriate and nimble enough to deal with innovation and technology that changes on the fly.”

The Senator’s aide said that esports will likely be on the agenda at the Commission’s next meeting on Feb. 28.

Does MA have the appetite for esports regulation?

The Commission’s purpose is stated as to:

“review all aspects of online gaming, fantasy sports gaming and daily fantasy sports including, but not limited to: economic development, consumer protection, taxation, legal and regulatory structures, implications for existing gaming, burdens and benefits to the commonwealth and any other factors the commission deems relevant.

The special commission shall not include in its review a comprehensive review of the state lottery or its ability to provide lottery products online or over the internet.”

While DFS is undoubtedly top of the priority list now that it has been legalized, the whole gamut of online gaming issues, including esports betting, fall within the Commission’s remit.

The DFS law expires on July 31, 2018, so the Commission’s job is to make recommendations for its replacement.

Given the breadth of its remit, the Commission will have the opportunity to make recommendations for other online gaming regulation to be included in the replacement bill.

MA Gaming Commission wants a comprehensive approach

The MGC has long indicated that it believes that politicians should not be deciding which specific gaming activities should be regulated and permitted.

In the January 2016 report that it was asked to produce dealing with the possible regulation of DFS, the MGC criticized the current responsibility of “existing branches of government, including the administrative agencies they contain, to determine whether a new Internet activity involves some element or elements falling within their existing regulatory authority.”

The MGC said that this approach results in “a balkanized environment,” where there was inconsistency and government agencies working at cross-purposes.

It proposed an alternative:

“a regulatory environment which is applicable to all online gaming technologies, assigning that regulatory structure to an agency for implementation, and leaving the daily work of drafting and adapting regulation of new gaming types to the regulatory agency that can be nimble and flexible in responding to technological gaming innovations.”

In other words, let the state government decide whether or not it wants to permit gambling, and what constraints it wants to impose, then let the regulator get on with the practical business of deciding what is or is not to be regulated under those constraints.

From a purely pragmatic perspective. the MGC’s recommendations make perfect sense—politically they may not get very far.

There are plenty of politicians who will support the state lottery, but oppose online poker, yet arguably the lottery produces a much greater risk of consumer harm.

Politicians are unlikely to surrender their right to be inconsistent and partial on issues that resonate with their electorates.

Online lottery may be next

Allowing the state lottery to sell tickets online is a proposal which is gathering support. In July 2016, State Treasurer Deborah Goldberg, who oversees the Lottery Commission said:

“The only way to reach the younger market is via online lottery games. It’s the future and we need to face it.”

The Commission is specifically excluded from considering the lottery, so it won’t be able to ride on the back of support for online lottery when it issues its own recommendations.

For Massachusetts residents, access to state-regulated online gaming may come piecemeal rather than in the omnibus bill that the MGC would prefer, but little by little the political mood seems to be accepting the validity of regulating a sector that is otherwise open to abuse.

Esports betting is growing so quickly that it is forcing itself upon the political agenda whether the politicians are ready for it or not. And there lies the risk–that knee-jerk policy making will crowd out the type of sensible approach recommended by the MGC.

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Stop press

During the writing of this article, Senate Minority Leader Bruce Tarr reintroduced legislation that would legalize online gambling in Massachusetts.

Tarr’s SD 618 bill is succinct, simply calling for existing gaming licensees to be allowed to offer online gaming so long as it doesn’t compete with the state lottery.

The only three gaming license holders currently are MGM, Penn National, and Wynn. The bill makes no mention of taxes or regulatory conditions, and there is no mention of esports.

Online gambling now looks like it will be discussed during the next legislative session, but the Commission will probably not be ready to offer its view on esports betting within the legislative time frame.

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Joss Wood

Joss Wood holds an English degree from the University of Birmingham and also earned a master’s degree in organizational development from the University of Manchester. Joss has a special focus on the international online gambling market, though he also writes extensively on US regulated markets, sports betting, and esports betting.

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